"To Have and Have Not"
Global food shortages are about to get real.
by Joel Bowman
Buenos Aires, Argentina - "Month-long protests... food shortages... rolling blackouts... and a 700 basis point rate hike. That’s what happens when your government goes broke, inflation gets out of hand and the local currency begins to spontaneously combust in consumers’ pockets. Just ask the good people of Sri Lanka. After a month of practically non-stop protests and street demonstrations, and facing severe shortages - nay, outages - of everything from food, fuel, power... even medicine, the government stepped in on Friday and jacked up its key lending rate by 7%. But with “official” inflation already running close to 19%, and supply chains tightening around the world, one gets the feeling the toothpaste is already out of the tube for the Democratic Socialist Republic of Sri Lanka.
In fact, many countries across Europe and Asia are already feeling the pinch of too much paper money chasing too few (and too unreliable) real world goods. And we’re not just talking Birkin bags and iGagets here (although, presumably, there’s a backlog there, too...) but everyday consumables people need to actually... you know... live.
Why does this matter, apart from the obvious and harrowing abyss of the alternative? As witnessed during the last year of the great covid panic (remember covid?) honest, hard-working citizens are generally ok with their Amazon deliveries being delayed a few days. They can even “suck it up” when their preferred lunch item is temporarily unavailable at their favorite restaurant... or when their plane is delayed because of pilot and/or fuel shortages.
But when staple grains like wheat and corn become “insecure,” and bellies go empty... well, that’s when mobs take to the street with pitchforks and heads of state begin fueling up the chopper for emergency Helivac plans.
So, where are we with all that, food prices and such? Here’s NPR: "The Food and Agriculture Organization announced on Friday that its FAO Food Price Index, which tracks monthly changes in the international prices of a "basket of commonly-traded food commodities," averaged 159.3 points in March. That's up 12.6% from February, which already saw the highest level since the organization began tracking in 1990. It's also 33.6% higher than it was last March."
BPR Investment Director, Tom Dyson, sent around this rather unpleasant chart yesterday afternoon...
Hmm…Transitory inflation... two weeks to flatten the curve... pandemic of the unvaccinated... Putin’s Price Hike...Look where listening to these people has gotten us so far. What’s that definition of insanity again? Something about doing the same thing over and over, expecting different results?
And on that note, here’s word from our resident macro analyst, Dan Denning, checking in from the High Plains of Laramie, Wyoming... "Food lockdowns? I have to admit, I didn’t see it coming so soon. Granted, we’re talking about lockdowns and curfews in Peru, where rising fuel, food, and fertilizer prices led to street protests, which led to lockdowns and curfews.
This month Lima. Next month, Los Angeles? It may be early to start expecting food lockdowns (and riots) in America. It starts with empty (or emptier) shelves. Fewer choices. Higher prices. And then? And then the public finds out that cheap energy is a critical component to cheap, digestible calories. Take away one, and you take away the other. This is not a supply chain issue. And it’s not Putin’s food riots. What is it? It’s inflation. And as history shows, when high prices start to lead to empty stomachs, people with nothing left to lose start to take matters into their own hands. Keep this in mind in Shanghai, too.
China’s Communist Party has locked down the city of 25 million because of 20 thousand new positive Covid cases per day earlier this week. On Twitter, you’ll find stories of people opening as many food delivery apps as they can in the morning, hoping to get something delivered by the end of the day (with no luck, in some cases).
If you were the sort of person who was inclined to conspiracy theories, you might begin to wonder if mass starvation was part of the population control playbook. First plague. Then war. Then famine. Strictly by the Book.
Soaring food prices, their effect on social stability and civil society, and Chinese ‘zero covid’ policy in Shanghai are the stories NOT making the front page this week. That’s why I led with them from my desk in Laramie. Misdirection is when a good magician draws your attention to something unimportant so that you miss the important thing (the trick). Keep your eyes open...
Looking at the tax-and-spend bonanza in DC... and judging by what’s already coming down the pike in other countries around the world... from Colombo to Shanghai to Lima and beyond... what you’re seeing at your local grocery store and gas pump may only be the beginning."
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