Latest / Stephanomics / The High Cost of Eating Is Crushing Europe

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The High Cost of Eating Is Crushing Europe · Stephanomics

• 0:04
  Speaker 1: Hello, Stephanomics. Here the podcast that brings you the global economy.
• 0:07
  Speaker 1: And if you think about the things that are well
• 0:10
  Speaker 1: functioning modern economy is supposed to deliver, food would have
• 0:14
  Speaker 1: to come pretty high on the list. If you're not
• 0:17
  Speaker 1: living in poverty worried about where your next meal is
• 0:19
  Speaker 1: going to come from, you might well take it for granted.
• 0:23
  Speaker 1: But not only more, or at least not for many
• 0:26
  Speaker 1: families in Europe. In the UK, last mark, food price
• 0:29
  Speaker 1: inflation hit a forty five year high, with prices nineteen
• 0:33
  Speaker 1: percent higher than a year ago, and across the channel,
• 0:37
  Speaker 1: food price inflation has also been close to twenty percent
• 0:40
  Speaker 1: for several months. If you're sitting in the US, you
• 0:43
  Speaker 1: probably remember food prices did jump sharply last spring in
• 0:47
  Speaker 1: the weeks after Russia invaded Ukraine. But there the spike
• 0:51
  Speaker 1: proved temporary. That's not been the case in Europe, and
• 0:55
  Speaker 1: people are not happy about it. In a minute, we'll
• 0:59
  Speaker 1: discuss the devil stating implications for the traditional English breakfast
• 1:03
  Speaker 1: and ask a former chief economist from the US Department
• 1:05
  Speaker 1: of Agriculture why it's taking so long for food prices
• 1:09
  Speaker 1: to ease off. Also whether the experience of the past
• 1:13
  Speaker 1: year should change the way we think about the global
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  Speaker 1: food chain. But first, Rome based economy reporter Alessandra Miliaccio
• 1:21
  Speaker 1: explains how soaring prices have even put the basic human
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  Speaker 1: right to a pizza at risk.
• 1:30
  Speaker 2: Inflation rates may be slowing across Europe, but you wouldn't
• 1:34
  Speaker 2: know it looking at someone's grocery bill. Food prices are
• 1:37
  Speaker 2: still rising at an alarming pace, and there's only so
• 1:40
  Speaker 2: much that governments can do to help people cope. Let's
• 1:43
  Speaker 2: start at La Mansune, a small, family run restaurant nestled
• 1:47
  Speaker 2: in the picture perfect town of Core, located in the
• 1:50
  Speaker 2: Sailer Valley in southwest France. A few tables, a cozy
• 1:54
  Speaker 2: room with a view, and a set menu with local
• 1:56
  Speaker 2: specialties allow owner Alin Falgier to stay afloat the titles.
• 2:02
  Speaker 2: He's kept most items on the menu between sixteen and
• 2:05
  Speaker 2: nineteen euros. But it's a struggle because well we.
• 2:12
  Speaker 3: Other prices are hard, from bread to cereals and animal feeds,
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  Speaker 3: and from that you have price increases on meat like beef,
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  Speaker 3: lamb poultry, and the same for the fresh fruits and
• 2:25
  Speaker 3: vegetables everything, and for fruits it's even worse. The biggest
• 2:30
  Speaker 3: increase since last year. It's not easy today, Profact.
• 2:35
  Speaker 2: Bloomberg has been tracking custom food and this is across France, Spain,
• 2:39
  Speaker 2: and Italy throughout Europe's worst cost of living crisis in
• 2:42
  Speaker 2: forty years. To calculate them, we figured out how much
• 2:45
  Speaker 2: it would cost to make a traditional dish in each country,
• 2:48
  Speaker 2: from classic cocoven to pizza margarita. To make cocoven, you
• 2:57
  Speaker 2: need to start with chicken, and those prices jumped about
• 3:00
  Speaker 2: eighteen percent in the year through March. Wine is another
• 3:03
  Speaker 2: major ingredient, which costs eight point four percent more than
• 3:07
  Speaker 2: it did a year ago. You can also add carrots,
• 3:11
  Speaker 2: but it'll cost.
