It’s Not Just About Empty Shelves. The Whole World May Starve This Year.

The supply chain collapse broke into national headlines last October. We all read reports of vessels backed up off the Port of Los Angeles waiting to unload container cargo, and the shortage of truck drivers needed to move the cargo to distribution centers and warehouses once it was unloaded.

Of course, the roots of that story go back to January 2018 and the start of the trade war between the U.S. and China. The pandemic panic of 2020 – 2021 just made things worse.

Now the War in Ukraine is unfolding in such a way as to make sure supply chains won’t get back to normal if they even could. Of course, citizens and the media tend to have short attention spans.

No sooner did the supply chain story become national news than government officials began to downplay the disruption and claim that deliveries were getting back to normal. That’s nonsense.

Shoppers don’t need the government to tell them what’s going on. They can see it with their own eyes when they walk into supermarkets and find long stretches of empty shelves in stores that used to be chock-full of food and other merchandise. Even goods that are available such as gasoline are being sold at much higher prices. Gasoline prices (and diesel, which is critical for goods transportation) have more than doubled in the past nine months.

All of this is clear. The question is, will it get worse from here? Unfortunately, the answer is yes.

This article features an interview with Bob Unanue, the CEO of Goya Foods, one of the largest food distributors in the world. Few people are better positioned to assess the global food situation than Unanue, who deals with raw food deliveries on the one hand and retail customers on the other.

Unanue told Maria Bartiromo, “We are on the precipice of a global food crisis.” Other experts are quoted making a similar point.

In the Northern Hemisphere, the planting season for 2022 is already over. The crops were planted (or not) in March and April. Based on that, you can already form estimates of output next September and October during the harvest season, (subject to some variability based on weather and other factors).

Plantings were far below normal in 2022, either due to a lack of fertilizer or to much higher costs for fertilizer where farmers simply chose to plant less. This predictable shortage is in addition to the much greater shortages due to the fact that Russian output is sanctioned and Ukrainian output is nonexistent because it’s in a war.

Russia and Ukraine together account for 29% of global wheat exports, 19% of global corn supplies, and 80% of global sunflower seed exports (used to produce various cooking oils). In short, we know enough now to predict much higher prices, empty shelves, and, in some cases mass starvation in the fourth quarter of this year and beyond.

This outcome is not yet priced into stock markets. Investors should prepare accordingly.

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