“Control the food supply and you control the people.”- Henry Kissinger
In May of 1969, then-President Richard Nixon, gave a special address to the US Congress where he introduced his war to end hunger in America.
Later that year, Nixon convened the first ever White House Conference on Food, Nutrition and Health. The conference participants totaled over 2,500 and included educators, scientists, medical and health professionals, as well as representatives from state and local governments, religious denominations, and social-action groups. The conference delivered a report to Nixon’s desk with over 1,400 recommendations and resulted in many government programs still familiar today, e.g. Supplemental Nutrition Assistance Program (SNAP or Food Stamps), National School Lunch Program, and Special Supplemental Nutrition Program for Women, Infants and Children (WIC). The goal was, as Nixon said during the conference’s opening address, “to put an end to hunger in America for all time.”
Considering there’s been no follow-up conference over the last fifty-two years, one might assume that Nixon was successful and hunger in America was eradicated. That is until this week when the White House posted a YouTube video of President Biden announcing a second Conference on Hunger, Nutrition, and Health. The President said the conference will convene in September and:
“will bring together anti-hunger and nutrition advocates, food companies and states governments, tribal and territory communities, to lay out a plan to combat hunger, and improve nutrition for every American.”
Apparently, these types of meetings are only scheduled on a bi-century basis. Jokes aside, this announcement suggests Nixon failed, hunger still haunts America, and Biden hopes to succeed where Nixon did not.
But why now? Well, for one thing, September of a midterm election year is a convenient time for politicians to appear busy solving constituents’ problems. Additionally, it could be Biden is reading the same news headlines as every other American. The incessant coverage of case-counts of 2020 and 2021 is now replaced by a barrage of the Ukraine war and predictions of upcoming food shortages and global famine. The headlines below are a sampling from just the past couple days.
It’s wise to take catchy headlines such as those above with a grain of salt. Unlike many American’s (present company excluded, of course), I don’t take mainstream or social media at face value, and instead question the incentives and motivation behind all their programing. But unfortunately it’s not just the media sounding the alarm. My mentors, top economists, renown and trust-worthy investors, and also my own research suggests serious food shortages are highly probable. Let’s drill down into a trio of the most compelling causal factors, and discuss what we can do in response.
To get the obvious out of the way, in case you hadn’t heard, there’s a war occurring between Russia and Ukraine…you’re welcome. As you also probably know, both Russia and Ukraine are massive exporters of wheat. The chart below shows that together the two countries accounted for 28.5% of global wheat exports in 2020:
But it’s not just wheat. Combined, the two countries contribute a hearty portion of the world’s food. This includes sunflower oil, barely, corn and countless other hard and soft commodities.
With these countries too preoccupied fighting to plant crops (Ukraine) or simply refusing to export their commodities (Russia), the rest of the world will be forced to cope with a lot less food. Cope is putting it nicely.
In the wake of Russia’s invasion in February, global wheat prices quickly rocketed up more than fifty percent. The prices have stabilized at levels seen only once before, back in 2008. Those elevated prices fourteen years ago, were a leading factor to the Arab Spring - the political uprisings, protests, and rebellions that violently rocked the Middle East in 2010. Today, with African countries relying on Russia for approximately thirty percent of their wheat supply (Egypt is close to 80%) it’s clear this current situation could lead to massive starvation and erupt out of control if food becomes expensive or scarce.
Doomberg, a newsletter written by an anonymous investment firm, is my favorite newsletter on Substack. In a recent article titled Farmers On The Brink, the author enumerated reasons that are creating a perfect storm for global famine. The entire article is worth a read, but here are the main points.
Doomberg’s list begins with the rising price of fertilizer. All three critical ingredients in fertilizer - nitrogen, potassium, and phosphorus - have dramatically increased in price. Most nitrogen is produced from natural gas which itself is at record prices (particularly outside of the US). To get potassium, you need potash, and the two largest producers are Russia and its ally, Belarus. Both have stopped exporting this critical ingredient. And to top it off, last year China ended its phosphorus exports to preserve it’s own strategic supplies. All together, this has caused the price of fertilizer to skyrocket. With pricy fertilizer, less will be used on crops this year, reducing the output this fall.
