We're moving from a global free trade world to a polarising world sped up by the events of the last three years. None of us can predict what will happen from the economic, production, and trade perspective but we can speculate. The current issues between Russia and Ukraine may seem far away from us who don't live there, but far from it.
We are an interconnected society and any break in supply chains can have ripple effects around the world. If we consider the fact that Russia and Ukraine are in the top 10 wheat producers in the world with a combined 112 million metric tons, having that cut-off and having a disruption in planting and access to fertiliser is going to seriously impact the amount of wheat available on the open market.
Other wheat producers would probably have not accounted for this happening and would not have planned to increase production to compensate for supply.
Top 10 countries by most wheat production:
- China (134.3 million metric tons)
- India (98.5 million metric tons)
- Russia (85.9 million metric tons)
- United States (47.3 million metric tons)
- France (36.9 million metric tons)
- Australia (31.8 million metric tons)
- Canada (30 million metric tons)
- Pakistan (26.7 million metric tons)
- Ukraine (26.2 million metric tons)
- Germany (24.5 million metric tons)
Source: - worldpopulationreview.com
If you're not a hipster or, on keto or have some sort of gluten issue, then wheat is a considerable part of your diet. It's used in everything from breads, beers, cereals, ice cream, pet foods, and even medication.
If we are to have a wheat shortage that in a worst-case would take around 14% of the world's wheat production offline, you will be in for a bidding war. Ones the richer countries will win, they will be able to fund the shortage and smooth it out for themselves, sure there will be higher prices for consumers, but they will accept it.
If there is one product that has price tolerance its food, as for the poorer countries in the developing world, we're probably shit out of luck. We will have to make do with the scraps that are left and if that results in famine I would not be surprised.
There is simply no way to quickly ramp up production locally and fast enough to smooth out demand and someone will have to pay the price or draw the short straw.
Add to that supply chain issues, markets are going to be short and prices are going to explode. If prices explode for food, it's a recipe for unrest.
A hungry man is an angry man and not one that is easily reasoned with when you cannot provide a solution that provides instant relief.
Summary of current shortages
If you want to explore more of the worldwide shortages that are going to be stretched to the max in 2022, then this video provides a great summary.
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