A Historic Disruption To The World's Wheat Supply

have to revisit that now. Yeah, well we were just talking about this, but I think a year ago, you know, the theme was the weather hasn't been that good, crops

haven't been that good. Food prices are rising, China is buying a lot, and that's adding additional pressure on supply, and now we have to throw Russia Ukraine into the mix, and it just seems like a pretty bad situation has possibly gone a whole lot worse, right, And so when people think about the commodity effects of that of the war, of that conflict, I think predominantly people think about oil and gas, and of course we have seen upward pressure

on both, but Ukraine is also a massive export of wheat. Belarus, which has also come under sanctions, is a big exporter of fertilizer. And so we have had this already tight market for commodities for grains for some of the conditions mentioned, and they've just gotten a lot tighter. Yeah. And of course, the one thing that I'm sure all lots listeners know about the commodities market by now is that everything tends

to be interconnected. So if you get a rise in the price of natural gas, for instance, that can end up feeding through into the price of fertilizers. I saw one news story right before we came on saying that um Yarra, which is one of the big fertilizer producers in Norway, is curtailing its production of fertilizer because of the nat gas price surge. And then you have things that happen in the commodities market that feed through into

other commodities. So again another example here, the price of wheat is expected to increase production of pork because of course a lot of pigs in Europe in particular eat wheat as their food grains. So everything is interconnected and it becomes really difficult to predict and track A lot

of these movements and impacts exactly right. Well, you know, we mentioned that we talked about this year ago, and so we're going to bring back the guests we spoke to before and try to wrap our heads around what is going around now, because the one other difference is that anxiety about inflation overall much higher today than it wasn't early one, even as we started to see these prices rise. So complicated time, complicated situation. I'm very excited

to bring back Scott Irwin. He's an agriculture economist at the University of Illinois. So Scott, thank you so much for coming back on odd Lots. My pleasure, really look forward to it. Absolutely great to have you back. Let's start with actually right before the invasion, just talk a little bit about how tight or how would you characterize the conditions in the grain markets. You know, sort of early February, we were kind of scraping along. Prices were

certainly elevated relative to historical averages. UH. The latest thing that the markets that are preserved was a less than stellar growing season for South American soybeans. But we were getting along anticipating a pretty good spring and big plantings of UH corn and soybeans here in the United States.

That would probably help smooth that out. We're going to have some volatility, may be related to summer weather here in the US, but I wouldn't say that, you know, we thought that anything was way out of bounds historically. So how big a deal is Russia invading Ukraine from a grains or agricultural perspective, because on the one hand, you hear a lot that the Ukraine in particular is you know, known as the bread basket of Europe. There's

a lot of production there. But on the other hand, farming is an industry that is familiar with supply shocks. You know, things happen, there's, um, I guess, bad weather and pestilence as well. So how big a deal is this? Um? Couch it in historical terms? Sure, This is the way that I try to communicate just how big of a whole this war is blowing in the global grain markets.

The Ukraine in recent years has planted about fifty nine million acres of their top six crops wheat, sunflowers, soybeans, corn, barley, and what they call rape scene. Um, So how big is that? And that's what's under threat of potentially not being planted at all, uh this spring due to the war. That's almost exactly equal to the total planted area of crops in Illinois and Iowa. So you're just blowing that right,

potentially out of the global markets. Imagine that now they're they're not as productive if those acres don't grow as much as Iowa and Illinois do. But you know that right there is about four billion bushels of production that potentially if it doesn't get planted, or the vast majority doesn't get planted. Uh, you're just taking that off. Uh you know. So that's just the immediate war impact then

they have. On the other side, Russia, they're not going to but have you know, any problems growing their crops this year? The question is how much of it will be available to the world markets. Russia is the world's largest exporter of wheat. And again, the way I try to put that into perspective, well, you know, with US production, what um would it take for US wheat production to

replace what's lost potentially for Russia. Well, Kansas is our biggest uh winter wheat producer here in the United States, and it would take four million Kansas is to replace what was lost Wow, that's a that's quite a striking way to put it. You know, we're recording this in the middle of March. Actually recording data is out March fourteen. Where are we in the cycle? And so you talked

about plantings in Ukraine right now? What needs to happen, like, are we talking about in the couple of weeks where exactly as the timing of this. In the Ukraine and Russia, their biggest wheat crop is winter wheat, which was planted last fall. It basically goes into hibernation in the winter and then it's plant and it's harvested in the early summer.

That that's already growing in both countries. Uh, then the question is how much of it will be available to be harvested and moved into international markets in the Ukraine. But the really big danger is the number one crop in terms of volume in the Ukraine is actually corn, which the vast majority of it is exported uh internationally. Ukraine exports now over a billion bushels of corn every year. And the planting window in Ukraine for their spring crops

it's almost the same as the United States. It's not really very much different. They will be planting in April and early May, so they're really literally just a couple of weeks from going back, or they would intend normally to go back to the fields UH in a couple of weeks. So we've seen the price of wheat shoot up really dramatically, and the price of corn has gone up to but not as much as wheat. What exactly

accounts for the discrepancy there? Well, because combined the Ukraine and Russia is a significant component of the total exports of wheat in the world. UH number one, Russia's number one, and Ukraine. Off the top of my head, I think their second. When we think about we where does it go? What is the end destination of wheat look like? And Tracy mentioned something that in Europe the pigsy wheat and how much is bread, how much is pasta, how much

is feed? What is the ultimate distribute and what kind of substitute ability is there between grains such that if the price of wheat sores, then the end bire can maybe switched to a cheaper commodity for feeding animals, for livestock feeding, there's a great deal of substitution. Basically, there's the potential for a substitution if you have those supplies. Where there's real concerns is you know, the vast bulk of wheat is actually used for human consumption, bread, pasta, crackers,

things like that. This is potentially huge problems for lower to middle income countries in North Africa and throughout the Middle East that have relied very heavily on the imports of wheat from this area and that's almost all for human consumption. Egypt is kind of the prime example. You know, Joe mentioned the substitution effect, the idea of people, you know, maybe instead of we you use something else to feed

your pigs. But could you walk us through exactly what happens when you get a price shock like this, Like how does it filter through the broader market? So prices increase, and then do pig farmers immediately start deciding to feed their herds something else? Do farmers respond to the price increase immediately by altering their planned crops? Like what exactly

is the sequence of events that happens. Well, all of this is really going on at the same time, and this is one of the reasons why in this kind of circumstance you see just such incredible volatility or spiking of prices in week because of the nature what I would say is the natural inflexibility built into the consumptions side of commodities like wheat, corn, and soybeans in a

very very short run. On the animal side, yes, there's some short run a substitution in terms of feeding, but that takes some time and you know, the animals that are there have to be fed something. So this is the heart and soul of the source of what economists called the short run in elasticity of demand for agricultural commodities. So on the animal side, the animals have to be fed,

and there's limited substantutability. You know, you have to get different suppliers, commodities have to be moved around in terms of this substitution. It will happen, but it just takes time. And then that's even harder on the human side, when as we know, diets are relatively fixed, and you know, countries like Egypt will do everything they can to probably try to increase subsidies and insulate their population from these price increases. But if wheat is simply not available in

a place like that, that's a huge problem. There's there's really besides aid from other countries Uh, it's very difficult to change that diet in a matter of a few weeks. Okay, so you walk through, we get this price surge, what happens on the consumption side, what happens on the supply side? What are a is there's still time for farmers in the US or anywhere else to change their choice of

crops or to reallocate acreage. And is there anything anyone, whether in the US or elsewhere, can do to increase supply overall in a short to medium period of time. What is the opportunity to replace the lost the lost?

Weeat A great question. Uh. In wheat unfortunately kind of in a devilishly tight situation here because the biggest wheat crop in the world, as I mentioned before, is winter wheat, and for the Northern hemisphere that was already planted and there's just nothing you can do now in terms of increasing the winter wheats supply in the northern hemisphere of the world because that planting window was last fall. Now, the southern hemisphere can uh, you know, begin planting winter

wheat right now. Uh. And there are some large producers like Australia, but the Southern hemisphere doesn't tend to be you know, that large of a wheat producer, so maybe we'll get some more out of that, but you know

that's you know, six eight months down the line. So the short run on the wheat supply is all going to be with spring wheat um and there is some scope for the ability to expand production of spring wheat, but springwheat tends to be grown in far northern areas of the Great Plains of the US and into Canada, and uh so there'll be probably some increased production there, but it can't show up until at the earliest September.