• 3:12
  Speaker 4: You more than thirty three percent now compared to last March. Meanwhile,
• 3:16
  Speaker 4: overall inflation in France is running at six point seven percent,
• 3:20
  Speaker 4: still historically high, but pretty low by comparison. Much the
• 3:24
  Speaker 4: same is happening in Italy, where the price of enjoying
• 3:27
  Speaker 4: a classic pizza margharita made with cheese, tomato and basil
• 3:30
  Speaker 4: has been at least twenty percent higher than a year
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  Speaker 4: ago for eight consecutive months. That's more than double the
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  Speaker 4: nation's headline inflation rate, and even with over ninety billion
• 3:39
  Speaker 4: euros of government aid spent to subsidize energy and gas
• 3:42
  Speaker 4: bills and tax cuts for fuel prices as the pump well,
• 3:46
  Speaker 4: there's just so much politicians can do when prices go up.
• 3:51
  Speaker 4: The government managed to reduce the impact of the first
• 3:53
  Speaker 4: wave of inflation following Russia's invasion of Ukraine, but as
• 3:57
  Speaker 4: prices rise across a wider range of goods, including food,
• 4:00
  Speaker 4: it's becoming too expensive to intervene. Dominic Co Lombardi leads
• 4:05
  Speaker 4: the Policy Observatory at the Lewis University School of Government
• 4:08
  Speaker 4: in Rome. He says governments can't keep trying to protect
• 4:11
  Speaker 4: everyone from inflation.
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  Speaker 5: The inflictionary outlook has evolved. Headline inflation is falling. However,
• 4:18
  Speaker 5: core inflation shows to be more persistent than expected, and
• 4:22
  Speaker 5: this comes heavy government support that has further narrow the
• 4:26
  Speaker 5: physical space. Let's not forget the pandemic, the shot course,
• 4:30
  Speaker 5: but the pandemic and then of course the energyender GYO
• 4:33
  Speaker 5: political crisis. So moving forward, the only physical support that
• 4:38
  Speaker 5: looks feasible is more targeted surgical interventions in favor of
• 4:43
  Speaker 5: those most affected.
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  Speaker 2: That's not easy for ruling politicians like Italian Premier Georgia
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  Speaker 2: Maloney who promised her people they wouldn't be left alone
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  Speaker 2: to face inflation, but she has to balance that with
• 4:53
  Speaker 2: keeping the country's fragile finances in check. The opposition has
• 4:57
  Speaker 2: blasted her for canceling a form of citizens income to
• 4:59
  Speaker 2: save money, and the government is now setting other solutions
• 5:02
  Speaker 2: like lower taxes on salaries to help increase purchasing power.
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  Speaker 2: In France, retailers have agreed to prolong efforts to charge
• 5:10
  Speaker 2: the lowest possible amount for some essential food items. The
• 5:13
  Speaker 2: three month campaign was announced in early March and set
• 5:16
  Speaker 2: to end on June fifteenth, until the Finance ministry recently
• 5:19
  Speaker 2: announced an extension. Supermarket chains are expected to take a
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  Speaker 2: hit to their margins amounting to several hundred million euros,
• 5:26
  Speaker 2: and the European Central Bank has increasingly highlighted the role
• 5:29
  Speaker 2: of corporate profits in the Eurozone's inflation crisis. Here's French
• 5:34
  Speaker 2: President Emmanuel Macron talking about the deal with retailers at
• 5:37
  Speaker 2: the Paris Agriculture Fair earlier this year.
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  Speaker 6: Our farmers are paying more for energy, more to produce,
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  Speaker 6: and they need to maintain their revenue. They have revenues
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  Speaker 6: that are still very weak, so they're not the ones
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  Speaker 6: who need to make an effort to reduce food prices.
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  Speaker 6: Our food industries have made considerable efforts these last few years,
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  Speaker 6: many small businesses and them. It is our distributors who
• 6:02
  Speaker 6: have to make an effort now.
