Ukraine Conflict Clouds Outlook for Global Food System

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Life is full of unintended consequences. And unfortunately, the Russian invasion of Ukraine has provided classic proof of the old adage.

In this environment, daily events — military and political — have an increased influence over daily commodity supply, causing gyrations in prices that obscure buying decisions. Further complicating matters is filling the 7 million metric-ton gap created by the dramatic decreases in Russian-Ukraine wheat export levels. In short, prices are not only higher than historic levels, but also subject to wider swings.

Far beyond the carnage facing citizens of Ukraine, the world faces some very real and substantial costs from the war. We risk facing a hefty tuition bill for once again learning the unforeseen dangers too late.

The immediate threat to our global food system

The threat posed to our global food system by Vladimir Putin’s invasion of Ukraine has been well documented. At the core of the threat is one simple truth: the world depends upon an interconnected network of agricultural trade. No country can credibly claim complete food self-sufficiency.

We’re committed to a system based on comparative advantage, in which all nations seek to exploit their natural advantages to supply the world with the commodities and food products they produce most efficiently.

If economics alone didn’t create such an integrated marketplace, our tastes would. Consumers everywhere simply want to have a wide variety of foods all the time, regardless of local growing seasons.

That fundamental reality of modern life has made Russia and Ukraine critical elements of the global food system.

The rich productive capacity of each nation has firmly established them as critical providers of a range of commodities, notably wheat, sunflower oil (see below chart), barley and corn.

The charts and graphs that accompany this post paint a sobering picture of just how significant Russia and Ukraine are to our modern food system – and suggest why both economic experts and political leaders are so concerned with more than just the carnage of battle.

The war’s rippling effects

When the flow of those commodities is interrupted – by war or any other factor – the effects ripple across the entire global food system. As just one example, the conflict has promoted a dramatic increase in insurance costs for shipping commodities in the region, effectively altering if not limiting trade flows. And the longer the interruption continues, the greater the uncertainty that fuels steady and often sharp increases in commodity prices.

How long prices will remain at current historically high levels is almost impossible to predict. Normally, high prices trigger increased production. But these aren’t normal times. Open conflict obviously will affect how much land in the embattled region is planted for next year’s crop.

Equally important, the corollary effects of rising energy prices also will complicate decision-making by producers everywhere who face dramatic increases in the cost of fuel for field equipment and especially the fertilizers needed to produce the best possible production levels.

Other producers of food grains, feed grains, and oilseeds around the world may not farm under the sounds of guns, but they can’t escape these high costs.

Production uncertainties – and price volatility – measured in months if not years will be among the most significant unintended consequences of the conflict. In the modern, interconnected food system, uncertainty translates into risk – and higher costs and higher prices for everyone.

The Threat of Immediate Hunger

But another, more pernicious effect of the conflict remains to be addressed: the very real threat of immediate hunger to millions – or more – of the world’s hungriest and neediest people.

Remember, wheat is the food of the here and now.

Most often, it’s the daily bread sustaining a majority of our world’s population, especially in the less economically developed areas of Africa, the Middle East, and other areas currently dependent on wheat from Russia and Ukraine.

And feed grains and meal from oilseeds are tomorrow’s food staples.

Oilseeds go into the feed rations that produce animal protein – a kind of investment in the protein-rich foods making up a greater share in more economically advanced markets.

But whether you live in an economically advanced country or lesser developed, disruptions of these commodities that threaten hunger become very real and very immediate for all.

Just how important are Russia and Ukraine to world agriculture?

Probably more than you think:

The two nations account for a combined 80 percent of global sunflower seed oil and meal…

  • Sunflowers account for about 9 percent of the vegetable oils consumed worldwide, mostly for cooking and processed foods
  • Linoleic acid from sunflower oil is in skincare products to lock in moisture, reduce inflammation and promote healing
  • Competing suppliers face price pressures of their own, with lower acreages in Brazil and Canada and export restrictions in Indonesia

…30 percent of global wheat production…

  • Russia is the world’s largest exporter of wheat, accounting for over 19 percent of global wheat trade, worth roughly $8 billion
  • Ukraine accounts for about 9 percent of the market, with sales of roughly $3.6 billion. Almost 41 percent of Ukraine’s wheat exports go to African countries.
  • In comparison, the U.S. and Canada each provide 14 percent of world wheat exports, worth about $13 billion in total

…30 percent of world barley trade and 16 percent of global corn exports. 

 Sources: FAS/USDA; S&P Global Market Intelligence GTAS Forecasting

How does fasting prevent disease?

