Russian Showdown and Food Prices

Russia is a fertilizer superpower -- and American farmers and consumers are about to pay massive costs for Biden's escalating economic war vs Moscow

“Soaring Fertilizer Prices Are About To Increase the Cost of Food.”

So screams a recent headline from Bloomberg business news.

As terrible and consequential as surging energy prices are, too little attention has been paid to the massive explosion in food prices that awaits much of the globe, including agriculture superpower the United States. Outside of that industry, few people realize to central importance of Russia to the fertilizer market. For wealthier nations, prices are set to soar skyward. For poorer countries, more ominous outcomes loom, including hunger and perhaps even famines.

Before the details on the situation and Russia’s pivotal role, an observation on the importance of fertilizers. Since the invention of synthetic ammonia-based fertilizers roughly a century ago, yields on crops have rocketed higher, meaning far more output from every acre that is planted.

During that same time, the global population went from 1.7 billion to 7.7 billion people, yet agriculture kept pace, feeding a more crowded and prosperous world, largely because of advances in fertilizers. Dependable and affordable foodstuffs became almost a given, especially for America, a land blessed with “amber waves of grain.”

Now, much of that progress is put at risk. A Midwestern farmer explains the economics of the situation. Ben Riensche farms 16,000 acres in Iowa and warns Americans: “You think they squawk about having gas go from three to four dollars a gallon? Wait until the grocery bill is $1,000 a month.”

There are two main causes for this massive input price appreciation. The first is the overall explosion in inflation caused by the misbegotten policies of the Biden administration, including his eco-radical war on energy, a critical component of fertilizer production.

But the second, new issue is Russia. The US has declared an unprecedent economic war against Russia because of its invasion of Ukraine. While the offense against Ukraine’s sovereignty is inexcusable, Washington’s insistence on hugely escalating the economic war with Russia incites enormous risks, including for our food.

Cutting off Russia equates to havoc for farming, right into planting season. Bloomberg’s fertilizer analyst Alexis Maxwell describes Russia’s importance: “No other nation has the same breadth of readily exportable fertilizer supply.”

Not surprisingly, the price of fertilizer storms higher. This chart depicts the St. Louis Fed’s Fertilizer Index which combines synthetic ammonia, nitric acid, and urea.

Food prices had already been climbing steadily higher ever since Biden was elected, as shown on the chart below. But this crisis in Ukraine and our decision to wage economic war against Russia has now sent key commodities like Wheat into overdrive:

The doubling of wheat prices since Biden prevailed in November of 2020 presents serious challenges to working class families who are already strain to handle gas and grocery tabs amidst the highest inflation in forty years thanks to the spend-and-borrow profligacy of Biden, Pelosi, and Schumer. Now, with our decision to weaponize money and wage war against the Russian Ruble while restricting their ability to transact with the globe, the food inflation spiral will really get dangerous, and fast.

For a view into what Biden and his Davos pals have done to the Russian currency, here is the US Dollar vs the Ruble: