Paul Graham predicts food shortages | Hacker News Reader

Paul Graham predicts food shortages

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A political activist/commentator anecdotally tells his Twitter followers that his family is cutting back their farming because of fertilizer and diesel costs, and then predicts a food shortage. PG then replies "Yes".

I've lost count of the number of one word PG tweets that have made the front page of HN.

Yes

:-)

Many.

Somebody replied with:

> It only makes sense not to plant if you think you won't be able to make up the cost of the fertilizer when you sell your crop. If there are shortages, food prices will go through the roof. Farmers who decide not to plant are implicitly predicting that there will not be shortages.

Which...seems like quite solid logic.

The only modifier is that there's usually social outcry when prices rise in response to a shortage and demands for the government to step in and fix prices with force. Sadly that tendency means even if a food shortage is perfectly predictable there's no incentive to prepare for it. Obviously prices can rise somewhat without being fixed (as has been happening in recent months) but there's a limit and in the case of widespread food shortages that limit may be reached.

Where was this protective failsafe when the price of meat doubled over the past year?

Did the price of meat double over the past year? You have a source for this? All my googling of "meat price over time" suggests the price of meat did not double in the last year. Or even the last 10 years.

No.

Just by eyeballing futures prices:

Cattle is up ~21% since pre-pandemic https://www.tradingview.com/chart/?symbol=CME%3ALE1!

Lean hog is up 53% since pre-pandemic https://www.tradingview.com/chart/?symbol=CME%3AHE1!

Also, looking at CPI figures, the "Meats, Poultry, Fish, and Eggs" is only up 19% since pre-pandemic levels.

The same pack of chicken wings that was 4 dollars last year is now over 8 dollars. You can publish whatever commodity price trends you want but it has almost 0 to do with end price.

>You can publish whatever commodity price trends you want but it has almost 0 to do with end price.

How about retail price data published by USDA?

https://www.ers.usda.gov/webdocs/DataFiles/52160/cuts.xls?v=...

Still does not change the price of an 8 pack whole wing at the grocer's till.

1. Your initial claim was "the price of meat doubled over the past year", not "8 pack whole wing price doubled"

2. If you don't mind me asking, what was the before/after price of said chicken wings, in unit terms? Some plausible reasons that might contribute the doubling you see, but not be representative of overall meat price trends include:

a. you misremembered (eg. $4.99 -> $4, $7.43 -> $8)

b. you were comparing sale vs non-sale prices

c. you buy some really boutique chicken wings that are subject to bigger price fluctuations than the typical wings that everybody else and the USDA measure

d. you were comparing regular chicken wings with boutique chicken wings

Otherwise, it seems strange for a grocery store to go from average chicken prices, to 66% above average (2x / 1.2x) in the span of a year.

I’d expect subsidies to appear a thousand times over before price controls in the US.

There's de facto price controls on drinking water during a catastrophe or at least calls for them. That's what I was thinking of.

That does seem logical assuming farmers are acting perfectly rational. I wonder if that's the case though given how people have been responding to the events of the past two years.

Or they simply are unwilling to bear the risk. To them, it's a risk, the prices the know are the prices they expect and it would be a gamble to predict otherwise.

If there is anything I notice it is that people and are absolutely terrible at predicting future demand.

Isn't futures designed specifically to allow for this kind of hedging? eg. everybody thinks that food prices are going to the moon next harvest, but farmers don't want to pay the risk, so futures allow farmers to lock in prices now and not have to worry about a price crash come harvest time.

I was precisely thinking about futures when typing the post. That is why I did not say "the economy" and said people instead. But I do not understand them so I tried to steer away from them.

Truth be told... I don't know. I wonder how futures look right now. I wonder how many futures are being traded in the agricultural domain, I wonder what is their actual, functional impact on the market. I simply admit my ignorance here.

I think there's a yield curve based on the amount of fertilizer added to the crop. I saw on one video that a "normal" fertilizer application on his crop yields 2x the amount vs no fertilizer. The yield change is a non-linear curve based on the amount of fertilizer application.

So farmer will have to estimate what the price will be at the time of harvest and then optimize this curve.

(edit here's the video):

https://www.youtube.com/watch?v=-mIBz5r29nw

I think the biggest issue there would be financing. Most fertilizer terms are COD but you don't realize any cash in farming until you deliver the crop (and for some crops, payment terms aren't great).

