A question from a well-respected agricultural lender generated fuel for thought. “The agriculture sector has been going through some tremendous changes in recent years. What does the average person on the street need to know, and why should they care about what is going on in the agricultural industry?”

Possible food crisis

The pandemic highlighted the importance of food, fiber and fuel with shortages of toilet paper and empty shelves of meat, milk and other staple goods. Now with the Russo-Ukrainian War, the aforementioned shortages and supply chain issues are even more prevalent.

The possibility of a food crisis is evolving in Ukraine, known as the breadbasket of Europe. Together, Russia and Ukraine produce nearly 25% of the world’s wheat exports. Fifty countries, many of which are emerging nations, are dependent on these two countries for more than 30% of their wheat imports. Typically, Egypt and Turkey import over 60% of their wheat from Russia and Ukraine. Combine this with weather issues in the U.S. and other growing regions in South America, and a food crisis in emerging nations is a clear and present danger. Food security is often the balance for stability in society where military and political terrorists and radicals can quickly arise when society is hungry.

Energy

The globe is feeling the pressure of quickly shifting from fossil fuels to green energy. This transition, which often takes decades, has resulted in the disinvestment in fossil fuels and shortages of critical elements produced in geopolitically sensitive regions of the world. This imbalance has played into strategies of authoritarian economies such as Russia and China and will remain prevalent both in the short and long run.

Input shortages of fertilizer and chemicals and supply chain issues will be felt at the gas pump and in the grocery store for an extended period of time. 

Environmental Issues

The agriculture industry is often blamed for environmental issues. Globally, cows are responsible for less than 5% of methane produced. Healthy soil and water in the U.S. are a high priority for most farmers and ranchers. Soil health is one of the strategic advantages of the U.S. compared to China where up to 23% of their soils have built up metal toxicities over the past century.

 

 

 

Dr. Kohl is Professor Emeritus of Agricultural Finance and Small Business Management and Entrepreneurship in the Department of Agricultural and Applied Economics at Virginia Polytechnic Institute and State University. Dr. Kohl has traveled over 8 million miles throughout his professional career and has conducted more than 6,000 workshops and seminars for agricultural groups such as bankers, Farm Credit, FSA and regulators, as well as producer and agribusiness groups. He has published four books and over 1,300 articles on financial and business-related topics in journals, extension and other popular publications.

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