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By Michael Every and Michael Magdovitz of Rabobank
Biblical, Lean, and Mean: 'Dreams' of an agri-commodity
super-cycle


Then Pharaoh said to Joseph: “Behold, in my dream I
stood on the bank of the river. Suddenly seven cows
came up out of the river, ?ne looking and fat; and they
fed in the meadow. Then behold, seven other cows
came up after them, poor and very ugly and gaunt,
such ugliness as I have never seen in all the land of
Egypt. And the gaunt and ugly cows ate up the ?rst
seven, the fat cows. When they had eaten them up, no
one would have known that they had eaten them, for
they were just as ugly as at the beginning. So I
awoke.”

  • Genesis 41:17-21
    Summary
    Key feed and food prices have been pulled to 9-month and 7-year highs
    We explore the ‘dream’ of Biblical scarcity; its origins and impacts; and draw
    comparisons with Joseph, the trader and central planner who avoided starvation for
    ancient Egypt
    One point is clear: global food insecurity falls heaviest on lower income, importing
    nations, who spend a far greater share of their income on food than the richer ones
    The Fed would play an ironic role in this process even as it embraces ?ghting
    poverty and inequality alongside in?ation
    This could exacerbate (geo)political risk – potentially even regarding institutional
    architecture
    Our Base Commodity Call
    At time of writing, our forecasts for three of the world’s key agri commodities,
    soybeans, corn, and wheat are as follows:
    The First Big Commodity Call
    In the Bible, Joseph interpreted Pharaoh’s dream as meaning great abundance for
    seven years would be followed by an equal famine. He was then entrusted with
    ensuring Egypt’s storehouses were full of grain so the country could survive – which he,
    and it, did.
    In short, Joseph made the ?rst agri commodity cycle call, where survival came before
    pro?ts. Today we have seed technology, automated agriculture, and global markets. Yet
    we still have lean and fat years for reasons meteorological, logistical, political, and
    geopolitical. This report will try to do several things:

– we will show we are, re?ected in our elevated base price forecasts;
Summarise price action in key agri commodities to consider if we are seeing anything
unusual
2. While the agri
market is very old, new developments could produce striking new price patterns;
Disaggregate and de?ne the main drivers of these price movements.
3. putting forward simpli?ed
assumptions to estimate what each of them in isolation could do to food prices;
Imagine what a Biblical scarcity would look like,
4. to ascertain how many countries are suffering already
and would do so in the scenario that prices rise higher; and
Look at global food insecurity
5. Consider the worrying (geo)political implications.

  1. Supplies Shaken, not Stored
    For key feed and food commodities, the message for markets and institutions is a
    simple one: they are going up. The S&P global agricultural index is up for a 9th straight
    month, to its highest level in 7 years (see Figure 1). Even though we are coming off a
    low base of comparison, which helps the base effects, the last period to see such a
    rapid rise was 2011, and prior to that 2007.
    When we look at key commodities one by one the picture is similar, whether it is grains,
    vegetable oils, dairy, meat, or sugar (see Figure 2). This correlation makes sense,
    especially as many of these products share characteristics, are complementary, or are
    planted on the same land.
    Most of the above markets have shifted into strong backwardation, indicating near-
    term supply scarcity that should ease with harvest replenishment. However, we remain
    sceptical about the resupply.
    Rabobank’s price forecasts for soy, corn, and wheat --the critical building blocks for
    bread, meat, dairy, biofuels, and more-- are in line with present levels and above the
    futures curve into 2022.
  2. A Bull-run of Many Colors
    Today’s elevated price trajectories shows nobody had the foresight, fortitude or ?nancial power
    to stockpile in the years of plenty, but there are many more factors at play.
    already covered the key drivers of the agri bull market. We will quickly reprise them as
    follows:
    Rabobank’s recent
    report
    On The Verge Of A Global Crisis: One Bank Warns Of A "Biblical" Surge In Food Prices
  1. Exporters stocks have fallen rapidly to 7-year lows;
  2. China is importing on a vast scale;;
  3. It’s hard to increase supply rapidly;
  4. Adverse weather conditions;
  5. Countries are engaging in food protectionism;
  6. Logistical costs are rising, notably in freight; and
  7. Speculators are holding more commodities futures.
     #1 Seven years of plenty ironically leave global agri commodity stocks low.
    Before the recent run-up, the S&P GS Agri Commodities Market Index had fallen over the
    last seven years as the price shock of 2010-12 incentivized diversi?ed supplies and a
    shift from high cost to low cost producers/exporters. This was good news for
    importers, but bad for the high-cost US, who saw its stocks steadily increase through
  8. The US-China trade war and Covid-19 also saw US farmers adjust acreage lower
    in response.
    When demand then surged in mid-2020, higher cost exporters, especially the US, sold
    both their production and stores. In short, the US --the global food reserve bank-- has
    seen its grain and oilseed stockpiles slip nearly 30% y/y (see Figure 3), primarily in corn
    and soybeans. Moreover, we forecast only a slight increase in 2021 as our base case.
    On The Verge Of A Global Crisis: One Bank Warns Of A "Biblical" Surge In Food Prices
    It is aggressively bidding for supplies to ?ll shortfalls and
    pad inventories (see Figure 4). Convalescence from dual pandemics --African Swine
    Fever and Covid-19-- has led to a surge in agri import demand, and hence global prices.
    The most remarkable increases have been in feed grain, the energy source for animal
    protein and ethanol: to
    address a structural supply gap that cannot be addressed by domestic production.
    Indeed, China is so stretched for feed it is resorting to using old domestic wheat
    reserves for livestock -- 35m metric tonnes this year alone, equivalent to Canada’s
    production-- in addition to vegetable oil, and even pig lard.