So you know, that's the vice that the wheat market is in in the world, is that our ability to basically really alter availability is through the channel of spring wheat, which is a relatively minor crop compared to the major crop, of which are wheat, So that makes it hard. You mentioned Russian winter wheat at the beginning, and of course you know that's expected to still grow and probably be largely unimpacted by the events in Ukraine, but no one can get to it, or fewer people can get to

it because of the sanctions in place. What are the chances that some of that is able to leak into the market. Well, that's going to be the great question because we know, first off, there's what economists called trade diversion in these kinds of situations. Um, you know, not everyone is going to follow the sanctions. For example, we expect that um, some of Russia's wheat exports will now go to China so that they can use that to feed their feed their animals and contribute to their diets.

So that's trade diversion will happen. The big question in my mind is always leakage that you know, um, not speaking to the morality of the situation, but we know that historically that large international commodity trading firms are experts at figuring ways uh semi legally is the way I would put it around the sanctions and to move these commodities around the world. Yet there's a cost of that. You know that they'll only buy the wheat from Russia

deep discounts. It takes time for these alternative channels and legalities to be worked out, and so inevitably, you know, trade diversion and leakage can't offset the full effect of the sanctions. And what you know, we're all trying to figure out, and that's what the market has to assess in real times. You know, well, what's that leakage and a trade diversion going to look like. So we mentioned

it at the very beginning in the intro. But when we had you on a year ago, I think it was about a year ago, the story at the time seemed to be about very aggressive Chinese buying and building up stocks, building a buffer stocks, and I think I saw ustand recently I forget the number. I'm not sure how many years worth of week trying to current he has.

Wait since you mentioned that China is likely to be a destination for whatever wheat gets out of that market, out of the Russian market, what is the state of Chinese buying? Is it still in accumulation mode? Has it balanced out the stocks? What kind of deficit or position is China in right now? I have to admit that we're all looking through the glass darkly in terms of China's grain reserves, and that's an official state secret, and

so everybody just guesses at it. Uh So, my perception is that they have done quite a bit of reserve rebuilding, but at the same time they're in the phase of rapidly rebuilding their animal herds and so in that race between increasing consumption from their animal herds versus their rebuilding. Uh, nobody really knows, but I do know that they've been back in the grain market for US supplies in a big way in the last couple of weeks, which everybody's expecting.

Of what we have seen for two before the Ukrainian crisis was that China soybean buying was back to basically the trend they were on before our trade war, which means it's huge. Uh. They weren't buying as much corn in two as they did in UM. It had backed off some. Uh that I suspect that they'll be back closer now in two now than they had planned because the lack of availability of Ukrainian supplies. But that story remains to be written. This might be a very basic shan.

But if supply is constrained, and you know, everyone in the world presumably wants to keep wheat prices relatively low so that the price of bread doesn't go up too much, China is still buying um large amounts. How does existing supply get allocated? Could we see a return or even more sort of food supply nationalism and the idea that people are going to be keeping more of their own crops closer to home. This is the great danger in

global grain markets right now, Tracy. This is what I'm most concerned about, which history shows that when you get in these huge scary price spikes, particularly for food commodity like wheat, that there's a tendency for a bit of panic to set in and countries begin shutting off exports to uh basically protect domestic supplies and protect domestic consumers, and that really leaves importers, particularly importers in the not rich countries, out in the cold. And we're already seeing

that kind of bing bing bing beginning to happen. And so if you lock up supplies in some doesn't take very many exporting countries, then that really makes prices for everybody else explode and puts more of the burden on generally poorer importing countries. And that's where things politically get really explosive. And so that's that's a real concern that I have, because the market is going to do its job.

The market's job is basically to the price of wheat up high enough that you ration current demands enough so that the globe has something left over at the end of the year the problem, you know, But in order for the market to do that job, somebody has to get priced out of the global market. And the job of trade is for the market to then spread around

available supplies to um to the highest bidder. And some people that as a policy matter, that we probably don't want priced out of the market can easily get priced out of the market as the market does its job. So that's what happens in the very short run. And the other side of the market's job is to run the price up of wheat high enough that as we can expand acreage and production to adjust to this that

supply response, and it will happen. It always does, but it's you know, can take a year or two for this kind of shock to fully be absorbed and we get the supply response in terms of expanded a creach and production around the world. So the shocks from this are going to reverberate for some time. Yeah, there's so many follow up questions I have to that, you know, But the first one when price of oil and also gas.