I think there could be a situation where individual farmers just can't finance enough fertilizer. The whole business runs on cash flow and it's tough in normal times.

Hum... What the thread describes sounds exactly like a shortage caused by price fixing. Except that the price fixing didn't even happen yet, so people are beforehand betting either on it or on there being enough stockpiling to absorb the full shock.

And who knows? The war isn't a month old yet, and I have no idea how long it takes to put some basic fertilizer manufacturing online. Also, most land can produce a crop or two without extra fertilizer with very little impact.

I'm not sure I should care about PG's hot take. Get me an agricultural economist to explain why the market isn't pricing this in and providing the proper incentives to farmers across the world? Food prices will no doubt be higher, but outside of third world countries that can't afford the higher price (and thus will need to be helped with food aid), I can't see widespread shortages in the developed world.

We have the biggest independent European seed manufacturer as client and they shipped more this year than ever before and see no stagnation in orders even after the war started this is all anecdotal evidence and jumping to conclusion in the twitter thread.

Isn’t Russia and Ukraine the biggest grain exporters in Europe? It (not the article, but as mentioned it has been headlines a few times already) is not about today, but possibly a year ahead prediction.

They are exporters but to countries that they mostly have good relationships with. There is little to no export into Europe or the US BUT Russia imports most of it's seeds from Europe. These seeds are one time seeds that means you are not able to seed again from the upspring of them. The seeds for this years seeding have not yet been provided. They will suffer even harder because they will compromise their soil by simply not being able to provide a proper rotation. For the west this is more a logistics problem than anything else other countries can and will pick up the pace on fertilizer and grain production. Russia can not yet provide enough seeds on their own and they will still export grain to their allies as they did before the sanctions. China has build up a pretty big reserve on grain and corn over the last past years and they will have to provide poor countries that would be hit by the production shortages to prevent their investment ie. in Africa in the last decade getting nullified. It's really not that big of a problem everyone wants to make it out to be and it will be worse for Russia than for the rest of the world. Russia will have the biggest problem on secondary fruits like potatoes and sugar beet that they will have to import in exchange for a higher export of an increased grain production. We will see an increase in prizes but there will be no shortages of oil or flour in your grocery shop next door except through the influence of hoarding in the beginning.

These are good articles about their problems with producing seeds

https://www.agroberichtenbuitenland.nl/actueel/nieuws/2021/1...

https://www.agroberichtenbuitenland.nl/actueel/nieuws/2022/0...

https://germination.ca/russia-to-up-seed-game/

This was literally on the front page of the NYT a week ago: https://www.nytimes.com/2022/03/20/world/americas/ukraine-wa...

The agricultural industry already relies heavily on government subsidies to survive. Trump paid $30 billion+ to farmers to make up for Chinese tariffs imposed during his trade war. It isn't as much at the mercy of market movements as people think.

It's also funny to see over the last few years how billionaire Silicon Valley VCs and programmers are declaring themselves the voice of middle America. Show me a report from the USDA or some economists over PG's anecdote about his "farmer friend".

I hate when interviewers ask "Do you think X?" and the interviewee mildly agrees, and then it's framed as "X said Y".

PG is really, really good with words. There's no reason to put words in his mouth. This title leaves out the word "may" from the original question, as well.

He's not predicting food shortages, he's saying yes to someone asking if it "may" happen.

> "A farmer friend told me the same thing is happening in the UK. The cost of fertilizer has gone up so much due to the Ukraine War that some farmers are not even planting."

Actually, fertilizer shortages were already a thing before the war started. As I understand it, it's related to high costs of natural gas (which is used to make some types of fertilizer). Also, Russia is a major exporter of fertilizer and they've been restricting exports for awhile (possibly to secure their own food supply).

The war in Ukraine certainly doesn't help the food situation though. Ukraine is a major food producer. It seems like the world on track for some expensive food for the next year or so, which will disproportionately affect people from poorer countries.

I read somewhere here and there, that companies making fertilizer produced much less since last year. This was due to the high(er) energy prices which didnt allow them to make profit; also due to how the contracts were structured, the price was fixed, so increasing price was not an option, but no-delivery due to high energy costs was somehow permitted.

Since way too little fertilizer was produced, nothing can be done currently, prices for retail fertilizers go up, but the shortage is real.