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  Speaker 2: Spain's Prime Minister Pedro Sanchez has announced several aid packages
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  Speaker 2: to help households cope with inflation ever since Russia's invasion
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  Speaker 2: of Ukraine last year. He decided to cut the so
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  Speaker 2: called value added tacks on a basket of essentials like
• 6:19
  Speaker 2: bread and olive oil. But Spaniards are still paying more
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  Speaker 2: to make their prize pay addish, especially after devastating droughts
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  Speaker 2: last year wrecked crops like olives and rice. Olive oil,
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  Speaker 2: which Spain is the world's largest producer of, costs thirty
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  Speaker 2: two percent more in March compared to a year ago,
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  Speaker 2: and rice is an extra twenty two percent. But back
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  Speaker 2: in the valley of the salea river restaurant owner Folgier
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  Speaker 2: tries to make the best of it.
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  Speaker 3: It won't keep going up. Some prices will go down
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  Speaker 3: at some point. A lot depends on global wheat prices
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  Speaker 3: and costs of animal foods. Meanwhile, you just have to
• 7:01
  Speaker 3: go locally. That's what I do. Go directly to the farmers, which,
• 7:05
  Speaker 3: as me, spent maybe twenty percent less that Arrows has
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  Speaker 3: to keep prices table and have the same profit, emmins
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  Speaker 3: clients can keep going to the restaurant.
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  Speaker 2: Bloomberg News in Rome. I'm Alisandro Miyacchu.
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  Speaker 1: So not quite as good for your heart as olive oil,
• 7:30
  Speaker 1: but an equally potemic part of Britain's national cuisine is
• 7:35
  Speaker 1: the traditional English breakfast, So we thought we should monitor
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  Speaker 1: what was happening to that before we go on to
• 7:41
  Speaker 1: discuss the broader global forces at work in these rising
• 7:45
  Speaker 1: food prices in Europe. And Bloomberg Reporter Arena Angel has
• 7:49
  Speaker 1: more on that arena. Thank you very much for telling
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  Speaker 1: us about the Bloomberg Breakfast Index. I guess you should
• 7:55
  Speaker 1: first tell us what exactly if you were eating and English,
• 7:59
  Speaker 1: traditionally English breakfast, what would you be in for?
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  Speaker 7: Let's see, so I think it's sausages, bacon, eggs, bread, butter, tomatoes.
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  Speaker 1: Mushrooms, fried bread as well, fried bread, yeah, yes, but
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  Speaker 1: taste and probably tea. Okay, So what if we found
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  Speaker 1: out what is the English Breakfast Index telling us at
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  Speaker 1: the moment?
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  Speaker 7: So you know, the English Breakfast Index sort of puts
• 8:26
  Speaker 7: inflation in the frying pan. So we, as you mentioned,
• 8:30
  Speaker 7: each month, we use it to track the cost of
• 8:32
  Speaker 7: the ten products or the product you mentioned plus coffee
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  Speaker 7: in case. I mean I personally prefer coffee over tea,
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  Speaker 7: and we use data from the UK Office for National Statistics.
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  Speaker 7: So the latest Breakfast Index showed that the average cost
• 8:48
  Speaker 7: of ingredients increased almost twenty three percent from last year,
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  Speaker 7: and it's the sharpest jump since we started tracking the numbers.
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  Speaker 7: In June, eggs, bread and milk saw the biggest price. Right,
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  Speaker 7: So Stephanie, if you and I go to the supermarket,
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  Speaker 7: we're going to pay around thirty five pounds fifty for
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  Speaker 7: all the ten products to make a full fry up,
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  Speaker 7: which is almost six pounds more than last March.
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  Speaker 1: Thirty five pounds. I mean, I guess it depends on
• 9:14
  Speaker 1: what the exchange rate is doing, but that's you know,
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  Speaker 1: at least forty five dollars. And of course that's not
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  Speaker 1: just for one person. I guess you'd be buying slightly more,
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  Speaker 1: would probably be for a few people, but that's yeah.