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Fasting has been in practice since the dawn of humankind and in all cultures and religions. We don’t hear about it as often now, but perhaps our ancestors were on to something…

In addition to its spiritual benefits, implementing a fasting program into an already-healthy diet has been shown to have a significant effect on our long-term health.

For someone who loves to eat, I wanted to fast for the minimum amount of time and get the most benefits. My parents both died of cancer, so my focus is preventing this awful disease, in particular.

A little starvation can do more for the average sick man than can the best medicines and the best doctors” 

– Mark Twain

What are the benefits of fasting?

Forcing your body to cope with the stress of no food, can help our bodies enhance DNA repair, eliminate toxins, increase brain cells, lose fat, reduce inflammation, and combat diabetes, cardiovascular diseases, obesity, cancer, and cognitive impairment.

The benefits, also listed in the image below, have been studied by some of the most trusted researchers today. Of course, many of the fasting studies have been done on mice and other animals – even Labrador retrievers (who lived longer) – but the results have been confirmed on human studies as well. Testing diets is always more difficult to do on humans, but I have learned that putting your body under stress, as in fasting, is something that most of us should do consistently – but with a solid plan.

What is a ‘fast’?

At D2D, we have written about intermittent fasting.  This is where you don’t eat for a period of time each day or week to ‘reset’ your body. For instance, you can fast for 14, 16, or 18 hours each day and then only eat during a 10-, 8-, or 6-hour window.  Or, once a week, you can fast for 24 hours, for example from dinner to dinner.  Maybe you want to do the 5:2 fast, which is fasting for two days each week.

What I wanted to know more specifically is: what happens to my body during the different phases of fasting? And what is the optimal timing to achieve the maximum benefits? Is it 16 or 24 hours?  Is it really five days? And…could I do it for five days?

Our 5-day experience

Our son and his fiancé inspired us to try the 5-day fast-mimicking program they do from time to time called Prolon. This specific one was developed by Dr. Valter Longo, professor at USC Davis School of Gerontology, Department of Biological Sciences, and Director of the USC Longevity Institute. For my husband and me, it sounded challenging but appealing because Dr. Longo has carefully researched and constructed a nutritious diet to follow for each of the five days. Dr. Longo was one of the select few awarded a grant from the National Institute on Aging, part of the National Institute of Health, to research fasting, cell regeneration, and disease protection.

Prolon sent us a box of plant-based food so we could dutifully follow the protocol which ‘tricks’ our bodies into thinking we were fasting. This means we ate a modest 1100 calories the first day and then between 700-800 calories on days two to five.

The food consisted of caffeine-free teas, an energy drink, fasting bars, crackers, and soups. For instance, one day we would have a bar for breakfast, watery soup for lunch and watery soup and a bar for dinner. All day, the Prolon directions encouraged us to hydrate and keep our energy up by drinking their glycerin ‘L-Drink’ mixed with the tasty teas.

We did it!

We decided to go from Sunday to Thursday. Honestly, I was nervous as we approached the date. I already do the 15-16 hour fasting and that is pretty easy because I know a good meal is coming that very day. I was curious about how I would do on such limited calories for five days without a real meal in sight. I wanted to make sure I kept my muscles, so I planned on continuing my workouts. Would I have enough energy?

Plus, I was worried about losing too much weight. So I did what most people don’t do — I bulked up beforehand and happily gained three pounds. My sister said that I should be more thoughtful and approach this with peace and mindfulness.  She was probably right…my husband just plowed right into this experience without any hesitation or trepidation.

What happened? After seriously overthinking this, basically, we were…fine. We had plenty of energy to work out, we were not tired and while we were hungry, we weren’t “hangry”, so the entire five-day period was only modestly unpleasant. Although, I was very excited to eat a ‘real meal’ on day six!

But the benefits from Prolon are only studied and proven if one does this once a month for three consecutive months. Really?  Do I have to do this again?  I am wondering if there is a shorter version to gain the same benefits.

Your body’s response to fasting

While there are multiple benefits to intermittent fasting, they can be categorized in three areas: burning fat, increasing brain activity, and preventing disease. How long you fast determines the benefits.

Burning Fat:

Each cell in your body needs fuel to function. That fuel comes from carbohydrates ranging from fruit to vegetables to grains. After a meal, the glucose from your meal is used for energy and the fat is stored as triglycerides. When you fast, your liver converts fatty acids to ketones, a major source of energy for many of your body’s organs.

According to a study by Mark Mattson, a neuroscientist from Johns Hopkins, who has studied intermittent fasting for 25 years, “more than just burning fat, ketones regulate the expression and activity of many proteins and molecules that are known to influence health and aging.’