But when the praise of oil surges, it immediately becomes a political question and people start turning to elected leaders, what are you going to do about this? What can we do to say, increase exploration or drilling in the United States, or what can Germany do to cut off its reliance from Russian gas, etcetera. Are there policy levers that countries, whether rich or poor, can pull here? But I'm thinking in the United States, for example, is there

something equivalent is this? Is there something for the U s d A Or the House to think about doing during such a time of high prices and tight supplies. Well, there is one that could be considered. In the United States. We have something that's called the Conservation Reserve program in the United States that currently contains twenty two million acres of previously cropped land that has been taken out of production presumably because it's most environmentally sensitive in terms of

wind and water erosion, or it has bio diversity. Really a lot of it's for pheasant hunting. Uh, So there's that acreage that could be considered for maybe a special one time exemption from the current long term contracts that are required to place acreage into that reserve. So we have an acreage reserved something like the search Egic Petroleum

Reserve that it's at least could be considered. UH. It's very controversial, as I found out when I suggested it a couple of weeks ago, But basically my argument is pretty straightforward, and you can hear it through the conversation with Pad today. I believe this is the largest supply

shock of my lifetime UH in global grain markets. UH if the conflict continues and severely harms planting in the Ukraine, and so we need to at least look at extraordinary measures like this here in the US that you use. Ahead of us, they're already apparently making plans to make their what they call set aside acreage available for production this year. And those policy means you might think, oh my gosh, you well you can plant this spring, but

we don't get that until next fall. But the markets will react to those move now, because the markets always are in an anticipatory mode, and if they see that there's going to be somewhat more supply than they would normally think, that will have an impact now. And so that's UH. In the EU and in here in the US, those those are pretty much the only policy levers that we have. No one has huge grain stocks piling up in warehouses anymore like we used to say in the

nineteen eighties. Nobody has those, So the only thing we really can do is try to juice up acreage this spring. Wait, could you walk us through exactly why this is so controversial, because I did see some people on Twitter who were pushing back. And you know, initially, if someone says, well, the price of wheat is going up a lot, there might be food shortages. Let's increase acreage. It sounds like

a very like good thing to do. But I imagine there are those environmental concerns and other issues with it. So what are those exactly? Well, there's what I would call a you know, they're the environmental concerns, and then they're the practical pushback on that idea. The environmental is these are supposed to be highly erodable acres and less

productive acres that are put into the conservation reserve. And there's no doubt that that is true, and so you're not getting your your prime acres motors, productive acres put in. And so if you took them out, people say it wouldn't be that productive. My counter that that is the U. S d A has actually done some great work tracking

parcel by parcel. What happens to acres in the past as they've come out of the conservation reserve, because it turns over there's acres going in every year, there's acres coming out. Without getting into all the details, but over time the acres that come out over go back into crop production or some kind of annual crops, so it can be used. So that's the one biggest is you know, these are supposedly our most environmentally sensitive acres, so why

would we want to um mess with them? And then the other point is you know that those acres have biodiversity benefits in particular, as I said, for recreation and animal biodiversity, and so those benefits are there. And in my mind, probably the bigger concern is the practical It's very very late in the calendar to for farmers to

adjust their plans to try to farm those acres. Um. You know, if even if you do try to farm the CRP acres, you have to plow up something that is in grass, can you get the seed and fertilizer that you need even if you want to do this. So so there are some very significant practical concerns to doing this. But I'm a big believer as an economist, I mean, if there were ever incentives in place to

do what uh. One of my old professors at Purdue, Earl Butts, was famous for saying when he was Secretary of egg in the seventies and the Nixon administration, he was famous for when that price pike went so high that farmers would plant fence road defense row. And the incentives are in place, uh to go fence row to fence row, and um, you know, and the other is a policy consideration. You know, there will be differences of

opinions about this, but these are extraordinary conditions. And I think, going towards what you said, Tracy, maybe we should consider doing what we can, even if it's not our most productive acres. Maybe if it won't make a huge difference, but why not do what we can to address these supply issues, even if they're not going to make a

