Ep. 622 – Empty Stomachs Bring Revolutions

The Kapital News
The Kapital News
Ep. 622 - Empty Stomachs Bring Revolutions

The FAO Food Price Index report for February 2022 was recently released and it has hit a new all-time high. The previous high was back in February of 2011 – which was also the beginning of the Arab Spring. Coincidentally, oil prices are back to 2011 levels as well. The cause of increase in world food prices is multi-faceted. There is of course the major fiscal and monetary policies that were implemented over the past two years and continue to this day – their very actions are inflationary by definition. Global supply chain disruptions persist adding chokepoints and contributing to upward price pressures. Growing conditions and crop production is also of concern – the FAO cites issues with corn production in Argentina and Brazil. Corn is not just used for human consumption, but also for livestock and ethanol – thus contributing to further downstream price increases. Lastly, the uncertainties that exist due to the Russia-Ukraine conflict. These two nations account for 25 percent of global wheat production and 20 percent of global corn production. Ukraine exports the bulk of their exports to Asian and Middle Eastern nations – as such, the stage is set for a redux of the Arab Spring – as bread is a main staple of the diet in the region. The conflict is also leading to some countries beginning to hoard their food production and limit or halt entirely the export of foodstuffs – Hungary just halted all grain exports. Other countries may very well follow suit and others, such as China, may go on a buying binge to obtain and store as much as possible in fear of continued rising prices – which if happens, such buying will continue to put upward price pressure on agricultural commodities. Further, in retaliation to economic and financial sanctions that have been placed on Russia, President Putin is retaliating by telling Russian fertilizer firms to stop exporting their products. This will have huge ramifications as Russia and Belarus, an ally of Russia, are two of the world’s top producers and exporters of fertilizers. In addition to this, natural gas prices have been rising, which is an input good and thus a cost to manufacturing fertilizers. It is easy to connect the dots and realize that higher food prices are likely the norm for the foreseeable future.

US gasoline prices are now averaging over $4 per gallon, a level not seen since 2008. The price increase is also the largest increase over a 10-day period, where the prior 10-day record high occurred following Hurricane Katrina in 2005. Transportation costs have already been on the move higher through the pandemic and rising fuel prices will only exacerbate the concerns. Stay diversified, stay vigilant, and stay with The Kapital News. #Inflation #FoodPrices #Revolution #USA #Russia #Ukraine #Gold #Silver #Wheat #Corn #Oil #Commodities #Protests #Liberty #Peace #Stagflation

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