Wheat price thread and effect on world

[President Punxsutawney Phil]

Arab World governments are probably watching the wheat price with immense interest.

[President Punxsutawney Phil]

Arab World governments are probably watching the wheat price with immense interest.

Certainly some of them are - Lebanon is probably the most klaxon alarm of all - but a lot of them are going to be bailed out by high oil prices.

That's true.
Egypt is probably the big one to look at here, given its overall food needs.
Ironic - Egypt was once the breadbasket of ancient Rome...and wheat from Egypt helped feed Rome.

[President Punxsutawney Phil]

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 ?

Japan would be a major loser from higher than normal oil, gas and wheat prices. Not a lot of Westerners know this, but the 1973 oil embargo had a major and severely negative impact on the Japanese economy. Nowadays, it is still a huge oil importer, and it's also a major wheat importer. Japan in general imports roughly 90% of its wheat and upwards of 95% of its oil. I'm not aware of any developed hydrocarbon fields on Japanese soil.
I don't think South Korea is much different either.

[President Punxsutawney Phil]

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.

I forgot about Turkey, but that makes sense.
Turkey gets a clear majority, perhaps even the vast majority, of its wheat from Russia; it just occurred to me that Russia could threaten wheat sales to Turkey as a bargaining chip.

[President Punxsutawney Phil]

Arab World governments are probably watching the wheat price with immense interest.

Certainly some of them are - Lebanon is probably the most klaxon alarm of all - but a lot of them are going to be bailed out by high oil prices.

That's true.
Egypt is probably the big one to look at here, given its overall food needs.
Ironic - Egypt was once the breadbasket of ancient Rome...and wheat from Egypt helped feed Rome.

Egypt had a far smaller population historical, when Napoleon invaded Egypt it had a smaller population than the Netherlands. If modern Egypt still had comparative population to Netherlands, it would still be a major food exporters.

I am aware of why it is now importing.
It is still a historical irony of course.

[President Punxsutawney Phil]

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?

[President Punxsutawney Phil]

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.

Interesting. Thanks for the run-down.
The enormous food stock China has should be helpful in preventing the country from being hit by COVID and severe inflation at the same time.