2 China is driving demand.

China’s imports of these have risen almost three-fold in a year
China’s moves are singlehandedly testing supply chains to their limits. The saving
grace for global markets has been that world demand across many of China’s favoured
imports was absent or squeezed until now; when it returns, global supplies could be
stretched further.
. Coming months will see a scramble by farmers to plant
and harvest. With many products facing scarcity, competition for limited arable land
will limit the potential resupply. The US, for example, can only increase its summer
plantings by about 5%; any production on top needs to come from yield improvement.

3 Supplies are on a tight-rope

Large
swathes of South America are too dry or too wet; meanwhile, much of the spring
planting area in the US faces signi?cant dryness.

4 Everything depends on the weather, where key exporters face an uphill battle.

Many critical agri exporters are
already putting up tariffs or export quotas, threatening free trade and curtailing local
farm prices and domestic production to keep prices affordable. Rather than ful?lling
their critical global role, such exporters are increasingly insulating themselves from
global markets: Russia, the world’s largest exporter of wheat, has implemented grain
export taxes; Ukraine export quotas; and Argentina, the largest exporter of protein feed,
has dabbled in export quotas too.

5 There is a heightened risk of protectionist policies.

On The Verge Of A Global Crisis: One Bank Warns Of A "Biblical" Surge In Food Prices
If a rising tide lifts all boats, a lack of boats lifts prices. ASF,
Covid, and weather events all drive demand shifts that suppliers have been unable to
anticipate or react to easily. Freight prices have jumped to a record for containers: bulk
(measured by the Baltic Dry Index) has also seen large increase, and this has delayed
and displaced shipments: naturally, these higher prices fall heavily on importers.

6 Logistics are tight.

Wall Street funds already hold in-the-money positions in soy and corn –
by far their largest net long position. Financial market investors currently hold contracts
of grains, oilseeds and livestock worth almost 50bn USD net length or 35% of the value
of all US agricultural exports in 2020. (see Figure 5.)

