The Israeli/US attack on Iran has led to first a collapse in
oil/gas supply, first through disruption of the Strait of Hormuz, but
subsequently from retaliatory bombing of GCC state energy facilities by Iran.
Petroleum shortage cuts feedstock supplies
This is not a problem of 'energy for power' only, but also
how disruptions in input raw materials will impact food prices, as seen here:
Article 1: India's major fertilizer plants,
including IFFCO, have shut down due to LNG shortages ...threatening
urea supply, higher global prices;
Article 4: Australia's wheat farmers are
cutting back plantings in favor of oilseeds and pulses due to
fertilizer shortages and high costs triggered by the Iran war;
Article 6: A North Carolina farmer warns that the Persian Gulf fertilizer crisis, with urea prices surging from $475 to $550/ton due to war disruptions, will trigger a massive decline in U.S. crop yields and planted acres ...potentially driving global food prices up 12–18% by 2026.
|
|
Not only are urea (and other fertiliser shortages) going to
drive up input costs, and thus producer prices selling to the market, the
reduced yields and reduced production could even trigger a bigger problem
- food shortage - recalling that famines lead to unrest and
wars, if the situation worsens (likely), we may see much more widespread
societal chaos soon...
Fuel costs to slash supply - bad for prices
The more obvious issue most people are aware of, is that oil
supply disruption increases costs of everything, but from the food perspective,
the impact on supply can be leading to shortages soon:
Article 2: Ireland’s fishing fleet risks
grounding within 2–3 weeks from soaring diesel costs it cannot pass
on, endangering 3,650 processing jobs;
Article 5: High diesel prices, up ~70%
due to the Iran war, have idled over half the Dutch fishing fleet (80-90%
of beam trawlers) and are crippling other European fleets, tightening fish
supply and driving up prices;
Article 3: Australia’s largest ammonia plant (Yara
Pilbara) will remain shut for two months after a power outage,
worsening global fertilizer and explosives shortages... hitting farmers and
iron ore miners.
The list can go on and on, but we will stop here.
Unsurprisingly (probably due to still ample storage and reserves), agri prices
have not gone up in line with other more immediately hit commodities, and may
indeed underperform in the short term (red arrows), but eventually when
shortage worsen enough, this will become more priceless than any electric car
or wind turbine needs as people want to fill their bellies:
|
|
Meanwhile, the still modest food price reaction is probably
our last chance to buy enough reserve NOW before the masses start waking up to
the implications, and the inevitable mass panic and scramble buying:
|
|
Agri price index has already broken out of the down trend
from the 2022 highs above, and could well recapture the 2011 highs in the next
few months.
Think of ripple effects, act ahead of crowds
If you are focused on just the headlines and oil prices,
then more surprises will be in store, think of everything you may need in
future (eg replace that 3-yr old phone, or upgrade your 5-yr old TV), and buy
NOW, before the cost tsunami take out daily necessities one after another:
|
|
We do not want to be alarmist, but it is pictures like this
that gave us the peace of mind for farm ownership - yes the produce may be
slashed due to costs, but at least you have all that's needed for feeding the
family, if not also the remoteness from conflict/unrest centres in most of the
urban centres:
|
|
With this in mind, here is a refreshed top buy farm list for
our target market.
|
(Topbuys for clients) |
We subscribe to the Scout Motto (link) of 'be prepared', and given it is the long holiday
weekend, we better leave you with a vaguely humorous end to the rather macabre
message above, enjoy Tom Lehrer's song of the same motto:
