Monday Apr.11, 2022

🚜 Farm-ageddon

On the brink of a global food crisis (Burak Kara/Getty Images)
On the brink of a global food crisis (Burak Kara/Getty Images)

Hey Snackers,

The humanitarian situation in Ukraine is only getting worse: Russia is now attacking civilian areas in the east of the country. The EU began sanctioning Russia's energy industry, while President Biden signed a bill suspending US-Russian trade relations.

Stocks slumped for the week as the Fed’s rate-hike agenda and war-driven uncertainty dampened investor confidence. The S&P 500 snapped a three-week win streak.

Bread

Farm-ageddon: The world’s food supply is under threat as a storm of rare conditions brews

A new crisis is building... From fertilizing manure to tractor-fueling diesel, the inputs that power the world’s agriculture industry are in short supply. Why it matters: these shortages make it hard for farmers to feed the world and have caused global food prices to surge at their fastest pace ever: a record 13% jump last month. The pandemic gave us shortages and sticky inflation. Now Russia’s war on Ukraine — plus Covid lockdowns in China’s farming provinces — are making a bad situation worse.

  • Pricey breadbasket: Wheat and corn prices soared more than 19% last month as war + sanctions crush supply from the key Black Sea “breadbasket” region.
  • Empty breadbasket: Food staples are running low as Russia bombs Ukrainian wheat fields and critical shipping ports remain closed.
  • FYI: Russia is the world’s largest wheat exporter, while Ukraine accounts for a quarter of all grains trade and is the #1 exporter of sunflower oil.

Corn Flakes price hikes… are just one ripple effect from a major crisis. Americans notice food inflation in the form of pricier General Mills Cheerios or Kellogg’s Pop-Tarts. While US food prices are up 8% from a year ago, the latest rally is hitting the world’s poor hardest. Countries in the Middle East and North Africa, for example, are feeling the brunt of food shortages because they largely import their staples. Russia’s war could plunge 40M more people into extreme poverty if it continues this way.

It’s an imperfect storm… From the pandemic and war to severe weather and historic droughts, a rare combo of terrible circumstances is putting every aspect of food production under pressure — all at once. Global food prices have surged 75% since mid-2020 and are expected to keep climbing. The UN said it’s putting some people in poorer countries at a “breaking point.” Food insecurity is known to lead to more civil conflict and unrest — it was bread prices that helped spark the Arab Spring over a decade ago.

Zoom Out

Stories we’re watching...

The drones are coming… with your allergy meds. Retailers from Amazon to Walmart are finally starting to deploy delivery drones after years of hype. Last week, residents of Frisco, Texas, became the first to receive robo-packages from Walgreens, via its Google-owned drone supplier Wing. Amazon is rolling out commercial drone deliveries this fall, with plans to deliver 500M aerial packages/year. While drone advocates say the delivery tech could reduce emissions (fewer traffic-clogging trucks), regulators have yet to give the green light for nationwide shipments.

The paradox of recession-omics... By most metrics, the US economy is booming: unemployment is back to pre-pandemic levels; salaries are rising at their fastest clip in decades; and consumers are splurging on spring fits and summer vacays. And yet… some economists are bracing for a downturn. Their reasoning: the Fed can’t cool the worst inflation in 40 years without also slamming the brakes on growth. Last week Deutsche Bank was the first on Wall Street to predict a recession, followed by Bank of America warning of a “recession shock.”

Events

Coming up this week...

Fanny packs and flower crowns... #FestivalSzn is back. Coachella, Cali’s most Insta-worthy music festival, returns for the first time in two years this weekend — launching what could be a blockbuster summer for live events. When the pandemic hit, the music stopped. Now it’s back with a vengeance, and people are ready to dance. Last year, some bookers sold a year's worth of tickets in six months. Concert giant Live Nation, a rival to Chella parent AEG, says ticket sales are up 45% from 2019 and predicts its best year ever.

Opening the vaults... Big banks kick off earnings season this week, giving investors the first peek at how an eventful first quarter affected corporate profits. Rising interest rates, which let banks charge more for loans, mortgages, and credit cards are expected to boost profits at JPMorgan Chase, Wells Fargo, and Citi. On the flip side, Citi and JPM expect big losses related to their holdings in Russia. And a dramatic slowdown in IPO and deal-making activity so far this year probably won’t help either.

ICYMI

Last week's highlights...

  • Zero: China’s financial capital remains locked down over a spike in Covid cases, with ~26M Shanghai residents forced to stay home — monitored by drones and robo-dogs.
  • Turbulent: JetBlue outbid Frontier with a $3.6B offer to buy budget airline Spirit. Pilot shortages and demand for scarce tarmac gates are forcing smaller airlines to merge to survive.
  • Muskular: Elon became Twitter’s biggest shareholder after nabbing a 9.2% stake — and a board seat. The web’s “town square” could get a makeover: Musk teased upcoming “significant improvements” (edit button?).

What else we’re Snackin’

  • Rich: No one knows how many billionaires exist, even popular wealth watchers like Forbes and Bloomberg. The reason: private $$ is often untraceable, thanks to OG assets like offshore accounts and new ones like crypto.
  • Hurry: The boom in 15-minute grocery delivery appears to be losing steam: VCs that poured $10B into the cash-burning industry are souring on its tricky biz model. At least three of the apps have already shut down.
  • Plan: Budgeting can be daunting, especially if you have inconsistent income. Watch a money mentor share tips on how to budget and distinguish needs versus wants.

This Week

  • Monday: CMT Music Awards
  • Tuesday: March inflation data. Earnings expected from Albertsons and CarMax
  • Wednesday: Q1 earnings season begins. Earnings expected from JPMorgan Chase, Wells Fargo, BlackRock, Infosys, First Republic, Delta, Bed Bath & Beyond, and Rent the Runway
  • Thursday: Weekly jobless claims. Earnings expected from UnitedHealth, Morgan Stanley, Goldman Sachs, Citigroup, US Bancorp, PNC Financial, Ally Financial, Ericsson, and Rite Aid
  • Friday: Good Friday (US markets closed). Coachella music festival begins
  • The weekend: NBA playoffs begin Saturday. Easter is on Sunday

Authors of this Snacks own: bitcoin and shares of Tesla, Twitter, Amazon, Walmart, Google, and Delta

ID: 2119480

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