7 Speculators.

What makes this signi?cant, apart from the scale, is that
While Joseph was second only to Pharaoh, so central banks
are second only to governments: yet they are not helping to smooth out food cycles like
Joseph did.
this is happening due to the
actions of central banks.
Markets have grown used to extreme monetary policy since 2008. However, the
aggressiveness of the Fed’s current policy stance, now aimed to let the economy “run
hot”, and the shift to massively expansionary US ?scal policy too, has altered market
perceptions of future in?ation risks. Investors have responded by holding assets as a
hedge: stocks, property, and gold/ Bitcoin.
Yet Wall Street is now holding/speculating with agri commodities too - even though this
pushes up in?ation!
3) A Biblical rally
Having then listed the various structural reasons for agri commodity prices to have
risen so fast, we free our minds to ‘dream’ (if that is the right word) of a Biblical price
rally. Our bull market stands on four legs:
(which is how day-to-day markets are supposed to
work);
(i) Normal supply and demand
(given its import appetite makes it the marginal buyer that matters most); (ii) China
(covering changes to trade ?ows, protectionism/tariffs, and export
controls); and
(iii) Politics
On The Verge Of A Global Crisis: One Bank Warns Of A "Biblical" Surge In Food Prices
(where could equally say ‘the Fed’) (iv) ‘Wall Street’
Leg one: Normal supply and demand:
As noted, the FAO price index at 7-year highs is supported by rises in all of its
components; sugar, cereals, meat, oils and dairy. In our dream we ruminate on the
products who’ve risen the most, and are thus closest to scarcity: cereals and oilseeds.
They are currently so tightly balanced a small weather issue --a regular occurrence in
agricultural markets-- could tip the scales towards global scarcity.
The USDA, today’s high priests of agriculture, expect maximum acreage and healthy
yields in the US to maintain, but not re?ate, stocks. Yet they are arguably dreaming! The
US has seen two consecutive disappointing summer crops (feed grains: 359 and 375
million metric tons, soy: 93 and 113 million metric tons); and yields can often worsen,
rather than improve, on expanded --less ideal-- acreage. Imagine a third consecutive
lacklustre US summer harvest.
Even if last year’s average, not poor, yields were repeated in corn or soy, supplies would
fall below 2012 levels, a time prices were 35% higher than today. All else equal, even a
3-4% drop in production could move soy and corn prices up by a third.
In normal times, alternative grain and oilseed export surpluses might help cushion the
blow of a US supply shock – but if we take these into account too, cumulative exporter
stocks-to-use are still close to 2012 levels (see Figure 6).
On The Verge Of A Global Crisis: One Bank Warns Of A "Biblical" Surge In Food Prices
We started with soy and corn: but feed grains and oilseeds compete for acreage with
other commodities. Moreover, soy and corn are the primary feed components for both
animal protein and dairy, and produce cooking oil and biofuels.
Wheat, for one example, exhibits slow demand growth in line with slowing global
population growth, but also little elasticity. The upside is that there are so many
substantive exporters, which distributes supply risk. Yet global exporter stocks are
again already near 2012 lows: a 10% production cut in major suppliers like the EU, US,
or Russia could lift prices 30% to levels last seen in 2012.
? Current futures market positioning may be too somnolent.
Can this Pharaoh’s dream be interpreted to see any one commodity evading in?ationary
capture
On The Verge Of A Global Crisis: One Bank Warns Of A "Biblical" Surge In Food Prices
As noted, adverse weather is affecting major production areas. Over 90% of the
US Northern Plains (the area most likely to boost overall acreage), 50% of the Midwest,
and 59% of the South are already in some form of drought (see Figure 7).
already
With winter wheat emerging, and soy, corn, and cotton about to be planted, the terrain
looks nothing like the promised land the USDA is projecting. Perhaps they shouldn’t
have slept on the National Oceanographic and Atmospheric Association report
predicting three months of dry, warm US conditions ahead.
And what if we were to get a real US drought, as in ancient Egypt? Obviously this would
be far, far worse on all fronts.
Any crisis in food in?ation risks being exacerbated by food politics. Emergent food
export heavyweights like Argentina, Ukraine, and Russia have played a role in driving
prices higher through export taxes and controls; and trade wars have been destabilizing
and ine?cient for agri ?ows.
On The Verge Of A Global Crisis: One Bank Warns Of A "Biblical" Surge In Food Prices
In short, global supply chains appear bereft of the underlying geopolitical stability
assured until recently.
In the case of a future supply issue, however modest, there is a risk of heavier exports
controls. For one key hypothetical example, if Russia re-implemented its ban of 10
years ago on even half its export potential – 19m tons, the ensuing burden on the US
and others could double wheat prices to the USD12/bushel last seen back in 2008.
A further ‘political’ catalyst is biofuels, bene?cial for farmers and the environment, but