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  Speaker 7: Exactly, Yeah, yeah, that is a lot of money. That's
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  Speaker 7: as you mentioned, Yeah, that's using the product sizes that
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  Speaker 7: the os provides provides a dozen eggs or a pint
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  Speaker 7: of milk, but it's it's a lot of money for
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  Speaker 7: a typical family.
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  Speaker 1: And how does that compare to some of these other
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  Speaker 1: sort of classic meals around the world that we've been
• 9:40
  Speaker 1: talking about.
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  Speaker 7: Well, national dishes are becoming a luxury everywhere around the world,
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  Speaker 7: sort of bloomberg. We saw it at the in South Africa.
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  Speaker 7: The cost of making a traditional barbecue, which sounds delicious
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  Speaker 7: by the way, with ingredients like beef, carrots, onions and corn.
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  Speaker 7: So the price for that increased twenty percent, mainly driven
• 9:59
  Speaker 7: by fresh products like pepper and tomatoes. Back in Europe,
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  Speaker 7: well you know, surging olive oil prices are behind the
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  Speaker 7: jump in Spain SPAIA index and they are making pizza
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  Speaker 7: malgaita more expensive in Italy. In France also the price
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  Speaker 7: of preparing cocovaine ROAs by fifteen percent because of more
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  Speaker 7: expensive carrots and chicken.
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  Speaker 1: So frice getting out of the out of reach in
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  Speaker 1: South Africa would definitely strike fear into the hearts. And
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  Speaker 1: when those numbers came out, I was in the UK
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  Speaker 1: and there was a sort of collective sigh because of
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  Speaker 1: course we've been expecting inflation to slow down, and we've
• 10:40
  Speaker 1: seen in large parts of Europe inflation coming down quite sharply,
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  Speaker 1: the headline inflation rate. Why are food prices still rising
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  Speaker 1: in the UK.
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  Speaker 7: Yeah, that's a that's a great question, and that's all
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  Speaker 7: the facts as you mentioned this, and plus the fact
• 10:54
  Speaker 7: that global commodity prices have also been declining for a
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  Speaker 7: while now. So part of the explanation could be that
• 11:00
  Speaker 7: big food producers in the UK are still tied to
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  Speaker 7: long term commodity contracts that they signed back when prices
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  Speaker 7: were sky high, so we have to wait for them
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  Speaker 7: to renew these contracts until we see the price falls.
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  Speaker 7: To feed through and manufacturers, it looks like they keep
• 11:17
  Speaker 7: passing on costs through the supply chain to consumers to
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  Speaker 7: protect their margins. However, there are some science inflation is
• 11:24
  Speaker 7: easy in some categories. Some supermarkets including Tesco, as the Sainsbury, Aal,
• 11:30
  Speaker 7: the Little Orcado all lower their price of milk. Tesco
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  Speaker 7: is also seeing some deflation for oils and grains and
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  Speaker 7: that could mean lower prices for big goods like croissants
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  Speaker 7: and all that.
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  Speaker 1: So do looking down the road if we decide to
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  Speaker 1: pass on the English Breakfast right now because it's too expensive.
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  Speaker 1: Is there any chance it's going to come back into
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  Speaker 1: reach in the next few months.
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  Speaker 7: The good news is even now, on a monthly basis,
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  Speaker 7: inflation in the Breakfast index looks like it's looked like,
• 11:59
  Speaker 7: I mean, it's might be already slowing. The price of eggs,
• 12:03
  Speaker 7: mushrooms and tea all fell in March actually from last month,
• 12:07
  Speaker 7: and the butter, milk and bread were unchanged. And we're
• 12:10
  Speaker 7: also entering the UK growing season and that might also
• 12:13
  Speaker 7: slow down food inflation. However, if you ask analysts, they
• 12:17
  Speaker 7: always say that absolute pricing rarely falls, so when we
• 12:20
  Speaker 7: finally see inflation slowing down, we might get more promotional
• 12:24
  Speaker 7: discounts rather than cheaper full price tags. So this all
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  Speaker 7: means that the English Breakfast is probably going to stay
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  Speaker 7: indulgent in every sense of the word.
