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Will The U.S. Face A Food Shortage? - YouTube
Channel: CNBC
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Food prices in the US soared
to record heights in
[3]
February 2022.
[4]
Global food prices also
followed suit, posting a
[7]
20.7% increase compared to
last year.
[10]
Highest prices we've seen
since probably for the last
[14]
ten years. Stock levels,
lowest levels since, in some
[18]
cases 2007,2008.
[21]
It's particularly severe
because we are just coming
[24]
out of a recovery from a
two year, two and a half
[27]
year pandemic that had
severe implications on the
[32]
price of goods and
services, as well as the
[34]
price of commodities.
[36]
Coming right out of that
kind of historic
[41]
disturbance of the world.
[43]
Boom were hit with a really
huge geopolitical event.
[47]
The war in Ukraine is
putting a massive strain on
[50]
the global food supply.
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The chief of UN World Food
Program warned that a
[54]
potential global food
crisis might be on the
[56]
horizon on a scale not seen
since World War Two.
[59]
Some estimates place the
total caloric value
[64]
of the food exports from
the Ukraine and Russia at
[68]
around 12% of the globe's
total calories.
[73]
The Ukrainians can't plant
right now and can't get
[76]
their wheat in the ground.
[77]
It does mean that the 2022
planting season will not
[81]
yield much if they get some
in or the size harvest that
[85]
the world is anticipating.
[87]
This is going to be another
major test of the food
[89]
supply system.
[91]
We will have to watch very
carefully what's happening
[93]
in other parts of the world
and consider ways to
[97]
reduce risks of food
shortages and conflict.
[102]
This is going to be very
challenging.
[104]
So how exactly does the
conflict in Ukraine pose a
[107]
threat to the global food
supply, and can anything be
[109]
done to stop it?
[114]
Russia and Ukraine are
agricultural giants that
[116]
provide a pivotal role in
the global food supply.
[119]
In 2021, Russia exported
$37.3 billion worth of
[124]
agricultural products to
the rest of the world, while
[126]
Ukraine exported more than
27 billion.
[129]
They regained their role as
one of the primary bread
[132]
baskets of the world.
[133]
They're not only large in
wheat, but also in things
[136]
like corn, where they
account for some 20-25% of
[140]
corn exported in the world.
[141]
Sunflower oil, where the
two countries account for
[144]
almost 75%.
[146]
So a lot of nations depend
on exports from those two
[149]
countries.
[150]
But the Russian invasion has
had a drastic impact on
[153]
Ukraine's agricultural
exports.
[155]
The country banned exports
of several grains, sugar,
[158]
salt and meat in early
March.
[160]
The blockade of the
country's port has also
[162]
halted the shipment of
existing grains.
[165]
As a result, Ukrainian
grain exports in March were
[168]
four times less compared to
the levels in February.
[170]
To ship 9% of the world's
grains.
[173]
When you don't have a
seaport is quite difficult.
[176]
Now there's some talk about
shipping on trains or on
[179]
land, but it's not a
substitute for the massive
[182]
kinds of shipping that was
existing before.
[185]
There's also the question of
whether Ukraine could
[187]
maintain its agricultural
productivity, given its
[190]
current predicament.
[191]
It's a really topsy turvy,
uncertain situation.
[195]
Maybe in the far western
part of Ukraine.
[198]
The security system is
pretty good, but are they
[200]
going to have the
availability of diesel fuel
[202]
to get the tillage and the
planting done?
[206]
And we also know a lot of
farmers are probably joined
[209]
the Ukrainian military so
there could be labor
[211]
shortages.
[212]
While Russia has yet to
impose a wide export ban on
[215]
agricultural goods.
[216]
Its involvement in Ukraine
has put a massive strain on
[219]
the cost of fertilizers.
[221]
Prices for raw materials
like ammonia, nitrogen
[224]
nitrate, phosphate, potash
and sulfate saw a 30%
[227]
increase compared to the
start of 2022.
[230]
Russia and Belarus are big
exporters of
[234]
fertilizers in the world,
and fertilizer prices have
[238]
been very high.