which exacerbate agri commodity supply stresses by shifting production from food
towards renewable energies made from agri commodities: namely biodiesel and
ethanol. Figure 8 shows higher income nations employing over 12% of their caloric
inputs (primarily vegetable oil and feed grains) for biofuel ingredients.
The ethanol market was largely absent last year amid a surge in feed demand; its return
could exacerbate supply pressures. For the US, a 500 million bushel rise in ethanol
usage fully offsets potential acreage expansion in 2021, for example. Assuming a
doubling of ethanol exports (to China), it would not be unrealistic to assume corn
prices could potentially rise a further 15%. Full implementation of biodiesel and
renewable diesel mandates in Indonesia, Europe, Brazil and others, supported by high
diesel prices, would potentially drive support for key component vegetable oils like
palm and soy near or to record levels.
In short, in the short term --where politics happens-- the Green transition could mean
higher food prices.
Leg three: China
China is the single biggest swing factor besides weather/production. It has the
potential to disrupt global agri balance sheets for years to come.
Higher imports and domestic production increases are the apparent solution. China is
expected to import 35-45 million metric tonnes of feed grains per year for the coming
years - much more if rosy production expectations are unful?lled. If China’s domestic
output disappoints, it would exacerbate a structural de?cit requiring yet higher imports
of grains and oilseeds --by as much as 15m metric tonnes-- and raise global prices of
corn and soy by additional 30%. In the past, China has implemented Joseph-like
policies and holds large stockpiles of wheat and rice,
On The Verge Of A Global Crisis: One Bank Warns Of A "Biblical" Surge In Food Prices
Higher imports and domestic production increases are the apparent solution. China is
expected to import 35-45 million metric tonnes of feed grains per year for the coming
years - much more if rosy production expectations are unful?lled. If China’s domestic
output disappoints, it would exacerbate a structural de?cit requiring yet higher imports
of grains and oilseeds --by as much as 15m metric tonnes-- and raise global prices of
corn and soy by additional 30%.
However, amid elevated domestic prices and imports of dairy, pork, oils, and grains, it is
far from apparent that China is purely engaging in strategic “restocking”: rather in our
‘dream’ we interpret that China is rapidly destocking in products including feed grains
and oilseeds. Higher imports and domestic production increases are the apparent
solution. China is expected to import 35-45 million metric tonnes of feed grains per year
for the coming years - much more if rosy production expectations are unful?lled. If
China’s domestic output disappoints, it would exacerbate a structural de?cit requiring
yet higher imports of grains and oilseeds --by as much as 15m metric tonnes-- and raise
global prices of corn and soy by additional 30%.
On The Verge Of A Global Crisis: One Bank Warns Of A "Biblical" Surge In Food Prices
As already noted, Wall Street is an established player in the agri commodity space and
has room to grow its in?ation-hedging bets from here. Despite current long positions,
the overall net position is still nearly 10% below the record.
Wall Street probably wouldn’t increase its positions in a vacuum: but if any of the above
‘legs’ come to pass, it would likely respond. Funds could easily extend their speculative
length, not just in feed, but also wheat. This ‘dream’ could help push agri prices up to
the 2012 peak 40% higher from here.
Moreover, should US ultra-loose monetary and ?scal policy produce signi?cant US
in?ation, or stag?ation, and/or yield curve control to peg the long-term cost of
borrowing, Wall Street would again likely increase its agri commodity in?ation hedges.
We summarize the relative impact on soy, corn, and wheat in this (bad) dream scenario
below:
Leg four: Wall Street
On The Verge Of A Global Crisis: One Bank Warns Of A "Biblical" Surge In Food Prices
For soy, the primary price driver ahead is weather (5 from a maximum 7), then China
and Wall Street equally (3), then potential political actions (2). For corn, China is the
largest potential factor (5), followed by weather (4), then Wall Street (3) and politics
(2). For wheat, weather (3), politics (3), and China (3) are all equally important, with
Wall Street relatively less so (2).
On The Verge Of A Global Crisis: One Bank Warns Of A "Biblical" Surge In Food Prices
Of course, all cows stand on four legs, and any one of the factors above could play out
individually for any one commodity to signi?cant effect. Yet as with any cow, where
one leg goes, the others usually follow.
In short, if we were to see bad weather; and protectionism/sustainability-related
regulations; and further heavy buying from China; and a surge in Wall Street
speculation then
.
it is hard to say just how high prices could reach before demand
destruction kicked in
(4) Food Security
The impact on food security should be obvious: indeed, it already is:
In the MENA countries --the highest per capita consumers of bread-- the 30%
increase in international wheat prices seen so far in 2021 leaves them just shy of
levels seen during the revolutionary Arab Spring;