Brain Activity:

Your brain loves ketones. Ketones help generate a hormone called BDNF which strengthen neural connections and promote new nerve cells in the brain for learning and memory. In turn, this may help prevent Alzheimer’s and other neurodegenerative disorders. Clinical trials have shown that caloric restriction improves verbal memory, executive function (memory, flexible thinking, and self-control), and global cognition.

Preventing Disease:

After a period of fasting, your cells go through autophagy. This is a cleanup of waste and damaged components in the cells. During autophagy, your cells repurpose some of the proteins and other cell parts and then direct them to where they are needed. This is where your body begins to flush out cells exhibiting early-stage diseases such as cancers and Alzheimer’s. Exercise also enhances autophagy, and even more so while fasting.

Inspired by Nimsdai Purja, who climbed 14 peaks in an incredible 7 months, we agree that ‘Nothing is Impossible’.

What kind of fast is right for you?

What type you choose depends on your lifestyle, your microbiome, your goals, and your ability to manage hunger. And don’t forget to check with your doctor – mine was a little curious about the five days.

For me, fasting will now become a way of life – and hopefully for my husband. As a result, I have decided to do an 16-18 hour fast each day with a three or four day fast about four times a year.  If I am extremely motivated maybe I will do Prolon again. Overall, I think this approach is balanced if my diet remains healthy during my eating periods.  I am also pleased to know that while traveling if there are not good food options, I can skip a meal and my brain and body might even thank me.

The key to success is to make sure you eat healthy meals during your non-fasting time. I have heard of some people diving happily and overeating with cheeseburgers, ice cream and beer. Maybe not the best choice on an empty stomach and a ‘refreshed’ body. Instead, lots of vegetables, fruits, healthy fats, whole grains, and proteins are a better bet. And stay away from sugary foods and drinks.

For more detailed information on this here are some credible and helpful resources:

  • My brother in law gave us the book “Lifespan” by David Sinclair, Professor of Genetics and co-director of the Paul F. Glenn Center for Biology of Aging Research at Harvard Medical School, which gave us a great understanding of “what happens to our cells when we age and why we don’t have to”.
  • Mark Mattson, professor of Neuroscience at Johns Hopkins University School of Medicine.
  • Andrew Huberman, neuroscientist and tenured Professor in the Department of Neurobiology at Stanford University School of Medicine, has some great podcasts on the effects of fasting and time-restricted eating on fat loss and health.
  • Satchidananda Panda, PhD, a professor at the Salk Institute, La Jolla, California, has researched time-restricted eating in a narrow eating window.
  • Chris Kresser, M.S., L.Ac., is an expert, clinician, and educator in the fields of functional medicine and ancestral health explains intermittent fasting with studies as references. He also wrote “The Paleo Cure”.
  • Eric Berg, chiropractor, is an educator and has some helpful videos.

What’s healthier: protein bar or burger?

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I was talking with a colleague one day about all of the different types of protein bars on the market. As someone who enjoys weightlifting, I am always looking for ways to add more protein into my diet, so we talked about which brands we liked and didn’t like. My colleague finally said, “I guess I was just looking for a reason to have a candy bar.” And, just like that, it clicked.

I quickly remembered my other friend telling me her favorite part of the day is when she gets to have a protein bar because it’s like a treat. I thought to myself, “Hold on, are these bars healthy or dessert?” I thought they’re supposed to be giving our bodies the nutrients it needs at that given time. Yet, so many Americans are unknowingly doing the opposite, pumping their bodies full of unnecessary sugar and fat when all they’re really looking for is a bump in protein to keep them fuller longer, get through the afternoon, or aid in muscle growth and recovery.

When snacks like some types of protein bars, granola bars, trail mix, and other similar foods are advertised as “healthy” choices with “real ingredients,” it’s no surprise the consumer is more confused than ever.

A Turn To “Healthy” Snacks

In response to the never-ending desire of many Americans to lose weight, companies met the demand by creating snack options that are filling and boast a higher protein content. With nutrition and health becoming more of a priority among younger generations, especially among those incorporating weight lifting into their regime, snacks with nuts, nut butters, added protein, and other seemingly healthy components seem like the perfect solution.

For this reason, we’ve recently begun regarding snacks like granola, granola bars, and protein bars as “healthy”, even in statistical reports. For example, in 2019, data collected from the U.S. Census and National Center for Health Statistics suggested that over 165 million American consumers said they consumed “healthy” snacks in the last year. However, the main “healthy” snack of choice was granola.