• 12:33
  Speaker 1: Well exactly, it's pretty indulgent. Maybe it's better, maybe for
• 12:35
  Speaker 1: the better for the British heart if we have fear
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  Speaker 1: of them, I do. I had heard quite a lot
• 12:42
  Speaker 1: of discussion around the fact that the structure of Britain's
• 12:48
  Speaker 1: supermarkets was actually means that when prices are low, more
• 12:53
  Speaker 1: of that is passed on to the consumer. People often say,
• 12:56
  Speaker 1: you know, they go into the supermarkets in general, and
• 12:58
  Speaker 1: more expensive in continental Europe. But the cost of that,
• 13:02
  Speaker 1: the cost of sort of squeezing the last penny out
• 13:04
  Speaker 1: of suppliers, is that times like this you just get shortages.
• 13:09
  Speaker 1: I guess the final question, Arena, can we blame brexit
• 13:11
  Speaker 1: for this soaring cost of the English breakfast?
• 13:14
  Speaker 7: I mean, one role that Brexit good play is that
• 13:17
  Speaker 7: there's labor shortages in the food industry more broadly, and
• 13:22
  Speaker 7: we've been speaking to lots of businesses who mentioned brexitters
• 13:25
  Speaker 7: their top problem that it can't find enough workers.
• 13:28
  Speaker 1: Well, I suspect this is going to continue to be
• 13:30
  Speaker 1: a debate, but Arena Angiel, thank you so much.
• 13:32
  Speaker 7: Thank you.
• 13:38
  Speaker 1: So we're going to broaden this out. We've heard about
• 13:40
  Speaker 1: a lot of hard pressed European consumers in this episode,
• 13:46
  Speaker 1: and we're going to carry on worrying about them, but
• 13:48
  Speaker 1: we're also going to think about the rest of the
• 13:50
  Speaker 1: world and the potential implications of all these ups and
• 13:53
  Speaker 1: downs of food prices. In the last year. With Joe Glaubert,
• 13:57
  Speaker 1: who is a senior research fellow at the National Food
• 14:00
  Speaker 1: Policy Research Institute, he also used to be Chief Economist
• 14:04
  Speaker 1: of the US Department of Agriculture. Joe, thank you very
• 14:08
  Speaker 1: much for coming on Stephanomics. I'm always conscious when I
• 14:14
  Speaker 1: am hearing about the soaring prices for things like wheat
• 14:20
  Speaker 1: or olive oil that you know, as an economist, demand
• 14:25
  Speaker 1: and supply, I mean, high prices are also a way
• 14:27
  Speaker 1: of deciding who gets none. It's a rationing mechanism when
• 14:31
  Speaker 1: there's a shortage of something. You know, who has got
• 14:35
  Speaker 1: much less food over the last year, and how bad
• 14:38
  Speaker 1: has it been relative to the expectations we might have
• 14:41
  Speaker 1: had when a year ago when Russia invaded Ukraine.
• 14:47
  Speaker 8: You know, I think actually the world's adjusted pretty well
• 14:50
  Speaker 8: to the invasion. You know, no question, the Black Sea
• 14:54
  Speaker 8: was a big producer of wheat and maize and f
• 15:00
  Speaker 8: oils like sunflower oil, and once particularly the a few
• 15:06
  Speaker 8: months after the war started, we saw this big rise
• 15:08
  Speaker 8: in prices. And you know, but by about June or
• 15:14
  Speaker 8: so of the of last year, prices had started to
• 15:17
  Speaker 8: come down again, and in fact, by about the fall
• 15:21
  Speaker 8: they were back to pre war levels. That hasn't been
• 15:24
  Speaker 8: the case for food price inflation. And I think that's
• 15:26
  Speaker 8: a very important distinction to make between commodity prices and
• 15:30
  Speaker 8: actually retail food prices, which is, you know what consumers
• 15:33
  Speaker 8: are facing. And then the develop developed economies like the
• 15:38
  Speaker 8: UK or the US or member states of the European Union,
• 15:44
  Speaker 8: the commodity value is such a small share of the
• 15:46
  Speaker 8: overall food costs, right So if you go to look
• 15:49
  Speaker 8: at a loaf of bread, you know that's five to
• 15:52
  Speaker 8: ten percent of that value of bread that you're purchasing
• 15:55
  Speaker 8: in a grocery store is actually the price of whek.
