Is famine in our future?

Hello this is Darrell Castle with today’s Castle Report. This is Friday the 22^nd day of April in the year of our Lord 2022. My discussion today will be about something none of us can live long without and that is food. What is causing the supply chain disruptions around the world? And is the world’s food supply really approaching crisis conditions?

The famine alarms begin

Governments across the Western World are starting to sound the alarm about a crisis in the supply chain especially in food. They blame the war in Ukraine for most of the problem just as they blamed COVID for the collateral damage that it caused. It is obvious, however, that the real culprit, is not so much the war as it is the reaction to the war. Just as the COVID lockdowns caused the economic devastation, severe economic sanctions placed on Russia are causing much of the supply chain problems the world is facing.

American politicians seem to be incapable of facing the fact that they have overplayed their hand with the sanctions imposed on Russia. Instead of deterring Russia, the sanctions have accelerated Russian and Chinese efforts away from the dollar as reserve currency for the world. For that and other reasons I contend that the U.S. sanctions policy is doing more harm to the U.S. and Europe than it is to Russia.

Things Russia now withholds

Russia formerly provided about 10% of the world’s oil supply so now that is effectively removed from the world market. Europe gets, or previously did get, about 40% of its natural gas from Russia. Perhaps even more ominous is that Russia is a very large supplier of wheat, fertilizer, and other components of the world’s food supply. Right now, with the agricultural system that has been in place since chemical fertilizers started to dominate the world, it is extremely difficult to grow enough food without those fertilizers.

A simple fact then, that anyone but an American politician can see, is that it is not possible to destroy Russia, or to cut it off and isolate it from the global economy without causing severe damage to supply chains and food production around the world. In addition, as we all know, the U.S. relies on the dollar’s status as the world’s reserve currency to maintain its financialized dominance over the world. Much of the world is now frantically working to end that reserve currency status and leave the U.S. financialized economy holding 30 trillion of debt.

Other likely causes of famine

Dire conditions already exist in food supply chains for much of the world. The head of the UN World Food Program has warned that this will be the worst food crisis since World War Two. Joe Biden has admitted as well that coming food shortages are real. I suppose the alternative for him would be the Baghdad Bob approach of you are not seeing this. Unfortunately, world events are coming together to accelerate the crisis and make it a lot worse. If the nations of the West were to suddenly reverse course and make an all-out effort perhaps in time it could be reversed, but that does not appear to be happening.

The COVID lockdown policy in China has now spread to so many Chinese cities that an estimated 400 million people are locked down or at least partially locked down. That is more people than the entire population of the United States. That number represents about 40% of the entire domestic production of the world’s second largest economy. Chinese lockdowns are harsher than in the West and who knows what the long-term economic fallout will be. For one thing, the Chinese economy, supplier to the world, is grinding to a halt and like a giant ship, once stopped, it takes a while to restart and gain momentum.

American food processing in China

Chinese lack of production effects even our food supply. We don’t realize it perhaps, but a great deal of our food processing is done in China. We ship them our raw food and they process it and ship it back. For example, in fruit we are so dependent that we don’t mass process it anymore. We grow apples and send them to China in refrigerated containers to be processed into apple juice, apple sauce etc. Much of that produce is now rotting in the Chinese sun without electricity for the refrigerated units.

Thanks to the economic sanctions, the cost of fertilizer is skyrocketing around the world, and you can’t mass produce food without it. Here in the U.S farmers are complaining that they cannot get the fertilizer they need to plant this spring so we should look forward to a season of poor yields. At the same time the winter wheat harvest in the U.S. is reported to be poor and winter wheat in China is the worst in history according to the Chinese Minister of Agriculture.

The bird flu – and a wheat famine

If that were not enough, we now have 27 states in the U.S. affected by the avian or bird flu. The price of eggs on average according to the USDA has tripled since November. Of course, we know that the avian flu problem will get a lot worse and spread across the country and the world just like COVID. We can buy a few cases of canned beans and put them in the pantry, but we can’t buy and store eggs or even chicken very easily.

Russia and Ukraine account for 30% approximately of the World’s supply of wheat so it would really help if that war could end, but no end is in sight. The stupidity and homicidal narcissism of the world’s politicians never cease to amaze me. Last Friday, one week ago according to NBC news the Biden administration said or admitted that the coming food crisis is real. He used the word famine to describe it and said Russia’s invasion was the cause. No, I say again, your reaction to Russia’s invasion is the cause. In addition, much of the sanctions imposed on Russia were in place before the invasion.