[239]
Natural gas prices have
been very high, and natural
[242]
gas is a feedstock for
nitrogen based fertilizers.
[247]
In early March, the Russian
ministry recommended the
[249]
country's fertilizer
producers temporarily halt
[252]
any exports.
[253]
If the price of fertilizer
goes up.
[255]
You know, that might be a
relatively small price in
[258]
terms of input costs that
might get transferred to
[262]
consumers. But if less
fertilizer is produced and
[265]
less fertilizer is applied
to crops, we might have
[269]
lower yields. And so that
could affect total global
[272]
supply of important food
commodities.
[277]
The global food supply was
already in a fragile state
[280]
before the crisis in
Ukraine due to global
[282]
warming as well as supply
chain disruptions caused by
[285]
the pandemic.
[286]
You've got to realize that
even prior to the invasion,
[288]
global food stocks were
tight.
[290]
That is, we have run down
levels over the last couple
[293]
of years, part of that due
to the pandemic, but some of
[296]
it due to the fact that we
had weather issues.
[298]
We had a drought in the
North America that affected
[301]
the wheat crop last year in
Canada and parts of the US.
[304]
We're just coming out of a
drought in South America
[307]
which is adversely
affected, the Brazil soybean
[309]
crop and Brazil's the
largest soybean exporter in
[313]
the world.
[313]
Coming right out of that
kind of historic
[318]
disturbance of the world,
boom were hit with a really
[322]
huge geopolitical event.
[324]
In response, food costs have
climbed to its highest level
[327]
in nearly two years, while
prices for commodities like
[330]
wheat and corn have reached
the highest it's been in a
[333]
decade. The US Department
of Agriculture predicts that
[336]
food at home prices will
see an increase of up to 4%
[339]
by the end of 2022.
[341]
The United States is already
experiencing very high
[344]
inflation on food and
energy prices.
[347]
There is no question that
the war in Ukraine will
[350]
accelerate the increase in
prices in both commodities.
[354]
That is food, the bread you
buy in your grocery store,
[357]
the gasoline that you have
to put in your car or truck.
[360]
The United States is a net
exporter of a lot of the
[363]
grains that we're talking
about.
[366]
Those exports are still are
affected by world prices.
[370]
So we're still going to see
increased prices.
[372]
And again, energy prices
are world prices as well,
[375]
and those are going up.
[376]
As consumers,when there's a
really large increase in
[381]
energy prices, consumers
are going to definitely see
[384]
that in their prices
because that affects every
[388]
stage of the supply chain.
[390]
While prices might rise,
experts reassure that a food
[393]
shortage is unlikely to
occur in the United States.
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The US does import very much
from from Ukraine a little
[400]
bit of sunflower oil, but
we grow a lot of soybeans
[403]
and other so called
oilseeds that we're able to
[406]
get vegetable oil. So the
lack of vegetable oil from
[409]
Ukraine itself is doesn't
have much impact on on us
[414]
consumers.
[414]
I can say with some real
confidence that in the
[417]
United States, the average
consumer is not going to see
[422]
a shortage of bread.
[424]
We may see some shelves
that are empty for
[429]
various kinds of food
products like we have as we
[432]
recover from the pandemic.
[433]
While richer countries have
the resources to offset the
[436]
shortage caused by the
crisis in Ukraine, a strain
[439]
on the global food supply
could still hurt
[441]
marginalized populations,
as well as developing
[443]
countries that are forced
to rely heavily on imported
[446]
food.
[446]
I do have concerns moving
forward of what will happen
[449]
to households that are
particularly vulnerable and
[453]
particularly impacted by
inflation.
[456]
And I am concerned about
countries that may
[458]
additionally have certain
frictions to global trade.
[462]
There are certain countries
that may be traded with
[464]
Russia and Ukraine and
don't have trade relations
[467]
with other parts of the
world where they might get
[469]
these products. We could
really see a lot of people
[472]
suffering here in the near
future.