With closely related underlying factors, the increased costs of weed killer, diesel, and propane are also on Doomberg’s list. Less weed killer means more weeds and less produce. Higher diesel costs equate to higher costs of operating farm equipment. Higher propane costs increase the price tag for drying wheat, oats, sorghum, and every other grain.
And finally with shortages of labor and essential equipment parts, not only will prices of everything increase, but things will not even be available.
I’m not claiming the world is ending, just the world as we know it. For a litany of economic reasons, we’ve lived our entire lives in an abnormally advantageous time.
For one, it’s been a period of consistently lower interest rates. Lower rates makes money cheaper to borrow. This incentivizes more borrowing, and as a consequence, increases productivity.
The American government and citizens alike have taken full advantage of this cheap money. Today, the US public debt stands at around $30,000,000,000,000 (that’s trillion). American private citizen debt rings in at another $15 trillion or so. It’s easy for life to be good if you just keep borrowing more money.
Not only has money been cheap, but because of increasing globalization, countries the world over can access cheap markets for goods, labor and resources. In his first three books (his forth comes out in June!), geopolitical expert Peter Zeihan makes the case that since 1945, America has agreed to protect all trade for every nation. In the annals of history, that’s unheard of. The US system produced an explosion of international trade leading to increases in efficiency and lower prices on a global scale.
The reasons for the United States’ generous global insurance policy were: 1) construct an economic coalition to counter the rise of the Soviet Union, and 2) ensure energy security (and thus economic and national security) which for years meant securing access to the Middle East. Now with the Soviet threat gone and the US able to produce all of its own oil (thanks to shale oil and fracking technology), will America keep protecting the trade of the entire globe for free? The chart below shows a leveling off and perhaps a decreasing of global trade over the past decade.
Not only have prices decreased because of globalization, but also for other reasons unique to America. Since 1983 corporate taxes have decreased by 25%. Since taxes are an expense, lower taxes led to more productivity and lower prices for the end consumer - you and I. With the current national debt burden and the present political environment, I wouldn’t bet on that trend continuing.
If we are indeed at an inflection point in these price-reducing trends, and they either stagnate or change direction, that will lead to higher prices and ultimately to fewer goods. Even the goods at the bottom of Maslow’s hierarchy of needs such as food will take a hit.
So why do I take precious time out of my day to think about such gloomy probabilities? One, I find macro economics and the geopolitics of natural resources fascinating. And two, I want to do my best to prepare myself and my family to thrive in the future.
I don’t claim to know the future…but I do think the probability of greater food insecurity around the globe is rising. An outright famine in the United States is unlikely. Americans are blessed with a continent and climate that consistently produces food in quantities and varieties unimaginable for other countries. I think what Americans can expect is higher food prices, and possibly shortages. Our standard of living may decrease. Much of the globe is not so fortunate.
The chaos of worldwide famine would produce ripple affects even in countries not directly involved. Like every crisis, it would be used by entities and leaders to consolidate power. History is replete with examples of people trading freedoms, property, and rights simply to stave off starvation. As Kissinger’s quote that kicked off this article so aptly states:
“control the food supply and you control the people.”
In challenging times, it’s those who live resilient lifestyles who preserve the most freedom.
If a resilient life is your goal, as it is mine, you must live and think differently than average Americans. And specifically, you must approach your food supply totally differently.
To be resilient you must grow your own food. Lack of space is no excuse. There are people who grow bushels of produce on small apartment patios. You must search out local food organizations, farmers and ranchers, and build working relationships with those people. If your weekly groceries depend on the fragile global supply chain, you are vulnerable. And if nothing else, you need a supply of a few months worth of all nonperishable items that you eat regularly. The best way to accomplish this is to simply buy two of each item every time you shop until you store up the necessary amount. Each little step is a step closer to a more resilient life.
As September rolls around I’m certain all Americans will pause their current Netflix binge and wait with bated breath on the recommendations of the second White House Conference on Food, Nutrition and Health. We can only hope that Biden can pull off what Nixon could not. And of course we all hope and pray that Russia and Ukraine end their turf war, that farming costs decrease, and all the advantageous trends of the last seventy years maintain full steam ahead. But just in cases they don’t, perhaps you should grow a garden. Rain or shine, you’ll be better off.
Now get out there and courageously live an unsafe, but good life.
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