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Missing wheat from the war is less than 1% of global wheat crop

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Re: Missing wheat from the war is less than 1% of global wheat crop

#91

Post by brian_cloutier »

groby_b wrote: post #52
s1artibartfast wrote: post #38

Earlier quoted context omitted.

>this raises the question if the claim that "capitalism is the optimal way to allocate resources" is really true at least for the current version of capitalism. It is important to remember that economic supporters of markets don't claim that the markets are always rational in the short term. Corrections and irrational behavior expected.

Yes - but we're currently in a situation where irrationality absolutely dominates. (And it's not exactly short term)

You seem to be claiming that the prices of many different assets are largely divorced from fundamentals.

I'm willing to believe you, what you're saying is plausible, but I apparently haven't been looking at the same data you've been looking at.

Do you have examples of some prices you think are bonkers, and reasons why they're bonkers?

Re: Missing wheat from the war is less than 1% of global wheat crop

#92

Post by pletnes »

randomdata wrote: post #76
prostoalex wrote: post #30

Earlier quoted context omitted.

> and farmers in other countries (India, USA) already are planting more to make up for it Are they? Fertilizer prices are up 3x-5x, depending on where you look, due to Russian export restrictions, so for many farmers it's cheaper to wait it out and give the soil a rest. Planting reports have only started trickling in, so we don't have a good global view of what has been planted in spring 2022.

> so for many farmers it's cheaper to wait it out and give the soil a rest. If you play your cards right, and Mother Nature plays nice, this could be the most profitable year of farming seen in a long time. Costs are up, yes, but the income potential is up even more. Why would anyone choose this year, of all years, to "give the soil a rest"?

Because you need the cash up front to buy the ingredients - seed, fertiliser, diesel - all more expensive than last year. (Not saying you’re wrong though.)

Re: Missing wheat from the war is less than 1% of global wheat crop

#93

Post by brian_cloutier »

This thread makes some claims which seem contradictory, or at least unusual. [0] claims that a rise in the price of wheat futures caused more wheat to be planted; fair enough. However, [1] claims that there is no wheat shortage, there is instead a shipping shortage, and [1] and [2] both claim that investors are unreasonably panicked, because there is not actually a wheat shortage.

However, I really don't see the distinction between a "wheat shortage" and a "shipping shortage"; as the thread notes, in either case there are people without wheat. Areas with wheat shortages are going to have higher wheat prices, doesn't matter if there's plenty of wheat somewhere else!

In [0] markets are good because the higher futures prices correctly stimulated enough production (which is strange because, if true, it means the inflated futures prices were _incorrect_). However, the markets which were smart enough to stimulate additional production were not smart enough to stimulate additional shipping.

In [1] and [2] the higher prices (reacting to "a very real shipping problem") are nothing but panic, and even make it "harder [...] to get new import shipments launched")

How can inflated prices be both the poison and the antidote?

[0]: https://twitter.com/SarahTaber_bww/status/150777681533463347... [1]: https://twitter.com/SarahTaber_bww/status/150777682233906790... [2]: https://twitter.com/SarahTaber_bww/status/150777682448235316...

Re: Missing wheat from the war is less than 1% of global wheat crop

#95

Post by randomdata »

pletnes wrote: post #92
randomdata wrote: post #76

Earlier quoted context omitted.

> so for many farmers it's cheaper to wait it out and give the soil a rest. If you play your cards right, and Mother Nature plays nice, this could be the most profitable year of farming seen in a long time. Costs are up, yes, but the income potential is up even more. Why would anyone choose this year, of all years, to "give the soil a rest"?

Because you need the cash up front to buy the ingredients - seed, fertiliser, diesel - all more expensive than last year. (Not saying you’re wrong though.)

The land is going to be your largest expense in the typical case. If you truly can't come up with the money for inputs, how are you going to carry the land? You can often push your land costs until after harvest, but if you don't have the harvest to pay for it... And if you know you won't be able to put a crop in due to budgetary constraints, why wouldn't you rent it out to another farmer? There are lineups of hungry farmers ready to spend whatever it takes to find new ground to work.

I find it hard to believe that land is going to lay fallow this year specifically because of what's going on. Certainly people are adjusting what they plan to grow to optimize for the situation. That is definitely happening.

Re: Missing wheat from the war is less than 1% of global wheat crop

#96

Post by jefftk »

brian_cloutier wrote: post #93

This thread makes some claims which seem contradictory, or at least unusual. [0] claims that a rise in the price of wheat futures caused more wheat to be planted; fair enough. However, [1] claims that there is no wheat shortage, there is instead a shipping shortage, and [1] and [2] both claim that investors are unreasonably panicked, because there is not actually a wheat shortage. However, I really don't see the dist…

> I really don't see the distinction between a "wheat shortage" and a "shipping shortage"

The distinction matters a lot if you're trying to solve the problem. I saw lots of people suggesting a few weeks ago that the US change policy to cause more wheat to be produced, which would only help with the former.

Re: Missing wheat from the war is less than 1% of global wheat crop

#97

Post by bluGill »

pletnes wrote: post #92
randomdata wrote: post #76

Earlier quoted context omitted.

> so for many farmers it's cheaper to wait it out and give the soil a rest. If you play your cards right, and Mother Nature plays nice, this could be the most profitable year of farming seen in a long time. Costs are up, yes, but the income potential is up even more. Why would anyone choose this year, of all years, to "give the soil a rest"?

Because you need the cash up front to buy the ingredients - seed, fertiliser, diesel - all more expensive than last year. (Not saying you’re wrong though.)

That is the easy part, any farmer these days is already selling their crop before it is planted. They let investors and insurance take the major risk, between the two they are guaranteed to break even, and if there is anything left over because of a good year (there normally is) that is profit. if investors are not willing to buy their expected crop at the price needed to break even the farmer doesn't plant at all.

Re: Missing wheat from the war is less than 1% of global wheat crop

#98

Post by onenukecourse »

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...

Re: Missing wheat from the war is less than 1% of global wheat crop

#99

Post by thepasswordis »

saiya-jin wrote: post #89
thepasswordis wrote: post #83

Earlier quoted context omitted.

https://www.reuters.com/world/europe/ukraine-sets-ceasefire-... Of course the “denazification” thing is dropped. It was nonsense propaganda to begin with. I’m curious where you are following this? This was absolutely huge news at the beginning of this week. It’s really weird to me that wherever you are closely following this didn’t cover it.

I don't get people like you - you are seriously contemplating what Putin's PR team announce on given day as some seriously meant opinion that's worth anything. When its exactly opposite, just empty words, full of lies, deceit and lack of anything meaningful. Spending any amount of energy on them is waste of time, next day will next round of demands. You do realize that even if his demands would be met for some reason…

Do you think that Reuters is part of some conspiracy to print things from Putins PR team and pass them off as statements by Urkairne?

Re: Missing wheat from the war is less than 1% of global wheat crop

#100

Post by heyitsanewacco »

1% is a lot... why can't people deal with percentages of large numbers? Its COVID all over again. 1% of 7 billion is 70 million. Thats ten holocausts!

Supply and demand means I won't go hungry, but less valuable people absolutely will. Like the Ukranians during the holodomor...

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