Who said granola was healthy and why do we believe them? According to Insider’s interview with Kim Larson, a registered dietician and nutritionist and media spokesperson for the Academy of Nutrition and Dietetics, granola, granola bars, and energy bars are rated as the second most unhealthy snack group you can eat. They come in right behind potato chips, crackers, and corn puffs — and are even regarded as more unhealthy than pastries and baked goods. If you venture further down the list, trail mix even made the list at #7.

How Are They Unhealthy?

It all comes down to sugar and saturated fat content. The Palinski-Wade Rule of 5, created by registered dietician Erin Palinski-Wade, states that for a granola bar to be good for us, it should contain at least 5 grams each of fiber, protein, and unsaturated fat. And, of course, they shouldn’t have the same sugar amount as a candy bar which, unfortunately, many do.

We know nuts are good for us (good sources of healthy fats such as monounsaturated and polyunsaturated fats, and low in unhealthy, saturated fats), and since trail mix and granola bars contain nuts, wouldn’t those be good for us, too? We considered these questions as we dove deeper into this subject. But when you think about it, is a nutbar covered in milk chocolate really good for you?

A PowerBar Lemon Cheesecake protein bar contains 341 calories, 6 grams of fat, 32 grams of protein, and a whopping 25 grams of sugar. A Snickers bar is 245 calories and contains only 22 grams of sugar! Granted, the amount of protein contributes to the calories of the PowerBar, but so does the high sugar component. Just go all in and have a Snicker’s candy bar instead.

Another example of a candy bar-like energy bar is a chocolate chip Clif bar. I used to eat these all the time in college, especially when I didn’t have time to eat a meal between classes. If I’d known what I was putting in my body then, I would have been appalled! A chocolate chip Clif bar contains 21 grams of sugar, a higher sugar content than two glazed Krispy Kreme donuts! And, the ingredients in Clif bars are also something to watch out for, like brown rice syrup, which is basically pure glucose and can cause major spikes in blood sugar.

And It’s Not Just Protein Bars…

Even other healthy snacks, such as flavored yogurt, are not that good for us. A plain vanilla Yoplait yogurt contains 17 grams of added sugar – 65% of our recommended daily maximum sugar of 26 grams (for women, 36 for men) right there! Even Greek yogurt, known to be the healthiest, has up to 24 grams of sugar in its flavored yogurts.

When looking at the macronutrients of a McDonald’s cheeseburger, and comparing it to a packaged protein snack, you may be very surprised. A McDonald’s cheeseburger has 300 calories, 13 grams of fat, 32 grams of total carbs and 7 grams of sugar. Let’s compare this to a Lenny and Larry’s Chocolate Chip Complete Protein cookie, which has 420 calories, 12 grams of fat, 60 grams of total carbs, and 24 grams of sugar. With a similar protein and fat profile, but considerably lower sugar and carbs, the McDonald’s cheeseburger is the clear winner for us.

How Are We Being Fooled?

Somehow, the snacks we’re told are good for us may be as unhealthy as eating a donut or candy bar. How did it get to this? Well, it’s all about advertising and marketing strategies.

Companies know that consumers want to be healthy. Millennials and Gen Zers, myself included, pride ourselves on being “the best version of us,” drinking our oat milk lattes (19 grams of sugar), and eating our protein bars after a good workout in the gym (5-12 grams of sugar). We really like protein so we gravitate toward these bars.

Some of us really like following what celebrities and social media influencers tell us. What we usually forget is that most influencers and celebrities are being paid to advertise these products on their channels and don’t actually eat those 12 grams of sugar in their sponsored bar.

My social feeds contain tons of ads for “health foods,” like detox teas, protein bars, giant salads, smoothies, the list goes on and on. What they’re not telling me is that the detox tea is just regular tea and has no real health components. The salad has more calories and fat than a simple sandwich or wrap. And, the fruit in the smoothie has been stripped of almost all its nutrients and fiber when it was juiced. Yet, we still trust them. Why?

Is it because the only information we’re getting on healthy eating is from social media? Possibly. Or maybe it’s because we align with certain company’s views? I’m a huge Starbucks fan because of their sustainability goals with respect to water conservation and reforestation practices, so I don’t mind buying one of their breakfast sandwiches with 11 grams of saturated fat and over 400 calories. Starbucks would never sell me something bad, that’s just not them. Think again!

Marketing is Strategic…Here’s What We Can Do

As consumers, we should know it is not our fault we are falling for these calculated marketing strategies. That’s what these companies are paying for…of course, it’s going to work! But we don’t have to be a victim. There are so many things we can do to make sure what we’re putting in our bodies is the BEST thing for us.