[474]
A global food crisis could
also potentially lead to
[477]
more conflicts around the
world.
[478]
For instance, the Arab
Spring is thought to be
[481]
fueled by anger surrounding
the rise in food prices.
[484]
Egypt, Yemen, Indonesia,
Bangladesh, Ethiopia and
[488]
Lebanon, Libya, Pakistan
and Iraq.
[492]
So those are the main
importers of wheat.
[495]
Of course there are then
others that get some from
[497]
Russia and some from
Ukraine.
[499]
But just think about the
size of these countries and
[502]
many of these places.
[503]
Yemen is in an ongoing
conflict.
[505]
Bangladesh is on the edge
because of all of the
[509]
refugees coming in from
Myanmar.
[511]
Ethiopia is in a war with
its province, Tigray.
[514]
Lebanon is in an extreme
state because of the crisis
[518]
that it had over a year
ago.
[520]
Just think about all these
places around the world that
[523]
could blow up.
[524]
There are several ways to
mitigate a potential
[527]
fallout. Shortly after the
invasion, countries like
[529]
Hungary, Serbia banned
exports of certain
[532]
agricultural products to
protect their food supply.
[535]
Experts say such
protectionist measures will
[537]
only have negative
consequences.
[539]
It might be a good short
term solution for that
[542]
country in the sense that
it keeps wheat prices lower
[547]
in the country. But by not
exporting, that means prices
[550]
in the rest of the world
are going to be even higher.
[552]
And unfortunately, with
things like export
[555]
restrictions, they tend to
be very contagious.
[557]
We economists call this as a
beggar thy neighbor type of
[560]
contagion. So if one
country does that, then the
[565]
next country will get
scared.
[566]
They'll do it. And all of a
sudden you've made a
[571]
very difficult situation
even more difficult.
[575]
The best advice is do no
harm.
[577]
That is, don't create
additional restrictions.
[579]
Don't put on export
restrictions in other things
[583]
that can further hamper
supplies to the market.
[586]
It's also important for
other major producers to
[589]
grow and export more food
to help fill the gap left by
[592]
Ukraine and Russia.
[593]
There are some things that
markets do very well, and
[595]
part of that is increasing
those incentives for farmers
[599]
and producers to produce
goods that maybe there's
[604]
some shock to supply in
another part of the world.
[606]
The European Union has
already announced that
[609]
they're going to try to
take some measures to
[612]
release what they call some
of their set aside acres,
[615]
make it eligible for
production this summer.
[619]
There's been a big
controversy about doing
[623]
something similar here in
the United States with
[626]
what's called conservation
reserve program makers.
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I don't think there's
probably much we can do
[631]
given the late date
relative to planting here
[635]
for spring planted crops.
[637]
But there's a possibility
of maybe making some of
[642]
those acres available for
winter wheat production next
[644]
fall.
[645]
Some policies might also
need a reassessment.
[647]
Given the current
situation.
[648]
I think it's time to really
give a hard look at things
[651]
like biofuel policies.
[653]
In the US, some 42% of our
soybean oil goes to
[657]
biodiesel production.
[659]
You know, this is a time
when vegetable oil prices
[662]
of which soybean oil is
one, are hitting record high
[666]
levels. So I think an
argument could be said, why
[669]
should we be putting 40% of
our soybean oil into into
[674]
biodiesel?
[675]
But as always, the most
effective solution might be
[678]
in prevention.
[679]
Do as much as we can to
encourage the
[683]
development of agriculture
within
[688]
these poor, consuming
countries.
[690]
That's probably long term
the most important thing
[693]
that we can do.
[694]
What I worry about every day
is that this common
[698]
knowledge that, oh, we will
not suffer because the world
[702]
has enough food is maybe
coming under question.
[705]
If this war goes on for a
long time, or we strain the
[710]
supplies and that the less
developed world which has
[713]
fewer resources, let so
many people squander
[719]
this opportunity.
[721]
And I'm just hoping that
the world's development
[723]
community uses this as a
wake up call to do more.
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