As #ukraine burns, the US is experiencing its own heat as the drought in key #wheat growing areas of the country expands.
While oil and natural gas get the majority of the news cycle, food production should be watched closely.
For the world, 20% of its daily calorie intake comes from wheat/bread. #Russia accounts for 19% of global wheat exports with Ukraine 3%. Both these exports are now effectively shutdown.
Much of those exports went to Turkey, Egypt and Iraq.
The price of wheat had soared over 100% yoy during the initial invasion, but has dropped off since.
Yet, the US drought has the potential to drive the price back above its recent peak. 2/3rds of US wheat is grown in the southern great plains where the drought is starting to get worse.
As of 3/15 according to NOAA, drought extended across about 61% of the country, the greatest drought extent seen since 2013.
Imagine if this gets significantly worse and persistent. US food #inflation will continue to soar. And political instability will grow in the Middle East, but likely spread to other countries like Mexico.
The US won’t be immune to the political uncertainty as inflation is already a #1 topic for the #midtermelections. Even if President Biden navigates an end to the war in the Ukraine, the interruption of key commodities out of the region will continue and put pressure on the global/US economy.
The US drought is happening at the worst possible time and could be catastrophic if it worsens significantly.