As I sit here, studying my screen as it scrolls through the various commodities I either trade or simply follow out of professional curiosity, I find myself once again staring at a sea of green – meaning the markets are positive for the day. Cash corn, for example, is trading at $7.97 per bushel. This is a run-up of 63% since January 2021. Cash wheat is trading $10.63 per bushel, up 73% since January 2021. Soybeans are up 43%. And so on. This is just in 18 months. The rise in commodities prices, especially food and energy, has been epic since their nadir during the Covid lockdowns went into full force around April 2020.
These flashing digits on my screen represent not just data points but very real and deep pain for hundreds of millions around the world. At least those without the wherewithal to leverage access to an important father to ink million-dollar “consulting” deals with Ukrainian oligarchs or Chinese despots, or the ability to enact market-moving laws while making personal insider stock trades so presciently timed they’d make Jesse Livermore salivate. Indeed, every uptick I see tells me someone on a fixed income or desperately trying to hang on to middle-class status, let alone half the world’s population who earn less than $10,000 per year, faces a crisis not seen since the advent of the postmodern age. And now we are starting to hear a frightening phrase bantered about not just in the media but also in the halls of power: food shortages.
In May, while speaking to the Treasury Select Committee, Bank of England Governor Andrew Bailey said: “The [risk] I’m going to sound rather apocalyptic about, I guess, is food…It is not just a major worry for this country; it is a major worry for the developing world.”
Not to be outdone, before the baby formula shortage arose to drive home his point, President Biden warned that “With regard to food shortage…it’s gonna be real.” Even a broken clock is right twice a day.
Naturally, the Biden administration is doing its best to steer blame away from its reckless spendthrift fiscal policies — and the Fed monetary policy given the chairperson who failed to see inflation on the horizon is now Biden’s Treasury Secretary. Instead, the administration is pointing its finger at Vladimir Putin’s invasion of Ukraine. As with all deeply complex subjects of macroeconomic systems, there is some truth in this. Some estimates say Ukraine provides roughly 40% of the world’s wheat supply. And even more impactful, Russia and Ukraine combined produce roughly 50% of the world’s fertilizer. The problem is not so much reduced production, but rather the inability to move product out of the warring nations and into the world markets. Such vulnerability has hit farmers hard, including those in the United States. Thus, they must pass on their rising costs to consumers. So even though the U.S. only imports 15% of its overall food supply from abroad, those providing the 85% domestically are being hammered with skyrocketing fertilizer costs that will punish Americans anyway.
Still, Russia’s invasion took place in February 2022. Inflation, which is often called the “hidden tax,” was on the rise throughout the global financial systems well before then — as anyone who has filled up their gas tank knows. Shipping, trucking, air cargo and railroads are also being impacted by higher fuel costs. And so we see the cost of transporting already-expensive farm products to market being passed on to shoppers on top of everything else. This could mean a one-two punch to the U.S. consumer of less food on the shelves, and a higher price for the goods that are available. As a result, we may very well see shortages of eggs, dairy, grains and meat. Such products make up the bulk of working-class Americans’ diets.
There are several arguments that could be made for who or what is to blame for the massive spike in inflation and the subsequent astronomical food costs. Covid lockdowns crimping supply chains. Massive government spending and “stimulus” diluting the value of the dollar, thus making everything cost more. Putin invading one of the most important food-producing regions on the planet. The Fed’s failure to see what even an Econ 101 student (or a caveman commodities trader with a state school education like your humble author) could see — that interest rates were too artificially low, and held there for too long.
Back in 2020, economists at the UN World Food Programme warned that, due to disrupted supply chains as a result of Covid lockdowns and freezes on international trade, some 265 million faced imminent starvation. As Mr. Bailey intimated, it will only get worse as food shortages spread. The United States will most likely not see the abject starvation as seen in the world’s poorest quarters, given our inherent bounty and social safety networks. But the average American, with each paycheck worth less in buying power than the one before it, will be faced with tough choices in the future. Dinner will still be served, but it probably won’t be as plentiful, or healthy, as it used to be.
Brad Schaeffer is a commodities trader and writer whose articles have appeared in The Wall Street Journal, New York Daily News, National Review, and The Daily Wire.
The views expressed in this piece are the author’s own and do not necessarily represent those of The Daily Wire.