Try eating a banana with nut butter instead of a protein bar. Incorporating whole foods such as these into your diet will give you better results than the processed bar, and keep you fuller longer. And always ask questions! We have Google and smartphones for a reason, use them!

If you truly want to eat “healthier,” limit your intake of processed bars. For example, if you want a quick, tasty, nutrient-dense snack, choose a high-quality 85% dark chocolate bar instead of a sugary milk chocolate one. We like Lily’s as it uses stevia instead of sugar.

If you’re accustomed to eating protein bars as your post-workout snack, substitute that with a protein shake, nuts or even a canned fish or grilled chicken salad for a non-processed, high-protein snack that’s healthier than any bar you could grab.

A Few Good Options…

If you’re still unsure which bar to eat, here are a few options that have at least 5 grams each of fiber, protein, and unsaturated fats, as well as very little added sugar. If you want to try your hand at a DIY bar, check out this recipe.

And the list doesn’t stop here…for instance, some Kind bar varieties have lower added sugar. Just be sure to check out the nutrition label.

And, as we always say…when you’re in doubt, you can make your own!

Happy & healthy snacking!

Railroads Drive Lower Costs, Fewer Emissions

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As we shop in the grocery store, it is hard to imagine how all the food we see and put in our cart arrives on the shelves. It’s a carefully coordinated, highly complex ballet with the railroads, trucks, river barges, ocean carriers and other transportation elements of the food chain. This is the second of a three-part transportation series on how our food moves around our country. Our previous post in this series explored the complexities within the trucking industry and the next one will examine river and ocean transportation.

It’s A Matter of Scale

We all know the story of railroads – or think we do. From childhood, we are immersed in images of the Mighty Iron Horse, in history books or western movies, or even in everyday travel along the more than 140,000 miles of railroad track in the United States. Who among us hasn’t found amusement in a boring road trip by counting the rail cars in the trains we see almost everywhere?

Yes, railroads helped build our nation, opening vast new areas to settlement and commerce. And they still make the wheels of commerce turn today, perhaps more than ever.

Source: Association of American Railroads

Look at the clothes you have on, or think about the dinner you ate last night, the cement used to pour the concrete for your house, the car you drive, and the appliances to keep your dishes and clothes clean. These are just a few items in your home that came by rail.

Freight railroads carry the high-volume commodities that fuel our power plants, our manufacturing industries, our food system and more. More than half of all rail shipments (by tonnage) involve coal, chemicals, minerals and crops like corn, soybeans, wheat and other staples of life. The remainder covers almost everything anyone can imagine, from major appliances and other consumer goods to individual parcels and consignments. Railroads, like other segments of the transportation industry, make both commerce and everyday life possible.

Farmers especially depend upon railroads to move huge volumes of crops to key export points all around the country — on the East Coast, West Coast, the Gulf of Mexico and the Great Lakes. Corn and soybeans often top the list of farm crops carried by major rail carriers to major export facilities, while short-haul rail lines are key links to the food processing and manufacturing customers closer to the actual farm or local grain elevator.

That’s A Lot of Bread

Think of it in terms the average shopper can grasp a lot more easily.

The average hopper car carrying crops such as corn, soybeans and wheat may contain as much as 286,000 pounds – up to five times the weight of a truckload of the same commodity. But to appreciate just how much that really is, consider a single hopper car of wheat – and what it translates into for the typical food consumer.

But Wait, There’s More

As impressive as the scale of operations may be, there’s far more to the story of railroads.

Railroads offer a degree of energy efficiency that often may be overlooked. According to the Association of American Railroads (AAR), railroads contribute only 0.5 percent – yes, less than a single percentage point – of all U.S. greenhouse gas (GHG) emissions. As a percentage of GHG emissions from the entire transportation sector, railroads account for 1.9 – 4.0 percent. (Automobiles contribute roughly 40 percent, trucks 34 percent and airlines and ocean transportation 11 percent each, according to

Higher efficiency means less fuel – and fewer GHG emissions. Since the year 2000, advancements in technology and other improvements have helped increase fuel efficiency by an estimated 675 million gallons – or roughly 7.6 million fewer tons of carbon dioxide (CO2).

Sources: The Journal of Commerce; CSX Railroads 

Rolling into the Future

The International Energy Agency (IEA) has found that railroads use up to 12 times less energy than vehicles or airplanes and emit 7-11 times less GHG per passenger mile. Globally, railroads haul about 7 percent of the world’s freight yet account for only 3 percent of total energy use, according to IEA. AAR adds to the good news by noting that moving the same goods by rail rather than truck can reduce GHG emissions by up to 75 percent.