Asia’s burgeoning middle class is grappling with 30-50% increases in pork,
cooking oil, sugar, and dairy prices; and
Africa, with lower GDP per capita, has an even clearer predicament.
Yet in our dream, things get worse. The impact of price increases will fall
disproportionately on poorer, importing countries, reversing the improved economic
outlook for some of the new global middle class - and even lower income deciles in the
wealthiest countries would feel it. We attempted to summarise these risks with simple
snapshots.
On The Verge Of A Global Crisis: One Bank Warns Of A "Biblical" Surge In Food Prices
World Bank data from 2017 show USD income per capita around the world at
purchasing power parity. The same data also show the amount spent on food per
capita. One can then calculate the percentage of income allocated to food (see Figure
10). Obviously, the ?gures vary between wealthy regions, such as North America, and
poorer ones, like Africa, where the differential is over a factor of four.
Holding income ?gures constant (as this is just an indicative exercise), we then change
agri commodity in?ation. Although such agri price changes have and will vary by
commodity, we use the aggregate index as a base to avoid having to break down the
complexities of varying national diet patterns.
As we showed, since 2017, agri commodity in?ation has been substantial (45%). We
then project a hypothetical doubling of the agri commodity basket for our ‘lean cows’
dream on top.
We must then consider how much of the change in price in the agri commodity basket
is actually passed on to higher food prices. One might be surprised how little of the
cost of the foods we eat actually re?ects the raw ingredients as opposed to labour, rent,
logistics, etc. (See Figure 11.)
Keeping all of these factors unchanged, we presume that
This re?ects OECD food in?ation of 6-8% in recent scarcity events, while recognizing
that in some sectors and markets this has tended to be higher, in particular for import
dependent countries.
agri commodity in?ation of
around 100% would translate into recorded global food price in?ation of around 12%.
As can be seen in Figure 12, on a regional basis we can see that for East Asia and the
Paci?c, the percentage of individual incomes spent on food rises from 9.3% to 10.4%;
in Europe and central Asia from 8.6% to 9.6%, Latin America from 11.5% to 12.9%; the
Middle East the same 11.5% to 12.9%; North America 5.1% to 5.7%; South Asia from
16.9% to 19.0%; and sub-Saharan Africa from 20.7% to 23.2%.
Of course, the actual impact may be less given incomes would have risen in most
places in the past four years in line with GDP growth – but then again Covid-19 could
well have seen these gains partially reversed in many locations.
On The Verge Of A Global Crisis: One Bank Warns Of A "Biblical" Surge In Food Prices
To put this into perspective, one also needs to consider where a crisis threshold lies in
terms of food affordability.
Although this again varies for a number of reasons, if one selects the 20% of income as
the key level, double the world average, then the global impact of this ‘dream’ agri
commodity price shift cannot be understated.
Figure 13 shows the total number of countries in each region that were already at risk
of food insecurity using the World Bank’s 2017 data compared to the number projected
ahead using our “lean cows” assumption. As can be seen, Central Asia sees 1
additional country slip into food scarcity; Latin America 1; MENA 1; and Africa 2. Again,
: if more lean cows were to emerge,
more people would also get leaner.
this is presuming a 12% increase in food prices
Even as is,
representing a
step backwards down the pyramid – Maslow’s pyramid of basic needs. We would be
back below 2011 levels in terms of food affordability, representing over a lost decade in
the ?ght against hunger.
42 countries globally would be food insecure: and a staggering 102
countries would see a relative decline in their purchasing power of food,
At the very least, steady progress experienced by much of the emerging world’s middle
class could be frozen or reversed. That’s a process we have seen end in populism in
Western economies already.
‘Yum’ Kippur?
We are talking here about a potential surge in parts of the agri-commodity complex.
However, our global macro in?ation thesis remains very different.
On The Verge Of A Global Crisis: One Bank Warns Of A "Biblical" Surge In Food Prices
We continue to recognise the signi?cant near-term upwards price pressures in many
areas of the economy, which stem from a combination of base effects, Covid-related
supply disruptions, genuine demand increases - or shifts, and looming US ?scal
stimulus. Yet as we have argued for many years, structurally one only sees in?ation
sustained if either supply is too weak (and outside agri commodities and
semiconductors, this is not an issue), or demand too strong – and workers still do not
have the bargaining power to push for pay rises in most sectors of most economies.
The present US ?scal stimulus does not address this issue at all.
Indeed,
Were we to see a
bounce in the US dollar on the back of higher long end US rates, this would exacerbate
that trend: it could also partially weigh against some of the bullish agri-commodity
trends we consider.
the greater likelihood is still that after an upwards surge in H1 2021, there will
