Miller Magazine Issue: 155 November 2022

28 MILLER / NOVEMBER 2022 Dwindling foreign-currency reserves in many cases reduced access to dollars, and banks are slow in releas- ing payments. IMF has warned of a catastrophe, while the World Food Programme says the globe is facing its largest food crisis in modern history. A combination of a strong US dollar, high commodity prices and rising interest rates are creating a mix that’s driving a “de- mand destruction” in crops, according to the head of Cargill Inc.’s World Trading Group. Developing countries in parts of North Africa, Middle East and southeast Asia are struggling with access to dollars that are needed for importing commodities, said Alex Sanfeliu, world trading head for Cargill in Geneva. That means in the upcoming months global trade flows may be reduced by 5% to 6% for wheat and 2% to 3% for corn and soybean meal, he said. “We are seeing a fair amount of demand destruction in parts of the world,” Sanfeliu said in a video interview to Bloomberg. “High interest rates, dollar appreciating and high prices in com- modities -- that is a really bad combination for many of these governments.” The International Monetary Fund has warned of a catastro- phe at least as severe as the food emergency in 2007-08. US Treasury Secretary Janet Yellen called for more food aid for the most vulnerable, while the World Food Programme says the globe is facing its largest food crisis in modern history. Weather shocks have driven volatility in recent months, grain stocks are low and soaring fertiliser and energy prices are boosting food production costs. Commodities traded in world markets are typically priced in the greenback, which has rallied 18% this year to a record against a basket of currencies. At the same time, agricultural commodities have resumed their rally amid the escalation of conflict in Ukraine and the uncertainty regarding shipments from the Black Sea region. In July, an international deal was brokered with the help of the United Nations and Turkey to keep grain flowing out of Ukraine. Concern is mounting over whether the deal will be renewed in November. The question of how much the Black Sea region can export will help guide the short term, Sanfeliu said, but fundamentally the market is different. “I don’t think you’re gonna make the same kind of highs,” should the Ukraine deal fall through. “I don‘t think we are going to reach $13.50 a bushel of wheat like we had before,” Sanfeliu said. Cargill, one of the world’s largest agricultural traders, posted record profits in 2021, mainly because of trade disruptions and tight global stocks. Strong US dollar adds to growing food crisis NEWS