CHESTERFIELD, Missouri – Russia’s invasion of Ukraine has created not only instability in the geopolitical climate, but also uncertainty in agriculture.
Ukraine has been called the “breadbasket of Europe” for many years and in 2020 exported $ 6.12 billion worth of agricultural products to the European Union, compared to $ 7.01 billion in 2019. In addition, Ukraine has changed the United States as the main supplier of corn to China. 2021
According to the US Department of Agriculture’s foreign agricultural service, in 2021 Ukraine harvested 32.7 million tons of wheat, 9.6 million tons of barley, 600,000 tons of rye and a record 40 million tons of corn.
Of Ukraine’s total area of 60 million hectares, about 42 million are agricultural lands, which include cultivated lands – cereals, industrial crops, fodder, potatoes and vegetables, as well as fallow land – gardens, orchards, vineyards, permanent meadows and pastures.
According to the CIA World Factbook, Ukraine produced 25% of all agricultural products when it was part of the former Soviet Union.
The National Corn Growers Association reviewed the impact of the situation in Ukraine in a recent podcast featuring Mark Purdy, executive vice president and chief operating officer of Aimpoint Research, a strategic consulting firm specializing in applying military tactical thinking to business issues. Purdy is a former army colonel.
The NCGA podcast “Wherever Jon May Roam” was hosted by NCGA CEO John Doggett and Dusty Weiss, president of Podcamp Media.
Here is part of the podcast.
Weiss: The fact that this is a very rich, fertile agricultural region that operates here and certainly served as food for much of the Soviet Union, do you think that is part of the attraction that operates here as well?
Purdy: Well, I think that’s certainly a factor. If you think about resources, then it is definitely a national and global element. If you control these resources, whether it’s fuel or certain minerals, oil, but food is definitely important.
Russia is able to control this, if Russia is a major producer of wheat, Ukraine is home to this most fertile chernozem, and Ukraine’s production capacity is not fully realized, it would certainly be a resource that Russia could use if they had control over the region.
Doggett: What are the immediate implications for food not only in Europe but worldwide?
Purdy: Yes, it’s big, just Ukraine is called a granary, especially for Europe to a large extent. Just take two goods that are near us in the United States, in corn and wheat – wheat, of course, if you take Russia, Ukraine, throw, maybe there parking, it’s one third of the world’s wheat coming out of this area.
The conflict is sure to destroy a third of the world’s wheat, and it has huge consequences when it comes to food. Think what was the impetus for the Arab Spring? I mean, it was this dense wheat, we can trace it right up to that significant moment in recent history, and we can see things like that, so the effects can be felt around the world.
Now corn isn’t that big, but when you talk about 10%, 12%, 15% of the global, it’s huge, so we’ll see second- and third-order effects when we talk about what’s happening around the world.
It will be limited supplies, it will be high prices for goods, perhaps at some point in time, which means that it will be difficult for people to get the food they need, food inflation and the like.
Weiss: This is something that is happening in the immediate sense, but in the longer term, how does it all affect manufacturers here in the United States?
Purdy: I think in the near future there will probably be some jump in commodity prices, but then how will the rest of the world react? Are they starting to look for alternative sources, alternative foods to meet demand? I think the impact could be volatility.
And then when we think of one area of marketing food for some of our goods compared to fuel, versus some other uses, I think that creates a lot of volatility.
It may be some profit in the short term, but probably in the long run we will see some wild fluctuations to high and low commodity prices. And then just stack it with some other things that are already happening to us, with inflation, with input costs and the like.
We have had this conversation with Russia and Ukraine, but we have a lot of other things going on around the world when it comes to competition and conflict.
Doggett: We have a number of hotspots around the world. We have China, we still have the situation in Syria, we are just coming out of the two longest wars this country has ever been involved in, Afghanistan and Iraq, and they are certainly unresolved. South of the border we have drug terrorism. What about these hotspots? What about China? What about the Middle East?
Purdy: This is a great moment, because if you take what is the relationship between Ukraine and Russia and China? Well, great. China is counting on Ukraine to make up for its dependence on any American goods for corn and soybeans, especially when we see what we see in South America with the long-term effects of La Niña.
Our disputes and competition with China certainly affect this, but it is no less. If you’re thinking about layering volatility effects, then China is coming to the US because we have what they need. If they can get it elsewhere, sometimes they do so that predictability isn’t always there, so it leads to volatility.
Doggett: The big difference between where we are now and where we were in the 80s and 90s is that we are energy independent, and that’s a huge benefit for this country. And I think one of the things that a lot of people have been working on, including our organization, is developing more energy. And we’ve had the development of natural gas with a rupture layer and all that, and I think it really helps a lot, but how safe are we with our food supplies now? We can produce a lot of food in this country, but in light of what happened after COVID, how fragile are we with this food security in this country?
Purdy: I think it comes down to our distribution, but if you think about it, there are a few world leaders who have said that only three meals take you away from chaos, no matter how developed your society is and how lucky you are, and we’ve seen some of them in COVID. I mean, just running around the shops when we even thought we might be in short supply.
Security, when it comes to the stability of society, we are a little more fragile than we thought, and this is due to some distribution. When we look at it, I call it food power, so when we talk about what we have in the U.S., we have food power, which means we can feed much of the rest of the world.
This means that others expect stability from us. This means we can feed our populations so that we can build our economic power and we use food for diplomatic power.
Our military power, if you think about it, does not happen without this food security. Our center of gravity in the United States is not only our ability to produce food for our people, but our national security, if you think of a center of gravity, is our ability to overproduce and supply the rest of the world.
Where are we in this? I think we are at a crossroads because when we look at some of the factors that are at work, it’s just this volatility in the market and worldwide demand, but also the movement towards the environment that we need to do, and we need to accept this, but we need to promote environmentally sustainable practices that support and increase production capacity.
That’s what I’m hoping for and at the same time worried about, because going back to the practices of two centuries ago to help the environment is not the place we need to go to preserve our nutritional strength.
We need to take care of this planet, we need to take care of our soils, waters and air, but we need to do this with a focus on the latest and greatest technology we have, and encourage it so that we maintain our food power positions in the world.
I am very enthusiastic about this, because food security is national security, and it is truly America’s food power, provided by corn growers, producers of all types.
We have to do it right. We need to focus on the environment and we need to take care of it, but we need to do it right.
Potential consequences of the attack on the “granary” of Europe
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