The global commodity and food fall-out from the Ukraine-Russia War is significant. G20 countries will feel the impact with higher energy costs and cost-push inflation, but emerging markets and frontier economies may face a real food shortage. Africa is especially dependent on Russia and Ukraine grain. If that supply is withheld from the market or if grains in the Ukraine are not planted and harvested, the shortfall must be made up from other sources. Yet, those sources may not exist. The last time we had a grain price shock in the Middle East sporadic food riots existed.
The same war disruption problem, albeit to a lesser extent, exists for metals and energies in other countries; however, the gravity of a food shortage dwarfs and shortage in metals or energy.
IMF global growth forecasts are being lowered. At the same time, financial conditions are tightening around the world. There are no easy solutions and investors should be prepared for monetary policy reversals if real growth is truly affected. We are already seeing governments discuss and plan for policies which subsidize the higher gasoline prices.
Any global food shortages will cause a flight to safety and will dampen any risk-on thinking that may try to assert itself in current markets.
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