The railroad industry takes pride in those numbers, especially when considering the enormous power required to pilot trains weighing literally hundreds of tons at speeds of up to 75 miles per hour – and considerably more on some high-speed passenger rail lines.

The rail industry is built around powerful locomotives, with a typical four-axle locomotive weighing as much as 125 tons. Freight trains largely rely on a combination of diesel engines and electric motors, although the passenger rail system is much more advanced in its reliance on electric-powered units. This shift to equipment with greater fuel efficiency – and lower emissions of greenhouse gases – is a major industry focus.

To fulfill this goal, developmental efforts by the rail industry, suppliers and shippers continue to integrate computer technology into the rail system. For example, automatic idling is being used to reduce fuel consumption during stops, and automated controls much like those in cars and trucks help guard against driver error from fatigue or distraction. Innovative control systems also help find the best possible balance of speed, power, fuel consumption and emissions on a continuous basis during train operation.

Wabtec, a Pittsburgh-based rail technology specialist firm with over 150 years of international rail experience, has pioneered battery-powered locomotives as an environmental aid and has already conducted pilot testing with several major railroads.

Wabtec offers a 100-percent battery-powered heavy-haul locomotive with an estimated 10 percent reduction in fuel needs and emissions. This 4,400 horsepower behemoth boasts 20,000 lithium-ion battery cells, charged both by the same methods used by electric vehicles on the road today and by harnessing some of the enormous energy created by braking a moving freight train weighing 430,000 pounds or more.

Pilot testing of the Wabtec creation by major railroads already has begun on routes matching the lifespan of the battery charge, which is roughly 40 minutes at full power. Work on the system continues, with what Wabtec contends is as much as $500 million in potential fuel savings for the rail industry – and the reduced GHG emissions that come with it.

Beyond technology improvements, the railroad industry also is placing emphasis on expansion of the basic infrastructure needed to accommodate anticipated increases in freight demand. Better coordination and cooperation with other modes of transportation (“intermodal transportation”) and with other members of the supply chain also are a priority after years of disruption due to the pandemic.

Agriculture’s Contribution to Added Efficiency

The agricultural sector has been a driving force in the rail industry’s efforts to improve efficiency. Agricultural shippers were among the first to recognize the power of the “unit train” – multiple cars all carrying a single commodity to a single destination. The practice reduces the time and expense of repeatedly switching and arranging rail cars.

Today, the Department of Agriculture (USDA) and rail industry groups note that corn and soybean crops typically move in 75-car unit trains, and wheat in trains of 6-49. Utilizing railroads for these high-volume cornerstone commodities in domestic and export markets helps keep prices low for consumers and export customers.

Keeping the Wheels Turning

Demand for rail freight is expected to grow by about 2.7 percent annually – and perhaps a bit more as the post-pandemic recovery gains steam. An increase of 30 percent over the coming decade will require a great deal from the railroad industry.

Even during the worst of the Covid downturn (2020-21), AAR estimates as many as 300,000 containers and trailers continued to move via rail each week.

Consumer demand for food, power and other essentials of daily life will remain strong, no matter what.

Railroads advocates argue persuasively that increasing reliance on railroads to meet consumer demand just makes good sense. Railroads move with minimal labor needs. They are more climate-friendly. They can help reduce the simple wear and tear on roads, bridges and other infrastructure created by trucks and cars – and lessen the need for so much taxpayer spending on infrastructure in the process.

The Federal Railroad Administration (FRA) notes that the rail freight industry invests one of the highest percentages of revenues of all modes to maintain and add capacity – 19 percent, or nearly $25 billion annually. The results of that investment: “…(T)he U.S. freight rail network is widely considered the largest, safest, and most cost-efficient freight system in the world,” according to the FRA.

Energy, Food Costs: The Unexpected Pain of Ukraine Invasion

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For more information on Ukraine’s ag system, check out our recent post, Ukraine: Quiet Pawn in Quest for Food Security

Putin and Russia are being canceled, to say the least. The most immediate and visible effect of the Russian invasion of Ukraine – beyond the awful carnage inflicted on the Ukrainian people – is a massive shift in global international relations. The world is watching Putin try to transform an independent nation into a satellite state loyal to Moscow — a transparent effort to re-establish the model of the old Soviet Union. And the world, except China, is stepping up to defend Ukraine.

