The world was facing a grain supply crunch even before Putin’s invasion of Ukraine.
The United Nations food price index was already higher in real terms than at the height of the global hunger crisis a decade ago, when Tunisian bread protests set off the Arab Spring.
The tight global market for grains, vegetable oil and fertilisers was probably one of the many reasons that Putin chose this moment to strike, calculating – wrongly it may prove – that the West would not dare to squeeze him too hard.
The world faces what amounts to a commodity “black swan” across the gamut of primary resources. Oil, gas, coal and the “ags” are all spiralling higher together, with metals catching up fast. It is a systemic stagflation shock, an intractable problem for central bankers. It acts like a war reparations tax on the economies of importing nations and is ultimately contractionary.
Natasha Kaneva, from JP Morgan, said inventories of tradable commodities are critically low and the world is running out of safety buffers. This is a recipe for “non-linear price increases”, she said.
Unlike the West, China is prepared. It has been stocking up for months and holds 84 per cent of the world’s copper, 70 per cent of its corn and 51 per cent of its wheat. “China has bought enormous quantities of US soy in recent weeks,” said Rabobank. One might ask if Xi Jinping knew something in advance.
Record food commodity prices are an ordeal by fire for some 45 poorer countries that rely heavily on food imports: the Maghreb, the non-oil Middle East, swathes of Africa, Bangladesh or Afghanistan…
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