Take this post with a big grain of salt, I do not have solid sources.

Ukraine is the fifth largest producer of wheat and has reduced crop sizes due to the war. This is being offset by other producers like Egypt increasing production because there's a market incentive to do so. Will this result in a food shortage? Technically, yes. Will this result in some sort of noticeable food shortage? Probably not, unless people start talking about it and causes people to buy an unusually high amount of food resulting in a self-fulfilled prophecy. Will that be catastrophic? Almost certainly not, it'll be like Covid again when preppers buy all the pasta for a few weeks - an inconvenience.

What is the absolute worst advice to give? To tell people to go out and prepare. That will cause issues.

Well we’re talking about shortages so shortages will happen because some will stockpile

Our food system is a mess. We need to transition our agricultural systems to use biology rather than chemistry to nourish our food crops. The technology is there, we just haven't figured out how to industrialize it at scale. I personally think robotics will fill this gap - as the main prohibitive factor now is labor availability.

Check out permaculture techniques like: composting, chop and drop, wood chip mulching, no till, Korean natural farming techniques using indigenous microorganisms.

Collapse has been inevitable. Wiping farmland clean, trying to sterilize it, and restarting the next year is incredibly wasteful and has only been feasible because of heavy subsidies at several levels in the upstream supply chain.

It's not that surprising.

Taiwanese commentators on both sides of their political aisles have noted that Ukraine and Russia are both exporters of food and fertilizer.

According to them, both exports will be severely affected. Buyers of food from Ukraine (and probably Russia) would be Middle East and Africa. Fertilizer prices will keep going up.

Effects of the war is most likely affect the poor in the middle east and africa the most. We'll probably see more inflated prices instead of outright shortages.

It's weird that he's talking about this entirely in terms of fertilizer prices and not the fact that Ukraine and Russia are both export large amounts of food.

Doomberg is saying similar things [1] with some pretty deep analysis behind it.

[1] https://doomberg.substack.com/p/farmers-on-the-brink

Doomberg is a cartoon green chicken with a quasi-anonymous group of heavy industrialist business consultants behind it. The content is pretty fantastic. Kind of strange, but, well, here we are.

Definitely one of the stranger sources of economic doomporn I've seen, but at least the whole vibe seems a bit more self-aware than most.

I hope a bunch of screenshots of indices at 5-year highs with conveniently short time frames (excluding the last major economic shock only ten years ago) isn't considered "pretty deep analysis" now.

I guess when your newsletter is titled "Doomberg" and you brag about prepping to IRL friends [1] the lack of context outside of the carefully selected graphs and time periods seems less surprising.

1: https://doomberg.substack.com/p/reflections-from-the-gas-pum...

I have a hard time believing this will be as severe as what we saw during Covid.

If you are expecting shortages, it should be in your interest to spend more now to capitalize on them. Especially if you expect inflation!

Unless a) you are worried about price controls in the future, b) you are a small-time farmer and averse or unable to take on debt.

I wonder if the bird flu outbreak will affect the demand for crops?

https://www.webmd.com/cold-and-flu/news/20220323/half-a-mill...

If there are shortages and people in developed countries will hunger it’s for government to step in with regulations about wasting food. Last year we had 40% of food in America thrown away. There won’t be a drop of 40% in food production because of the war in Ukraine not even close to it.

> The cost of fertilizer has gone up so much due to the Ukraine War that some farmers are not even planting.

The rising fertilizer cost and impending food shortage has been in discussion since 2021 due to the global supply chain crisis. Surely the reason for it now is not suddenly because of Ukraine.

It's interesting to see a Tweet by the founder of YC get flagged on HN.

On a related note, I predict Russia invades Ukraine

I mean yeah Biden already said this days ago:

https://twitter.com/ABCPolitics/status/1507052235192254472

Predication? It's been obvious for weeks (months?). The POTUS just mentioned it in his speech several days ago. Food shortages are coming to America.

"It’s going to be real" ~ Joe Biden

China has been stock piling food reserves for years. That's a strong signal.

Here's an article about this:

https://farmpolicynews.illinois.edu/2022/03/its-going-to-be-...

Indeed.

Idk if people think I'm trolling whilst just trying to share facts. Here is Biden video [1] for those who don't trust written word.

[1] https://youtu.be/iBxpwOmAQcw

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