be a downshift in aggregate in?ation pressures again into 2022.
Moreover, were we to see an economic slump after the current US ?scal ‘sugar rush’,
then presumably agri commodity prices would come under further downward pressure:
note that previous spikes have often been rapidly followed by just such a slump. (More
like seven lean then seven fat months in that case!) In that case, the Wall Street
speculation we have already underlined would also be rapidly reversed: and what has
helped make for fat markets would then make for lean ones. In short, volatility would
be ampli?ed in both directions.
let’s dream agri commodity prices stay high for structural/political factors
even as aggregate in?ation falls back due to a weak global economy.
Nonetheless, We have seen something similar to this hypothetical backdrop previously
if one shifts the kind of oil one is thinking of.
On The Verge Of A Global Crisis: One Bank Warns Of A "Biblical" Surge In Food Prices
Indeed, think of the oil price spike experienced after the Yom Kippur War of 1973 and
Arab oil producers responding with reduced supply into what was then a far more
Keynesian, ?scally-driven world economy.
WTI oil, for example, jumped from USD3.56 in July 1973 to USD4.31 at the end of that
year --a 21% increase-- and then again to UDS10.11 --a 293% increase from the July
1973 price-- at the start of 1974 in response to Arab oil-state’s actions (see Figure 13).
This necessarily pushed general in?ation much higher in tandem globally.
As we know, the demand-led policies of Western economies, which were still far more
regulated, far less globalised, and had far stronger unions at that time, led to in?ation-
matching pay rises, so setting off a wage-price spiral. Consequently, oil prices marched
as high as USD39.50 --a 390% increase over January 1974 and 1,109% over July 1973--
before eventually declining.
On The Verge Of A Global Crisis: One Bank Warns Of A "Biblical" Surge In Food Prices
What is critical to recall is that
in order
reduce the power of labour in favour of capital, capping in?ation pressures in the
process. With global populism rising, and critics pointing out those reforms have gone
too far, producing socio-economic problems of an entirely different but just as
damaging kind, the key hypothetical to ponder is this:
this episode was arguably the key political driver of the
structural reforms put in place to globalise and liberalise Western economies
Of course, nobody knows. However, you don’t have to be Joseph to see that political
developments such as Brexit, and obvious examples of agri protectionism, mean it
would be dangerously naïve to rule this risk out entirely.
This in itself would then open up a new discussion of what such a structural shift might
mean for the increasingly-turbulent geopolitical backdrop, and how that then might
?ow back to markets.
After all, there was open talked of an Arab “oil weapon” after the 1970s: and the
emergence of the “Petro-dollar” was intimately linked to how the huge oil surpluses
Arab states then began to accumulate were recycled: in short, into the US, in exchange
for US military protection.
This brings us ?rmly to geopolitics.
5) Not Just Any Dream Will Do
After all, let’s not forget that Egypt was the ancient world’s superpower because of its
grain harvests: the ?ow-through from food prices to geopolitics today should be
obvious:
On The Verge Of A Global Crisis: One Bank Warns Of A "Biblical" Surge In Food Prices
: it’s not a
coincidence the last global agri commodity price surge coincided with the Arab Spring.
Given even developed economies have experienced major socio-political unrest, the
risks should be self-evident. In short, an agri commodity price spike, like Covid-19,
could be an accelerant to pre-existing political trends.
First, weaker states could ?nd themselves at risk of signi?cant instability
, in which US food production and a Chinese food de?cit plays no small
part. Would higher agri prices mean the US-China Phase One Trade Deal holds, or
breaks, for example?
Second, we live in a new age of Great Power politics, centred around an unfolding US-
China rivalry
More broadly, a key question is whether an agri commodity price shift higher would
help force changes in the structure of the global economy and ?nancial system. We
have covered the likelihood of a paradigm shift away from the USD many times, and
have always been highly sceptical. Yet hunger is a powerful incentive for action.
. Both China and Europe could push for adoption of alternative payments
systems, or at the very least for commodity pricing in EUR or CNY.
Such a ‘lean’ backdrop could accelerate efforts to shift the global trading system away
from the USD
China is already trying to boost local agri production and diversify its agri imports.
However, it would require an entire network of major agri producing countries to make a
FX/trading paradigm shift away from the USD in tandem with it in order to break free
from the US(D) yoke in agri markets. Until then China would remain in a relatively
weaker position vis-à-vis the US on this key front. Its huge appetite for agri
commodities (and by extension, USD) would remain: and if it were to continue to snap
up global agri supplies, then resentment could rise against it too along with said prices.