• 15:59
  Speaker 8: So we can go up a lot, but the price
• 16:02
  Speaker 8: of bread not so much. But by the same token,
• 16:05
  Speaker 8: all of those other post farm gate costs get built
• 16:08
  Speaker 8: into the price of food. So what we're seeing in
• 16:11
  Speaker 8: a lot of economies right now is overall very very
• 16:14
  Speaker 8: high rates of inflation. So that's affecting energy prices, it's
• 16:18
  Speaker 8: affecting processing costs, it's affecting wage rates. All of these
• 16:22
  Speaker 8: things have built into very high food prices. That's one.
• 16:26
  Speaker 8: Some of that is less the case in developing countries
• 16:30
  Speaker 8: where maybe that post farmgate share of the overall food
• 16:34
  Speaker 8: cost is smaller that the price of the underlying commodity
• 16:39
  Speaker 8: means more. But there unfortunately those countries haven't seen quite
• 16:44
  Speaker 8: the price decline as we've seen on global markets. Why
• 16:47
  Speaker 8: because the dollar has remained so high and is actually
• 16:51
  Speaker 8: appreciated against some of those commodities. So if you go
• 16:54
  Speaker 8: to say Egypt, and look at the price of wheat
• 16:59
  Speaker 8: that you know is used bread as a huge staple
• 17:02
  Speaker 8: in a country like Egypt, those prices have increased substantially,
• 17:07
  Speaker 8: and you know, right after the war began, But they
• 17:11
  Speaker 8: haven't declined nearly as much as they have on global markets.
• 17:14
  Speaker 8: Why because the Egyptian pound has has lost value relative
• 17:18
  Speaker 8: to the dollar, and because commodities are most commodities are
• 17:22
  Speaker 8: denominated in dollars, that means in local currency, so those
• 17:25
  Speaker 8: prices haven't fallen nearly as much.
• 17:28
  Speaker 1: You've actually highlighted a good point. I mean, we have
• 17:31
  Speaker 1: looked at some of the causes of Eurozone inflation over
• 17:34
  Speaker 1: the last year, the increase in the inflation rate, and interestingly,
• 17:37
  Speaker 1: our economists found that a big chunk of the increase,
• 17:40
  Speaker 1: not just in the food sector, but across the board
• 17:43
  Speaker 1: was from European companies expanding their profit margining margins, which
• 17:47
  Speaker 1: I guess some people would call price gouging. So there's
• 17:50
  Speaker 1: definitely a lot of things going into that higher price
• 17:53
  Speaker 1: in the shop in the shops. But you know, we
• 17:56
  Speaker 1: tend to blame one way or another the Ukraine invasion
• 18:00
  Speaker 1: by Russia with these issues. But I feel like I
• 18:05
  Speaker 1: was hearing about serious problems with fertilizer prices and some
• 18:12
  Speaker 1: commodity markets long before Russia's invasion.
• 18:14
  Speaker 3: Is that right?
• 18:16
  Speaker 8: Yeah? No, absolutely, And if you were to look at
• 18:18
  Speaker 8: commodity prices generally, and that's certainly the case for wheat,
• 18:23
  Speaker 8: in maize, in vegetable oils, they were all rising prior
• 18:28
  Speaker 8: to the invasion. I mean, this was the big concern,
• 18:31
  Speaker 8: even prior to Russia invadeing Ukraine, as we were looking
• 18:35
  Speaker 8: back in January twenty twenty two at very tight global
• 18:40
  Speaker 8: stocks and we're looking at fairly high prices now. The
• 18:42
  Speaker 8: expectation was that farmers would respond and by the end
• 18:46
  Speaker 8: of the year we would have rebuilding the stocks that
• 18:49
  Speaker 8: didn't happen because of the war, And I think that
• 18:52
  Speaker 8: is the war has had definitely an impact there. But
• 18:55
  Speaker 8: when we talked about those commodity prices down to pre
• 18:59
  Speaker 8: invasion level, they are still running very much above levels
• 19:03
  Speaker 8: of say two years ago or back to twenty twenty.