huge difference. But you know, even a few hundred million extra bushels of wheat in this country could go along ways, uh to spanning the gap in places like Egypt potentially as we go through the next year. So that that's my counter argument to those that criticize that idea. That was great and uh, that was very interesting answer. I want to continue on the supply side aspect of the question because you mentioned okay, is the fertilizer going to

be there? And again it is something I think about, let's say oil, which is that even if there were some sort of you know, impulse to explore more oil, there's a lot of tightness in labor markets. At the oil padge. People talk about the shortage of steel pipes, in the shortage of fracts, and what are you know, even prior to this crisis, how have shortages in general and tight labor markets, how are they affecting the farmers

that you speak to in the grain area. And what kind of scarcity of other commodities in labor make the supply side perhaps less rapid or how much of a challenge would that be to scaling up more production. Excellent question. Farmers have been struggling on the labor side like everyone else, but I haven't really heard that that would be a significant constraint, you know, Uh, farmers being farmers, they'll just work extra hours to get it if they have to.

The bigger concern is the availability of fertilizer and her besides and pesticides that they need. I think farmers were counting on all that working before the Ukraine crisis, and I think that was a reasonable position for the US because we don't actually import that large of a proportion of our fertilizer probably so, so I think that what we needed was probably in place in the United States, but it was a little iffy. But right now, UM, when I talk to farmers, they're very nervous about just

getting their uh, chemical chemicals and fertilizer supplies. Now no one seems to be giving them firm answers on anything. So that's that is what I'm hearing. I think the supplies are there, but everything is just in such turmoil that uh. That's if there's a place for a bottleneck, that is where it's going to show up this spring. Uh. I believe that for the planned acreage that we had before the Ukrainian crisis, that the vast majority of the

supplies are there and they will eventually get through. But it makes one a little, I think, a little sketchy how much we can expand beyond that even with these

great prices. From what I'm hearing from farmers, what is the situation with fertilizers at the moment, because you know, as you mentioned, it seems like it's difficult to get information on supply potentially, But we have seen some impact in the market already, and even before Russia actually invaded Ukraine, there's a lot of talk of tightness in that market.

Oh clearly. I mean we saw starting last fall that nitrogen fertilizer prices just spiked, uh to um, you know, extraordinary price levels, you know, more than double and and some of that is just demand side and natural gas prices or spiking, which is the primary input for making nitrogen fertilizer. So you know, we were already struggling with extremely large increases in production costs, particularly for corn here

in the United States. Uh So that was already a major topic of conversation here in the in the corn belt. It seems like there's two, at least a couple of

factors on the fertilizer side. There is the high cost of energy, and I think Tracy mentioned in the beginning that we saw some fertilizer companies in Europe just say we're not going to produce right now because it's not economical given the high cost of natural gas and then my understanding is that Belarus itself is a huge exporter of either fertilizer or one of the key ingredients to fertilizer. Maybe can you talk a little bit more about the

sources of constraints and particularly the Belarus angle. Well, right, um, you know, Russia through Belarus is you know, they're a huge at exporter of potash uh. You know, one of those things that we never talked about. You know, again, for the United States, that's probably not a huge uh issue, even though if we would could lose ten or fifteen percent of your supplies, you know, that has an impact.

But that's potentially next year a major issue for a country like Brazil, which imports most of its fertilizer, and

so that's you know, the difference. I do not know the import percentages for for Europe, but I suspect they're also very tightly tied to the Russian and Belarusian supplies, you know, and you know, and one of the things that I find terribly interesting little factoid about how this stuff filters in one of the Formula one Grand Prix UH teams is actually or was sponsored by one of the largest Russian fertilizer companies and his son was a driver on a Formula One team, and last week it

was announced that Formula One kicked him out. Oh I think I saw that headline. I didn't. I didn't make the connection of what was going on there. Yeah, they're they're one of those companies and they were sponsoring a Formula One team, the host team and uh, you know they've canceled the Russian Grand Prix uh and kick the UH fertilizer sponsor from Russia out of out of the program. I mean, it doesn't have much to do with this, but it just showing how extraordinary and how fast moving

these events are. Right now, I want to go back to things that can be done about the situation. And another thing that I've seen floated recently is this idea of maybe suspending incentives for renewable fuel production. So that would mean, you know, less corn being used for stuff like ethanol and more of it going into actual food production. How feasible is that politically and practically? U super question and something that you know I've been talking about in