Higher food costs

France, Germany, Italy, Spain, Greece, and others are sounding the alarm with food costs soaring in those countries and some rationing of certain products has begun. In Africa, fertilizer is unaffordable for most farmers. A continent exploding in population is expected to suffer a 30% drop in food production this year. What do you think Africa’s billions will do when they are starving? That’s right, they will head north and who could blame them. What is being done to those people is completely out of their hands and completely criminal. This confluence of things affecting the price and supply of food worldwide is for some still just an inconvenience, but for others it is life or death.

Russia is the key player in food because Russia is perhaps the world’s biggest key player in natural gas which is a major component in fertilizer production. Russia is one of the world’s biggest exporters of the three ingredients of modern fertilizer, nitrogen, phosphorus, and potassium. Naturally then, with much of the world facing starvation, we should ban exports from that country. How homicidally stupid and irresponsible can one group of politicians get?

Sanctions hurt everyone except the Russians

Many other countries are facing dilemmas as well as Africa except without the population. Some countries namely Armenia, Kazakhstan, Eritrea import virtually all their wheat from Russia, or they did before the sanctions. Those relatively small countries as well as Africa compete against much larger, better financed countries for the dwindling supply. Turkey, Egypt, and Iran import about 60% of their wheat from Russia. Russia is threatening to restrict exports to only friendly countries so I suppose Iran would be OK. Demitry Medvedev, a very close associate of Putin, who was once the Russian president, has threatened to cut off the export of food to the West. Maybe this globalization thing is not all that after all.

The United Nations World Food Program feeds roughly 125 million people per day. The executive director recently said there is no precedent for this disaster going back at least to World War Two. He went on to say that Ukraine/Russia has compounded a problem that is really a catastrophe stacked on top of other catastrophes. He said he has warned and warned that this day was coming and now it is here. It is a nightmare, and it is now upon us.

American effects only starting

Here in America, it is only starting to show its effects. To this point we are now seeing some supply chain problems reflected mostly in the continuing price increases. Farmers are screaming that their warnings about lack of fertilizer are going unheeded, but when food is no longer affordable perhaps, we will here them.

Bird flu is just starting to take hold with about five million birds having been slaughtered so far. That’s about 1.3% of U.S. chickens and about 6% of U.S. turkeys. According to the agricultural research group Gro Intelligence the bird flu has the potential to disrupt the poultry and egg markets in America. Once Again, the group says they are sounding the alarm because this time the safety protocols to prevent catastrophic loss have not worked.

If there is any way in this world to make a terrible problem worse, you can rest assured that some politician somewhere will find and employ it. For example, the European Union, already in the midst of an energy crises, and potential food disaster, now has announced that it intends to eliminate imports of Russian coal. Right now, 70% of Europe’s coal comes from Russia and coal accounts for 20% of Europe’s electricity. Hysterics over Ukraine to whip up anti-Russian support are one thing, but the question remains, what is going to replace all that Russian coal. How will your grandstanding heat your homes or power your factories?

First American famine emergency?

Down in the State of Georgia the Republican Governor, Brian Kemp has declared a State of Emergency due to supply chain problems. He takes the position that his declaration converted the state from a republic run by a legislature to a dictatorship run by him alone. He really has assumed martial law like powers to run the state as far as prices, rationing, etc. go. He is going to punish price gouging, he says, so I suppose he doesn’t believe in supply and demand economics. I predict his edict will end in disaster as price controls always do.

My hometown newspaper, the Memphis Commercial Appeal, in a frontpage article last Tuesday the 19^th illustrates the level of understanding we have of this problem in America. I read the article entitled “Fighting Food Insecurity” anticipating that maybe someone recognized the problem at last, but I was greatly disappointed. The article was about students at the University of Memphis who have trouble getting enough nutritious food. I mean, don’t college kids eat Ramen Noodles anymore. The subject of the article was a 4^th year Ph.D. candidate from Bangladesh who reported that yes indeed he suffered from food insecurity. Sometimes when he finishes classes the cafeteria in his building is closed and I guess it’s too much for him to walk two blocks to dozens of restaurants and grocery stores.

In Conclusion

Almost everything that could go wrong in world food production and distribution chain is going wrong at the same time. There is no obvious indication that the world’s politicians are reacting to the problem and very little evidence that they even recognize it. Accordingly, there will be no quick fixes or heroes riding to the rescue.

Finally, folks, this appears to be a problem that we can’t print our way out of. We can print money, but we can’t print food. I’m certain that politicians will try, however, and excessive money printing will lead, in the final stages of printing, to civil disorder, economic chaos, recession and poverty. The U.S. had better find leadership that is more than an international joke or famine, like objects in your car’s side mirror, may be closer that it appears.

At least that’s the way I see it.

Until next time folks,

This is Darrell Castle.

From the Castle Report, appears here by permission.