• 19:07
  Speaker 8: Even in the case of energy prices or fertilizer prices.
• 19:12
  Speaker 8: They're down eighty percent from there from the peaks that
• 19:15
  Speaker 8: we saw in the spring of twenty twenty two, but
• 19:18
  Speaker 8: still one hundred percent above where they were in January
• 19:22
  Speaker 8: compared to January twenty twenty. So, yes, prices are high.
• 19:26
  Speaker 8: They have come down a lot, but they're still high
• 19:28
  Speaker 8: relative to historical levels.
• 19:31
  Speaker 1: And I guess when we think about higher energy prices,
• 19:33
  Speaker 1: we often forget that that feeds that has also affected
• 19:36
  Speaker 1: fertilizer prices, which then affects future crops of countries years
• 19:41
  Speaker 1: into the future.
• 19:42
  Speaker 8: Right, And don't forget that energy costs are very much
• 19:46
  Speaker 8: embodied in food. Food costs ultimately, I mean transportation, all
• 19:51
  Speaker 8: the transformation, depending on and even at the farm level,
• 19:57
  Speaker 8: some crops are very very energy intensive, you say, particularly
• 20:00
  Speaker 8: when you factor in fertilizer and other products.
• 20:04
  Speaker 1: COVID was another sort of force on making us think
• 20:07
  Speaker 1: about this that people realized when we had these supply
• 20:11
  Speaker 1: chain issues globally, that dependence on just one or two
• 20:15
  Speaker 1: suppliers for anything, whether it's you know, widgets or grain,
• 20:20
  Speaker 1: is not necessarily a healthy thing. Do you think do
• 20:23
  Speaker 1: you see efforts by countries by agricultural businesses to broaden
• 20:32
  Speaker 1: their sources of supply. Is that one lesson that comes
• 20:35
  Speaker 1: out of all of these experiences COVID, Ukraine invasion and
• 20:39
  Speaker 1: other things.
• 20:41
  Speaker 8: Yeah, I know, there's no question. I think the market
• 20:44
  Speaker 8: actually has responded pretty well, particularly bulk trade. Weak corned
• 20:51
  Speaker 8: countries were able to source alternative sources for their products.
• 20:55
  Speaker 8: There wasn't a case where we just ran out of wheat.
• 21:00
  Speaker 8: People were able to find wheat around the world. I
• 21:04
  Speaker 8: think the longer run, as we look forward, I think
• 21:07
  Speaker 8: the real key is flexibility to be able to pivot
• 21:10
  Speaker 8: and seek alternative sources. I'm not sure that you necessarily
• 21:14
  Speaker 8: would diversify just for the sake of diversification. It's a
• 21:17
  Speaker 8: strategy and it's much like an insurance product. You have
• 21:20
  Speaker 8: to look at what the cost of diversification is. So
• 21:24
  Speaker 8: if I'm Egypt and I'm looking across the Mediterranean at
• 21:28
  Speaker 8: a very black sea area looking at very cheap source
• 21:34
  Speaker 8: of wheat, if I were to say, well, I'm not
• 21:37
  Speaker 8: going to import from them because I want to diversify
• 21:40
  Speaker 8: to a much more higher cost supplier, that's the cost
• 21:44
  Speaker 8: you have to pay. And so I think the if
• 21:46
  Speaker 8: you look at what Egypt was able to do by contrast,
• 21:49
  Speaker 8: is they were able to pivot import from India, import
• 21:53
  Speaker 8: from the EU, and so I think having that flexibility
• 21:57
  Speaker 8: is was really important. And that does mean having the
• 21:59
  Speaker 8: ability to tap alternative sources. So I'm not saying that
• 22:03
  Speaker 8: diversifications the wrong strategy. I'm just saying that you don't
• 22:07
  Speaker 8: diversify just for the sake of diversification, that you need
• 22:11
  Speaker 8: to be able to be flexible to pivot to other areas,
• 22:15
  Speaker 8: to find sources when there are disruptions, and the obvious
• 22:23
  Speaker 8: disruptions that we're seeing right now, and I think unfortunately
• 22:26
  Speaker 8: the long run disruptions because of the continued low prices
• 22:30
  Speaker 8: in Ukraine and we're seeing you know how that's affected
• 22:33
  Speaker 8: plannings in the fall last year, they are now affecting
• 22:36
  Speaker 8: supplies this year. The ongoing war, the fact that it's very,
• 22:41
  Speaker 8: very costly to ship product out of Ukraine right now,
• 22:45
  Speaker 8: all that has longer term significance for the region.
