GrowingFood Shortages & Food Insecurity

Theintensity of the Russo-Ukrainian conflict continues as Russian armed forces traversethrough the Ukrainian agricultural heartland. During this period of extreme globalmarket volatility and uncertainty, several fundamentals continue to supportpresent-day and near-future agricultural price gains.

LogisticalOperations

Theimmediate impact on agricultural goods price rise has been the prolongeddisruption of Ukrainian agricultural food exports. Draconian sanctions onRussian agricultural exports have compounded the global shortfall since thecombined Ukrainian and Russian production represents 30% of the agriculturalexport market.

TheRussian navy has prevented commercial shipping in the Black Sea from entering ordeparting key ports through which 90% of Ukraine’s agricultural goods are exported.According to the London-based shipping tracker Windward Ltd., there are 200maritime vessels unable to depart from Ukrainian ports. Furthermore, road, railand maritime infrastructure damage by the conflict has greatly inhibited the commercialtransport of goods.

AgriculturalOperations

Theconflict is adversely affecting present-day and future production ofagricultural crops. Some of the major issues are as follows:

1.   MissedPlanting Season: With respect to mostUkrainian agricultural crops, particularly wheat, the planting season normallybegins in early March and must be completed by late April. Many of these fieldsare directly in the path of Russian forces moving northward from the southernregion. For this reason some of these fields may be mined or have unexplodedordinances which must be identified and removed before ploughing can safelybegin.

2.   FertilizerFailure: The draconian sanctions onRussian energy exports has triggered high gas prices from elsewhere and aredramatically reducing the production of fertilizer. Gas is a key ingredient whorising prices may be unaffordable for Europe’s ammonia facilities to continueproduction. Less fertilizer means lower crop yield.

3.   Labor Shortage: Because of the conflict there is a manpower shortagefor planting and harvesting. Many farm workers have joined the Ukrainian war effortwhile others are using farm equipment to remove destroyed or abandoned Russianmilitary equipment.

Evenif the war ended immediately and all Russian armed forces left Ukraine and theRussian navy in the Black Sea permitted the free passage of maritime vessels, therehas already been severe damage to the food supply chain in Ukraine.

TheAgricultural Commodity Super Cycle Has Just Begun

Myrecent SA article published March 5, 2022 and entitled How to Gain on Grains – More Opportunities In Wheat was wheat-specific because it’s classified as a“strategic grain” and highly political. For those investors who prefer to havea diversified agricultural portfolio, the following list of ETF and ETNinvestment options provides broad-based and crop-specific agricultural goods.

Agriculture | broadbased

·      Teucrium Agricultural Fund (TAGS)

·      iPath Series B Bloomberg Agriculture Subindex Total Return ETN (JJA)

·      Elements Rogers International Commodity Index-Agriculture Total ReturnETN (RJA)

Wheat

·      Teucrium Wheat Fund (WEAT)

Corn

·      Teucrium Corn Fund (CORN)

Grains

·      iPath Series B Bloomberg Grains Subindex Total Return ETN (JJG)

·      ELEMENTS linked to the ICE BofAML Commodity Index eXtra Grains TotalReturn (GRU)

Thefollowing maps provided by the US Department of Agriculture (USDA) ForeignAgricultural Services indicate thegeographical region in Ukraine for specific crops (wheat, corn, barley,soybean, sunflower seed) and where they are planted and harvested. These willenable investors to determine the level of risk of the planting and harvestingfor each crop.

Wheat

Ukraineis the world’s 6^th largest exporter of wheat. Their largestpurchasers include China and Egypt.

Corn

Ukraineis the world’s 4^th largest exporter of corn.

Ukraineproduces 12% of the world’s crop.

SunflowerSeed Oil

Ukraine is the world’s leading sunflower seed oil,planted in April harvested in September. It’s their most profitable cropbecause of low production costs and high demand.

Soybeans

Ukraineis the world’s 7^th largest exporter of soybeans.

Conclusion

Theglobal markets will continue to experience extreme volatility. However Ibelieve that the overall trend is for dramatic near-to-medium term increasingagricultural commodity prices based on the aforementioned fundamentals of logisticalblockages in Ukraine for present-day, ready-to-ship agricultural goods and acutenear-future reduction of crop yields.

Grainprices have risen considerably since the outbreak of the Russo-Ukrainian war inlate February as I forecast in my SA article entitled Buy Opportunities with Tightening Global AgricultureMarkets on February 19, 2022 beforethe Russian invasion 5 days later.

Ibelieve that agricultural commodity prices are still laggards and under-valuedbecause the aforementioned factors have not yet fully impacted consumer prices.Unlike energy needs whose usage is seasonal while declining during the warmermonths, global food requirements are consistent year-round.

Forthis reason there are still ample investment opportunities in the agriculturalsector to get onboard the once in a lifetime, inexorable surge of the commoditysuper-cycle on steroids.

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The Cerulean Council is a NYC-based think-tank that provides prescient,beyond-the-horizon, contrarian perspectives and risk assessments ongeopolitical dynamics and global urban security.