I believe this could be more of an issue than oil: Why the U.S. Needs to Act Fast to Prevent Russia from Weaponizing Food Supply Chains
https://www.politico.com/news/magazine/2022/02/27/russia-wea…
OTFoolish
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Why the U.S. Needs to Act Fast to Prevent Russia from Weaponizing Food Supply Chains
China getting food from Russia I understand (as long as Russia is stable). However, wheat is largely a fungible commodity. If Russia sells its wheat to China rather than to, say, Sri Lanka then Sri Lanka can buy wheat from Australia who now has reduced sales to China.
DB2
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And what about corn, soy beans, and sunflower oil which have been grown by Ukraine in large quantities?
India is a major cutomer of the Ukraine for corn and large percentage of the world’s sunflower oil comes from the Ukraine.
OTFoolish
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And what about corn, soy beans, and sunflower oil which have been grown by Ukraine in large quantities? India is a major cutomer of the Ukraine for corn and a large percentage of the world’s sunflower oil comes from the Ukraine.
There are two issues here.
One is lost production which will put upward pressure on prices. Very real and you can make investment decisions accordingly.
The second is the “weaponizing” of food exports which seems pretty thin to me. If Russia won’t sell corn to India and sells it to China instead then India can buy from the other countries that were supplying China.
DB2
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If you are familiar with the futures’ market than you know that commodities are generally purchased and locked into contracts in advance of delivery. Therefore if I have committed to a July contract from a million bushels of wheat to India then I can’t turn around and give them to Germany instead.
Also farmers plant X number of acres of corn which are used in everything from fuel, cooking, cereal, cattle feed, etc… and they don’t normally plant a surplus. By removing large quantities of these grains from the market Putin can now cause food shortages across Europe and beyond.
Farmland is not infinite and neither is the number of farmers.
OTFoolish
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By removing large quantities of these grains from the market Putin can now cause food shortages across Europe and beyond.
Agreed. That was the first issue I mentioned, lost production which will put upward pressure on prices. Very real and you can make investment decisions accordingly.
If you are familiar with the futures’ market than you know that commodities are generally purchased and locked into contracts in advance of delivery. Therefore if I have committed to a July contract from a million bushels of wheat to India then I can’t turn around and give them to Germany instead.
The putative “weaponizing” strategy has to be a long-term one, trying to win friends and influence people/countries. This allows buyers time to pick and choose suppliers. Certainly Russia could offer sweetheart, low-price deals to countries other than China, but they could do that anyway.
DB2