As promised, it’s time to review this analytical piece by reporter Nikolai Storozhenko, the rather blunt title is:
How The USA Created The World Food Crisis
According to American President Joe Biden, tens of millions of tons of Ukrainian grain are the key to lowering world prices for food. Who is to blame for the increase in prices? Russia, of course. It’s also Putin’s fault that world fuel prices have risen, that just goes without saying. Everybody will be poor and hungry, and it’s all Putin’s fault.
Author points out that the U.S. is itself a grain-exporting nation. In the 2021/22 marketing year the U.S. exported 18.9 million tons of grain. Ignore the fact that this is the lowest amount in the past 20 years, it’s still not to be sneezed at. [Unless you’re allergic to grain.] Fact is, since the 1970’s the U.S. is one of the largest players in the world grain market.
Take wheat. Please. In 2014 the U.S. was the world’s largest exporter of wheat (25.6 million tons). Russian wheat was historically not nearly as successful, although in that same year, 2014 Russia took the bronze medal with 22.1 million tons. But get this: Over the past few years Russia has jumped to First Place. In 2021/22 Russia exported a whopping 39.5 million tons of wheat! This year’s harvest is set to be a “bumper” one, as the Americans say.
In this sense, Biden’s rant against Russia contains a grain of truth (little pun there); in that the world certainly needs Russian wheat. But the deeper question is: what the heck happened to American wheat? And how did it come to this, that wheat blocked in a Ukrainian port is affecting American prices for food? Surely the Americans, with such God-given bounty, can feed themselves cheaply, no matter what is going on in the port of Mariupol.
Instead of blaming Putin, Biden should actually blame Barack Obama, who foolishly started a trade war with China, in 2015. The negative trade balance between China and the U.S. has achieved a whopping sum (by 2021) of almost $400 billion dollars. Trump inherited this problem then doubled-down with his own tariff war against China. China retaliated by placing a deadly tariff on American wheat; with sad results for American farmers. It was this factor which led to Russian nipping in and seizing the crown away from the U.S. (became #1 for the first time in 100 years!), when it came to grain exports. Not only that, but Russia began to successfully compete in America’s “traditional” markets and steal some of their customers away.
Next the author discusses the fact that the American government (Dept of Agriculture) has a really super system for prognosticating international harvests. Their forecasts are highly accurate, even years in advance, and especially for the upcoming year. Thus, they should have no problem controlling the market and adjusting prices for inflation, in the domestic market. They should be able to leverage their own resources and make intelligent decisions, how much to produce. For example, why should they bother growing millions of tons of corn or “forage wheat” if they know that Ukraine is going to produce it.
Differences Between Ukrainian And Russian Grain Exports
Ukraine truly does play a key role in the world grain market. The two countries together, Ukraine and Russia, are the biggest exporters of wheat, corn and vegetable oils. Yet the two economic profiles differ greatly.
For example, Russia trades mainly in wheat, sending roughly half of its harvest to export.
In the Ukraine there are the following categories of grains: There is “human” wheat (продовольственная пшеница), of which around 3/4 of the crop is exported. There is another category, called “forage wheat” which is presumably for animals. Of this it seems like more than two-thirds of the crop is exported. Then there is corn, which is Ukraine’s main grain-type export, and it seems like over 90% of this crop is exported. There is also barley.
In 2021 the Ukraine collected a pretty decent harvest: 30 million tons of wheat (both human and forage); 40 million tons of corn; and 10 million tons of barley. So, around 80 million tons in all, if you count everything. Doing some very rough math, based on the usual rations of harvest kept to harvest exported, it seems like around 21 million tons of the combined wheat types are “owed” to export, along with around 16 million tons of the corn. Hence, Joe Biden may actually have been a kind of autistic math genius when he pulled that number of 20 million tons out of his a**. Which is the amount of wheat that he said Russia was blocking the Ukraine from exporting.
Another way to look at this: Between July 1, 2021 (the start of the “marketing” or fiscal year) and March 1, 2022 (a week after the Russian invasion started), the Ukrainians had already exported around 43 million tons (including all types of grains). The remaining 37 million should include seed needed for the next sowing, plus domestic consumption needs, plus a safety reserve. When you deduct these, then around 20 million tons are waiting to be exported. Just like Biden said. Where Biden is wrong, is that the export has not really stopped. In March and April the Ukrainians were able to ship around 2.7 million tons of grain using the friendly ports of Romania and Moldavia. This is less than the usual monthly average of 5 or 5.5 million tons, but it’s not a complete blockage, either. There is, overall, a shortfall of around 8 million tons which people somewhere in the world were expecting, but will not receive. Due to the war, of course.
[to be continued]