| Some thoughts: 1. Costs are at the margins. Is 1% irrelevant, or cannot be replaced? Replacement depends strongly on local weather and requires that land be substituted for wheat instead of other things. 2. Global production is 778 million, but Russia produces 74 million, Ukraine 28 million and landlocked (by Russia) Kazakstan 11.3 million, or a total of 113, or about 15% of total production [1] . This is the wheat Russia effectively controls. True, not all of that is exported, but I doubt Russia with 2% of the world's population eats 15% of the world's grain. I'd really like to see the source of her export figures (is dollar denominated exports? Total exports? Wheat of a certain type? Etc). 3. Food needs the following inputs: - Ammonia - Potash - Phosphorous - Diesel - Propane (in the US to dry the grain in remote farms) - man power. All of those input costs are going through the roof, and Russia effectively controls more than half of those inputs: - Ammonia: The Russians are a top exporter and they export the NH4 EU needs to make more - Potash: Canada is the top exporter followed by... Belorussia and Russia - Phosphorous: China, I believe is the top producer - Diesel: Russia is a top exporter of diesel and also exports the heavy crude needed to make diesel. Diesel is used in everything, it's hard to sub out, has very inelastic demand, and short term supply is inelastic as well (fracked oil is diesel poor). - Propane (used in the US to dry the grain in remote farms). This is byproduct of NH4 production (i.e. produced by Russia). Also, the price, like oil but unlike CH4, is basically global since it's readily liquified. Therefore, it's a (expensive) substitute good for NH4 which the EUros are scrambling to get. Conclusion - The US produces enough for itself, but Russia is the marginal producer and sets the global price. - Man power, computer chips (those self driving tractors need chips!), etc. These need money, and the USD is not exactly going through it's finest moment. Farming is considered a perfect competition, so margins are important. A sharp blow on any one of these would knee caps farmers, but they're facing all their inputs going up. Russia doesn't need to be the majority, or even the top player in any of these to bring large increases in the cost of food to whomever she wants. [1] https://en.wikipedia.org/wiki/International_wheat_production... |