the last week. UM, It's a little bit complicated, so I'll try to be really condensed in my answer. Short answer is that waving the ethanol mandates here in the United States I don't believe would have hardly any impact on the use of ethanol um in the United States, which means that wouldn't have any savings in terms of

corn bushels. And the reason is that ethanol has now become the cheapest source of octane available to gasoline blenders, and so without intending it to be, we ran an experiment about waiving the mandates and what would happen to ethanol use in the Trump administration through something called small refinery exemptions, and that was effectively waiving the mandate, and we didn't use any less ethanol. In fact, it grew

a little bit as we waived the ethanol mandates. So I think that that's that would have no impact on corn usage. So the ethanol side of the equation in terms of our bio fused policy to me as a nonstarter. It doesn't get us anywhere, and and it would have the follow on effect of likely raising the price of gasoline a little bit at least and maybe noticeably. So I call that a robbing Peter to pay Paul uh

policy response that doesn't really get us anywhere where. It's more interesting those ideas, and and doesn't get discussed enough is on the advanced or biodiesel renewable diesel side. We are currently going through a boom in world veg oil prices through a boom and building what are called renewable

diesel UH plants. Long story, but even there, if we waived those parts of our RFS mandates, it's not very clear if it would have much impact because the largest policy subsidy for renewable diesel is not coming through the UM the RFS, our national policy. It's coming through the local Urban Fuel standard in California. So to have really any guarantees you want to take pressure off of world veg oil markets, you have to waive the California Low Carbon Standard and the RFS at the same time. That

doesn't seem likely to happen, particularly the California. And can you talk a little bit about the effect of the end consumer and so, you know, people don't eat wheat. Typically they eat bread or the pasta. And I'm seeing some claims that you know, in the end like the actual wheat hasn't got a huge source of the UH cost of a loaf of bread or whatever it is, how much do these huge swings feed through to the price of finished goods that consume wet Again critical point

to understand. Um uh. Here in the United States, on average, the cost of what a consumer bias in the grocery store for food, only about fifteen per cent is represented by the cost of the raw commodity. So if you take a dollar food expenditure, fifteen cents is the raw commodity. Even if that doubles, you know, you go from fifteen to thirty cents, that's fifteen cents on a dollar. You know, it's noticeable, but it's not doubling because you have that

passed through effect. Um. You know, in terms of the retail food price inflation, the number one factors are one, price of fuel basically crude oil because uh, it's like we have to move all this food around from producers to consumers. And then number two wages because of all the processing that goes on. So those are the biggest determinants of retail food price inflation. Although you are certainly gonna gonna be added cost push inflation from these raw

commodity price increases as well. But here in the US, you're not going to see you know, fifty percent food price inflation because the price of reed's gone for that reason. But that's not true in countries like Egypt, where those those pass throughs are much closer to one for one. I have one last question, just based on that. Finally, like on this policy question, should rich countries think about aid too poor? I mean that seems to be the recurring theme that we keep coming back to. Is okay

US reasonably insulated. Yes, prices will rise, but obviously, as you just mentioned, there isn't anything close to a one to one passed through. We're probably not going to have

outright shortages in the US. But for poorer countries Egypt and elsewhere, food rise in food price is gonna have seriously, obviously devastating health consequences, devastating political cuntic quinces, consequences for stability overall, From a policy perspective, should leaders in rich countries be thinking about that, about what can be done with our own wealth, with our own stocks, to ameliorate some of the negative effects on the countries that can't

easily afford these price wings. Absolutely, and the number one policy lever that should be pulled there is to the degree possible to persuade exporting countries not to hoard their supplies exactly when they're most needed on world grain markets. That's number one. To try to stop that kind of beggar thy neighbor dominoes falling, that's number one. Number two, if there are ways to increase food aid where we can,

that's important. And number three the this is a longer term response, but we've we know that the best way is to continue supporting the growth of agriculture in these poorer areas. That's the number one way for their economies to develop and to um become more self sustaining in some of these key commodities areas. So support for their domestic agricultural producers it's really important. For example, you know,

you've got to be really careful. We've learned Joe that Okay, yeah, we have this emotional response and we want to really help poorer countries and so we kind of dump food aid in there. In the short run, well, that just destroys the livelihood of farmers in those countries. So it's it's it's not as easy as just give them a lot more aid. Well, Scott Irwin always fascinating to catch up with you, and like I said, said in the beginning, it seems like infinitely more complex than the first time