On The Verge Of A Global Crisis: One Bank Warns Of A "Biblical" Surge In Food Prices
On one hand, this suggests a weaker CNY, as we saw under previous periods of
structural stress (over exports to the US, and technology controls): on the other hand, a
stronger CNY would help make agri imports cheaper. In short, China would have
di?cult strategic choices to make, with each option coming with major trade-offs.
Europe would be better placed in terms of food security due to its comfortable agri
surplus and high incomes. It also has plans to broaden the international usage of EUR.
Yet its twin Achilles’ Heels are still that relies on a US-controlled Eurodollar and a US-
owned defence umbrella.
Emergent global middle powers would have to adapt to a multipolar, volatile
geopolitical environment, and ponder what food (in)security means for their own
strategic positioning: for exporters and importers it obviously implies very different
opportunities/risks. More concretely, would they side with the US or China if forced to
make a choice in the global trade/FX paradigm?
Meanwhile, there would likely be a new “Race for Africa”. China has been extremely
active there in recent years; so has Russia; and Turkey; and the EU sees itself as having
a major role in both Africa and the Middle East. America is also likely to be involved,
albeit under the guise of national security – which in a way it of course is.
Ultimately, however,
).
Indeed, global food insecurity would underline the extent to which the US can ride out
food price cycles that batter other economies, supporting its hegemon status.
just as the gold-pegged USD segued to a new, bigger ?at role as the
“Petro-dollar”, backed by US military might, so the stronger global “Eurodollar” would be
supported by the US being a major net food producer and exporter (and military power
On The Verge Of A Global Crisis: One Bank Warns Of A "Biblical" Surge In Food Prices
For countries unable to afford food imports priced in USD, the US would be in the
position to bail them out with FX swaps or loans as it saw geopolitically advantageous
– or to support multilateral organisations doing the same. It might not be able to
produce extra food at short notice, but it could produce the USD to buy existing food,
even if it forced prices to spiral even higher in the process.
Yet at the same time, however, global resentment of the US would likely rise if these
actions did not materialise; and/or on the perception that the old adage of “the dollar is
our money and your problem” were the US starting point.
How does
one sell helping the poorest in one of the world’s richest economies if it also hurts the
poor in the world’s poorest economies?
How much global patience
would there be for the Fed (and US government) to echo Dr. Martin Luther King, Jr.’s “I
have a dream” on equality if the global outcome was greater food insecurity?
In short, it is the stuff of (bad) dreams: but
and open up new ones. This could easily ?ow
back to agri commodity markets in a re?exive process.
high global food prices would deepen and
widen pre-exiting geopolitical fault lines,
What Dreams May Come
Although nobody’s dreams correctly tell the future, there appears a worrying risk that
many individual factors (weather, politics, China, and Wall Street) could individually --
and in a worst case, collectively-- push up global agri commodity prices signi?cantly on
top of the marked increase that we have already seen in 2021 to date.
On The Verge Of A Global Crisis: One Bank Warns Of A "Biblical" Surge In Food Prices
Were this to prove the case, with the impact
potentially felt by billions, most so in sub-Saharan Africa and South Asia: we would
face a potential lost decade for reducing food insecurity and improvements in
disposable income; and the rapid growth of their middle classes could be stunted for
years. In terms of food affordability, 42 countries would be worryingly insecure, and
102 would be worse off than they were in 2011.
food insecurity would obviously increase,
Critically, this would not be something the current global political economy would
passively accept. Shortages of luxuries or electronics are one thing: food is quite
another. Rising populism among a weakened middle class in the West, 2020’s
scramble for PPE, and 2021’s dash for vaccines already all show just how easily the
rules of the global trading order can be up-ended when local politics dictates.
that are already evident across
various locations.
All of this would only exacerbate geopolitical tensions
Moreover it could, in some scenarios, such as last seen in the 1970s, shift our global
political economy and ?nancial architecture in new (or rather, old) directions: at least it
may see attempts at such, even if not successful.
Food for thought (Joseph), as we consider how Pharaoh this rally still has to run.
Arbeidsavtale er ikke på plass innen Tangen starter i sin nye jobb. Meget problematisk!

The bottom line is for the people to regain their original, moral principles, which
have intentionally been watered out over the past generations by our press, TV, and
other media owned by the Illuminati/Bilderberger Group, corrupting our morals by
making misbehavior acceptable to our society. Only in this way shall we conquer this
oncoming wave of evil.
Commentary:
Administrator
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