The West has been fairly swift in launching a widespread and coordinated effort to inflict economic costs on Russia for its actions. Russia’s exports totaled $39b in November 2021. If every country cancels the bulk of their imports, it would be financially difficult for Russia to survive.

  • Restrictions on Russian banking have made doing business more difficult and costly for them, with likely further declines in the Russian ruble.
  • Further economic sanctions against the Putin regime and his oligarch cronies will add targeted economic penalties. The EU and the U.S. are even chasing these supporters out of countries where they have their yachts, as well as freezing some of their assets.
  • Germany is cutting its dependence on Russia’s natural gas and coal and rethinking the timing of its green carbon-neutral strategy.
  • Turkey is limiting Russian ships through the Bosporus from the Mediterranean to the Black Sea.
  • A long list of European countries and the U.S. have banned Russian aircraft from their airspace.
  • The U.S. banned exports of high-tech goods, such as semiconductor microchips, to curtail Russian defense production.
  • Daimler Truck Holding, Volvo Car, General Motors and Harley-Davidson are all reconsidering their business dealings with Russia.
  • Apple, Google and Nike, and energy companies such as BP, Shell, Equinor, and TotalEnergies, are starting to pull out of Russia.
  • Norway’s sovereign wealth fund is freezing and eventually exiting from its $2.8 billion in Russian assets.

The list grows every day, and the overall effect is to make Putin and his oligarch pariahs in the larger community of nations, and to highlight what many see as a growing international polarization that pits democratic, market-oriented Western economies against the controlled societies built around socialist and communist principles.

As the conflict continues and the world’s attention remains focused on the day-to-day events, average citizens in the United States are likely to see the beginning stages of the consequences of conflict. The most apparent signal will likely come in higher energy costs, notably at the gas pump. 

Russia’s top export category is fuel and energy, representing just over half of its total export value of $335 billion in 2020. Imports in May 2021 reached a record 26.2 million barrels, second only to Canadian shipments (over 125 million barrels in May 2021) and ahead of Mexico (22.6 million barrels in May 2021).

By February 2022, Forbes reported that Russia had eclipsed Canada as the largest supplier of imported gasoline for all of 2021. Russia’s Federal Customs Service also noted the United States purchased almost one-fifth of the country’s heavy-oil products, making it Russia’s largest single buyer.

In advance of the invasion, petroleum prices already had peaked above $100 per barrel. As of March 2, the AAA National regular gas price was $3.66 a gallon, up from $2.71 last year. California is now over $5.00 in some spots. Energy experts can’t agree on just how high prices will go – but agree that further increases are on the way.

Source: Forbes, US Gasoline/Energy Imports, 2-24-22.

U.S. efforts to expand domestic energy production could help bring more balance to the supply-demand picture. But expanding domestic energy production will take some time to ramp up and already faces numerous concerns from the green energy group.

Ag in the Energy Crosshairs

Higher energy costs will have a ripple effect across the entire U.S. (and global) economy, and agriculture promises to be among the hardest hit. Energy costs represent as much as 15 percent of total production costs for farmers, according to the Department of Agriculture.

Much of the energy is consumed as fuel for all the various machinery and equipment that drive the efficient production of crops and animals. But another factor becomes especially important for the ag sector: the enormous energy component of the fertilizers farmers around the world depend upon. Rising costs of diesel and gasoline will have an immediate effect on the economics of farming and ranching. But the longer-term implications for fertilizer costs may prove even more serious.

Russia’s major role in global fertilizer markets often goes unnoticed by the average consumer. The country produces and exports petroleum, natural gas and other energy products.

In fact, its leading export category is mineral fuels, worth more than $143 billion each year, or just over 42 percent of all exports.

Russian natural gas is a key source of ammonia that serves as a building block for many nitrogen fertilizers. To add to its prominent role in global fertilizer markets, Russian exports of potash represent 21 percent of the entire global market for the product. (Neighboring Belarus accounts for another 21 percent of potash market.)

The prospect of losing access to these important energy sources concerns the entire ag sector – especially after a year of extraordinary increases in fertilizer costs, even before the threat of invasion fully emerged. Farmers already had seen anhydrous ammonia prices rise by 300 percent, urea by 214 percent and liquid nitrogen by 250 percent over the year before. Potash prices had increased by 213 percent, as well.

Such dramatic increases in energy-related prices – and the prospect of still higher costs to come – can’t be ignored. They threaten significant increases in the cost of production for cornerstone crops such as corn and soybeans, indicating that the food price inflation consumers have seen for the past year is likely to continue. The extent of those inflationary pressures – and the speed at which they spread through the food system – remain the subject of intense debate among economists around the world.