• 22:49
  Speaker 1: I guess the final question is whether any of this
• 22:52
  Speaker 1: has accelerated or changed the attitude to some of these
• 22:57
  Speaker 1: exciting technological break throughs that we hear about in other
• 23:01
  Speaker 1: parts of the economy, whether it's robotics or AI or
• 23:04
  Speaker 1: genetic engineering. Is there is the debate around deploying that
• 23:11
  Speaker 1: in agriculture and having a second or are we at
• 23:13
  Speaker 1: this point a third or a fourth green revolution. Has
• 23:16
  Speaker 1: that debate changed in the space of the last few years.
• 23:19
  Speaker 8: Well, I think two thousand and seven, eight, twenty ten,
• 23:22
  Speaker 8: eleven they were real wake up calls because we're under
• 23:26
  Speaker 8: invested in agricultural productivity for so many years. That's and
• 23:33
  Speaker 8: now seeing this over the last year, particularly with starting
• 23:37
  Speaker 8: actually with COVID and now seeing the problems in the
• 23:41
  Speaker 8: Black Sea. Yes, you're right. I think that there's increasing
• 23:45
  Speaker 8: calls now to increase productivity in areas like sub Saharan Africa,
• 23:50
  Speaker 8: areas where we see big gaps between yield potential and
• 23:53
  Speaker 8: actual potential and then our actual production. And then the
• 23:57
  Speaker 8: other issue is fertilizer. You know, unlike where you know,
• 24:01
  Speaker 8: wheat has grown in a lot of areas around the world,
• 24:03
  Speaker 8: you know, something like potash, you're talking about just a
• 24:06
  Speaker 8: handful of countries that are major producers. And so I think,
• 24:10
  Speaker 8: you know, interest in things like green fertilizers and other
• 24:14
  Speaker 8: sorts of technologies which are still a ways off. I
• 24:17
  Speaker 8: think there's renewed interest in putting more research dollars into
• 24:23
  Speaker 8: that area to again, in this case, you know, look
• 24:26
  Speaker 8: at more sustainable ways of increasing improving productivity.
• 24:34
  Speaker 1: So that's Deephonomics for you folks. We have one week
• 24:36
  Speaker 1: we had grand financiers in la and the next week
• 24:40
  Speaker 1: we're talking about potash. Joe Glaba, thank you so much
• 24:43
  Speaker 1: for helping us out with this.
• 24:45
  Speaker 8: Glad I could be of help.
• 24:55
  Speaker 1: Well that's it for this food focused episode of Stephonomics.
• 24:58
  Speaker 1: We will be back next week. In the meantime, you
• 25:01
  Speaker 1: can get a lot more economic insight and news from
• 25:03
  Speaker 1: the Bloomberg Terminal website or app. This episode was produced
• 25:07
  Speaker 1: by Mangus Henrikson, Yang Yang and Summer Sadi, with special
• 25:11
  Speaker 1: thanks to Alessandra Milaccio, Irina Angel and Joe Glauber. The
• 25:16
  Speaker 1: executive producer of Stephanomics is Molly Smith and the head
• 25:19
  Speaker 1: of Bloomberg Podcasts is Sage Bowmen.