Wheat price thread and effect on world

[jaichind]

India is a big wheat producer and will benefit from this.  Of course that is more than wiped out many fold by the surge of energy prices impact on energy import prices although India will be able to lower the bill by importing Russian energy selling for discount.

[jaichind]

India is a big wheat producer and will benefit from this.  Of course that is more than wiped out many fold by the surge of energy prices impact on energy import prices although India will be able to lower the bill by importing Russian energy selling for discount.

Which country is the biggest loser from lack of oil and wheat ?

I would say Japan, ROK, and Turkey.  Indonesia is a big food importer but they are solid in terms of energy.   PRC is a big importer of both but they are small relative to the size of their food and energy markets.  Also, the PRC seems to have started to hoard food starting in 2019.  Some of it is because of the USA trade deal but they have gone beyond that.  Perhaps they knew something like this was coming ?

The impact on all this in Japan will be interesting to see.  Part of the "problem" in Japan is that consumers (especially from the pensioner class) refuse to accept any prices increase which means businesses could not raise wages.  This has been the situation since the late 1990s.  An external price shock, in theory, could break Japan out of it and the 2007-2008 world inflation surge potentially could have broken this but that was quickly followed by the Great Recession and worldwide deflation.  If the current world inflation surge goes on for a couple of years it could cause a large economic shift in Japan with huge impact on the pensioner class but good news for those in their 20s and 30s.

[jaichind]

https://citywireusa.com/professional-buyer/news/high-flying-wheat-etf-runs-out-of-shares-amid-russo-ukrainian-war/a2381654

Wheat ETF runs out of shares

[jaichind]

FT reports Middle East bread prices have surged 70%

[jaichind]

Revolution time!

in Venezuela, Cuba, Russia, China, Iran, Belarus, and most of the -stans?

Well, Russia is a food surplus economy so domestic food prices would be relatively stable under the circumstances.   As I mentioned before in the 2019-2021 period the PRC has been hoarding grain/food of all types which was part of the reason for rising gain prices in 2021.  Part of it was because of the Trump trade deal with PRC but my understanding is that PRC hoarding goes way beyond that.  I think under these circumstances the PRC has enough gain stored up for them either to make money selling it internationally or to stabilize food prices within the PRC.  I suspect they will go for the latter. 

I think the Middle East, Turkey, and other food import economies will clearly be hit since most likely they have not hoarded last few years and now there is a supply shock.

[jaichind]

https://apnews.com/article/russia-ukraine-science-business-india-global-trade-4d32889d982bf0a60396ff4ba817ca16

"Heat wave scorches India’s wheat crop, snags export plans"

[jaichind]

Revolution time!

in Venezuela, Cuba, Russia, China, Iran, Belarus, and most of the -stans?

Well, Russia is a food surplus economy so domestic food prices would be relatively stable under the circumstances.   As I mentioned before in the 2019-2021 period the PRC has been hoarding grain/food of all types which was part of the reason for rising gain prices in 2021.  Part of it was because of the Trump trade deal with PRC but my understanding is that PRC hoarding goes way beyond that.  I think under these circumstances the PRC has enough gain stored up for them either to make money selling it internationally or to stabilize food prices within the PRC.  I suspect they will go for the latter. 

I think the Middle East, Turkey, and other food import economies will clearly be hit since most likely they have not hoarded last few years and now there is a supply shock.

One month later. Do you think this has manifested? Yes/no and why so?

Well, using investment bank 2022 inflation estimates the level of expected 2022 inflation is up across the board but extra so in the Middle East.  Even with a history of low inflation, East Asia like Japan expected inflation has gone up based on rising energy and food prices.  The only exception is PRC where inflation for 2022 was expected to be 2.2% in Feb and is still 2.2% today.  Most of this is because they are buying more Russian energy on the cheap, COVID lockdowns and they have a massive hoard of food.  All these are short-term tricks and I expect later this year or early next year inflation will start to come to PRC as well.

[jaichind]

https://www.bloombergquint.com/global-economics/india-considers-restricting-wheat-exports-as-heat-destroys-crops

"India Mulls Wheat Export Curbs in Latest Food Supply Squeeze"

India has done this in the past over onion exports years ago during the time when onion prices shot up.  On the whole, I think this is unwise as it disincentives Indian farmers from planting more wheat in the future.  Also, Indian food prices are impacted as much by logistical issues as supply issues.

[jaichind]

Wheat futures in Chicago rose 3.1% after a U.S. Department of Agriculture report said production in Ukraine, one of the world’s biggest growers, will drop by one-third compared to last season.

[jaichind]

The USDA makes it clear that Russian agricultural trade isn’t suffering much of a blow from the war. The country is expected to regain its rank as the world’s top wheat exporter, overtaking the EU -- both in the 2021-22 season and the 2022-23 season that starts midyear.

It seems it will be Russia that will be the greatest source of wheat exports in the world and help mitigate the wheat price surge.

[jaichind]

India Bans Wheat Exports

[jaichind]

https://www.zerohedge.com/commodities/satellite-imagery-shows-global-crop-declines-except-russia-and-china

"Satellite Imagery Shows Global Crop Declines – Except For Russia And China"