The significance of energy in determining the fallout from the Russian invasion on the average person reflects a bigger truth in modern international relations. We are seeing first-hand just how interconnected all nations have become in a global economy built around a global trading system.

It’s increasingly difficult – and perhaps practically impossible – to function in a vacuum, in which the economic links we have built can be ignored.

A military threat can easily make a normally invisible economic relationship highly visible – and highly important to consumers everywhere.  This economic interdependence may offer a powerful tool to resolve the conflict.

It’s all about the trade

The outlook for U.S. farmers and consumers isn’t totally bleak, however. The response to the Russian invasion is built around the significant economic advantages enjoyed by the United States and its allies – and the leverage these advantages can apply to resolving the conflict and restoring more-normal international relations.

The value of Russian exports dipped in 2020, falling from $423 billion the previous year to $335 billion, according to Russian customs data.  Statistics also show a mutual trading dependence between the United States and Russia. U.S. imports of Russian energy and minerals create a significant trade deficit in goods. But Russian demand for U.S. services creates a trade surplus that helps offset the deficit.

Overall, Russia remains only the 20th largest trade partner for the United States – and only 40th in terms of the total goods imported into this country. 

In contrast, the United States is the sixth-largest trading partner of Russia.

Because we have lost our energy independence, the United States – and the EU – needs Russia’s energy offerings notwithstanding this invasion. But Russia needs U.S. machinery, automotive, aircraft, sophisticated electronics and medical equipment – over $9 billion in 2019, according to the Observatory of Economic Complexity (OEC). Total imports from the United States reached $13.4 billion in that same year, according to the World Bank. Russia needs and wants what the United States has for sale.

Other statistics suggest the Russian economy needs the West – including the United States – far more than Putin would like to acknowledge.  On average, the United States generally imports more from its trading partners than it exports to them – roughly 62 percent imports, to 38 percent exports, according to the Office of the U.S. Trade Representative. However, the U.S. exports far more to Russia than it imports – roughly 82 percent exports, only 12 percent imports.

In other words, Russia needs the United States – and other western markets. The potential loss of trade promises to hit hard on a broad spectrum of Russian interests. (The notable exception is China, which remains Russia’s largest single trading partner.)

How Does U.S. Agriculture Fit into the Picture?

U.S. farmers also stand to benefit from the disruption to key global agricultural markets created by the invasion. Markets for wheat, barley and certain oilseeds may be among the commodities most affected by the invasion and its after-effects.

Russia is the third-largest producer of wheat in the world, with Ukraine rising rapidly in the mix. Together, the two countries also account for more than one-quarter of all global wheat trade and about 70 percent of the world’s total trade in sunflower oil. Ukraine also supplies 13 percent of the world’s corn exports, much of it bound for China, according to USDA. Agricultural export sales from Ukraine have been rising in recent years, climbing to $22.2 billion in 2020. Russian wheat exports mainly go to Egypt and Turkey but the rest of the countries such as Ethiopia, Cameroon, and Kazakhstan will be hard-pressed to afford rising wheat prices.

Trade at-a-glance – 2019 Russia/Ukraine Percent of Global Export Market Share:

  • Sunflower Oil: 70%
  • Wheat: 25%
  • Coal: 14%
  • Corn: 13%
  • Crude Petroleum: 13%
  • Mineral Fuels (coal, petroleum, natural gas): 11%
  • Liquified Natural Gas: 6%

Disruptions to Ukraine’s exports of these and other farm commodities could open the door for U.S. growers, especially if restrictions on Russian trade emerge. Rising world prices would help offset the continuing rise in energy and input costs facing the U.S. and other producers. U.S. wheat production and exports have declined slowly in recent years, in part due to significant growth in wheat production around the Black Sea area. The conflict could be the trigger to reverse that trend.

Today, U.S. farmers account for about 6 percent of total world production and 12 percent of export markets. But with wheat prices currently at their highest levels since 2008 and the invasion promising to add fuel to the upward trend, the economic incentive to capture more of the world demand is very strong. Should the conflict expand beyond Ukraine, the risks become even higher.

Increased reliance on the United States as a major source of supply for wheat, corn, oilseeds and other farm commodities also could have another ancillary benefit to the global food system. As the conflict further complicates the regional and global export picture and the associated logistics, the relative stability and continuity of the U.S. food chain might help mitigate further disruptions to the global supply chain.

The U.S. farmer may well prove to be the global food consumer’s best ally in holding the line on further food price inflation.