Soaring Fertilizer Prices Unleash Global Hunger, Chaos
World facing 'summer of starvation'
Russia’s war with Ukraine has been fostering a potentially cataphoric scenario that could affect the entire world’s food chain, the spike in fertilizer prices.
As Neon Nettle reported, there are still millions of tons of grain stuck in Ukraine.
There are many as four and a half million tons of grain just sitting at Ukrainian ports waiting to be exported, according to the regional director of the United Nations’ World Food Programme, Germany-based Martin Frick.
According to Bloomberg, the glut of fertilizers piling up at the biggest Brazilian ports signals that the price of the nutrients has to drop further before farmers start buying.
In Paranagua, private warehouses reached their maximum storage capacity of 3.5 million tons, Luiz Teixeira da Silva, Paranagua’s operations director told Bloomberg.
A terminal operated by VLI Logistics, one of the two at Santos port that store fertilizer, is also full, according to people with knowledge of the matter who asked not to be named as the information isn’t public.
The price of fertilizers across the globe has exploded to an unprecedented level, and Brazil is no exception.
The country imports almost 85% of its fertilizer and Russia is the main origin.
Even though supplies have normalized, prices have declined over the past weeks, but farmers still aren’t buying.
They are waiting for further price cuts, according to Marina Cavalcante, an analyst at Bloomberg’s Green Markets.
“Farmers have the expectation that prices will keep falling after declines last week and in the previous one,” she said.
“So they’ll wait for further decreases to buy," Cavalcante said.
Zerohedge outlines an example in supply/demand game theory:
Brazil is the world’s biggest shipper of several crops, including soybeans. Farmers can delay their purchases until the eve of the soybean seeding in September. But if they all wait too long, a last-minute rush could lead to inland transportation bottlenecks that may leave some of them empty-handed anyway.
There is another problem: there just may not be enough actual fertilizer coming out of Russia, which has decided to punish the world by sending food prices for western nations to record highs and spark social unrest in the process. After all, the biggest reason prices are so high is because there is just not enough supply. And while speculators may have pushed prices somewhat higher than they should be, any farmers hoping that prices will fully renormalize will be disappointed.
Which leaves us with “demand destruction” only as Rabobank’s Michael Every reminds us, when it comes to food “demand destruction” - especially at poor, third world countries - it has a different, less pleasant name: starvation.
Cutting Russia off from the world, is a pretty stupid move...
Here is one example, in April Neon Nettle reported that the CEO of Germany’s multinational BASF SE warned that cutting off energy imports from Russia would result in pushing the likes of Germany into its most “catastrophic” economic crisis since World War 2.
During an interview with Frankfurter Allgemeine newspaper, Company CEO Martin Brudermuller gave an “early warning” to industries and the population of possible natural gas shortages.
While “Germany could be independent from Russia gas in four to five years,” according to Bloomberg, “LNG imports cannot be increased quickly enough to replace all Russian gas flows in the short term.”
Brudermuller said that “It’s not enough that we all turn down the heating by 2 degrees now, given that Russia covers 55 percent of German natural gas consumption.”
Meanwhile, the White House refused to budge on Russian calls to lift sanctions over the war in Ukraine as a looming global food crisis becomes more apparent.
Russian President Vladimir Putin pressed world leaders to lift the sanctions, claiming the West’s penalties are blocking the export of millions of tons of grain and other agricultural products.
Analysts fear the blockade has put the world on the brink of a food security crisis.
The Kremlin also has argued that U.S. sanctions have hampered its own ability to export agricultural products.