we chatted. But thank you so much for coming back on Odd Lots. Yeah. I really always enjoy it and hopefully added a little signal and not too much noise to the conversation. Absolutely, that was very useful and I learned a lot from it, So thank you. Yeah, that was great, Scott. Thank you, Tracy. I always really like speaking with Scott. It does feel like something like a wheat shortage here. We might look at a screen and see arise and prices, but and this is a theme

that comes elsewhere. There's sort of a very there's a difference between arise and prices and then places just not being able to get the actual commodity. Yeah. Absolutely, And I think this is something that we actually wrote about for the Odd Lots newsletter recently, this idea of the difference between the financial realm and the physical realm, which is something that it feels like the world is very

much way king up to at the moment. But I also like Scott's nuance on the point of wheat prices in the US and the idea that well, if the raw material goes up a lot that shouldn't necessarily translate into higher prices for things like bread and pasta, because a lot of those are going to be driven by

larger input costs like labor and energy. Unfortunately, at the moment, energy prices and perhaps labor as well are also going up, right, So it's not exactly much constellation necessarily that the price of bread isn't entirely determined by wheat, is just determined by everything else in the price of all those things are. You know, it's interesting. Another theme that continues to emerge is how bifurcated or how fragmented a lot of these

markets are. And so, you know, a scout mentioned in the US, we might be in decent shape from a fertilizer perspective, It might be tight, it might be a little bit more expensive, whereas for a country like Brazil, which he noted is extremely reliant on imported potash UH, that could be a totally different story. Of course, it would all come back around and connect and then you'd

have global prices. But it is interesting to think about, you know, the US relatively insulated on a number of these things compared to UH, compared to lots of other countries, whether they be producers or consumers of great well. Also the point about certain countries that rely a lot on food imports um now being most vulnerable to all of us. And I know Egypt is the one that was mentioned a number of times, but of course there are others, and when it comes to food price inflation, this is

something we've discussed again. But that is clearly a really sensitive topic for for consumers and people who have to eat, and it's the kind of thing that tends to um explode into the political sphere very quickly as well. So I think I'm very briefly mentioned the the egypt bread riots. I think that was back in two thousand and eight. I mean some people talk about those as a sort

of prelude for the Arab spring entirely. So it's very easy to see food price pressures translate into political upheaval as well. Last point though, it'll be interesting if the White House does anything on those uh millions of acres that are currently held back. I didn't realize that previously that we have this equivalent of essentially, it's not quite

a strategic patrol. It's not quite the equivalent of a strategic patrollingm reserve because there's nothing to sell into the market immediately, but to make them make those acres available for planting. I don't know. It doesn't feel like wheat politics, uh create havoc for the White House the same way gasoline prices do. But it will be interesting to see if that lever or something similar is pulled at some point. Well.

Also Scott's point about you know, even if you just did something relatively small, and it's probably not feasible that releasing those reserved acres would suddenly lead to a big boom and supply, but even something small can send a price signal to the market and start bringing them down, particularly at a time when people, when countries are hoarding.

And so if there's a lot of access buying because everyone is nervous and you're signaling to the market, okay, supply is going to come in September or whenever that comes. That might ease some of the current hoarding now and be able to have have a response even before the weed is actually or whatever grain it is is actually grown. Yeah, it's an interesting one. Although maybe the pheasant hunters will get upset. I don't know how how large is like

the pheasant hunting lobby. It'll be really bad if we have to like, like we're not going to do a pheasant huntings. I mean, what if it gets to that point we're like, well now we have to do a pheasant hunting story. But we all know it's really bad if that's where we have to keep keep keep going down that route. Yeah, so we leave it. Let's leave it there. Okay. This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me

on Twitter at Tracy Alloway. And I'm Joe Wisenthal. You can follow me on Twitter at the Stalwart. Follow our guest Scott Irwin on Twitter. He's at Scott Irwin UI. Big thanks to our producers Magnus Hendrickson and Colin Tipton. Follow the Bloomberg had a podcast Francesca Leaving at Francesci Today and check out all of our podcasts Bloomberg under the handle at Podcasts. Thanks for listening.