Tuesday, April 28, 2020

Impending Food Shortage to Provoke Civil Unrest


The $213 billion meat & poultry industry that includes such corporate titans as Tyson Foods, Inc., Smithfield Foods, Inc., Cargill, Inc., JBS USA and Hormel Foods Corp. have already closed 12 US plants and are operating at far less than capacity at many others because of worker contracted Covid-19 virus. According to the Wall Street Journal article 23 April 2020 Grocers Hunt for Meat as Coronavirus Hobbles Beef and Pork Plants, production is down 24% for beef, 20% for pork and 10% for poultry. The shutdowns by these large food companies is an ominous sign that genuine food storages are arriving sooner than you can imagine.

Furthermore farmers have been reluctantly dumping up to the equivalent of 5% of the US annual milk production and reluctantly destroying and burying crops because of the logistical and market disconnect of supplying the consumer market directly.

Moving down the proverbial food chain, as outlined in the MSN article 28 April 2020 Food Banks Are Closing And Losing Their Work Force, the nation’s food banks are closing because of several reasons:

·         Fewer donations.
·         Limited refrigeration capacity for perishable items.
·         Inability to re-stock because orders that normally took 8-12 days to arrive now arrive in 8 weeks.
·         Increased demand ranging from 40%-100% due to a deluge of suddenly unemployed workers who are in financial distress.
·         Fewer volunteers to operate them.

A superb analogy to this rapidly growing food crisis is a scene from the movie Apollo 13 entitled Square Peg in a Round Hole, in which the astronauts of the crippled spacecraft have plenty of total oxygen but need to transfer from one unit into another where they reside. However the two different units have incompatible oxygen systems. For this reason the NASA engineers are then tasked with creating a system so that the oxygen can flow from one unit to another with the limited parts available aboard to spacecraft and communicate those instructions to the astronauts verbally.

The present-day plentiful foodstuff inventory already in supermarkets and enroute will diminish rapidly in the next 2-3 weeks. This will initially result in a price spike for food followed soon after by actual shortages.

The civil unrest problems will emerge in the gap between the price spike and the diminishing inventories because psychologically through many generations Americans are accustomed to seeing aisle upon aisle of shelves bulging with diverse food choices. Suddenly there will be either few choices or none at all regardless how much money the consumer has. Frustration will turn to anger as the warmer weather provokes short tempers.

According to the Department of Agriculture in 2018 there were 37 million food insecure Americans. The world’s breadbasket may soon find itself going from food secure to food insecure within a matter of weeks adding millions more food insecure Americans to that list. The present-day brutal irony is that market stocks are rising and food stocks are falling. The following pie chart gives you a visual perspective of US food security status.




The next chart developed by the Urban Institute and presented by Statista, an online German statistical service, provides greater depth and “texture” to those Americans who are food insecure.




Adding to the aforementioned disturbing statistics is that over 70% of Americans have less than $1,000 saved for emergencies. Below are the pre-pandemic 2016 figures (provided by Statista) which are certainly far worse present-day with the growing mass unemployment:

Savings Pct of Americans
$0 34
<$1,000 35
$1,000-$4,999 11
$4,999-$9,999 4
$10,000> 15


A second wave of panic buying will occur if there’s a resurgence of the virus after easing restrictions and/or food shortages manifest which would “vaporize” the remaining inventory. Once there’s an initial attack or looting of a store whether it be a humble bodega or corporate supermarket, the domino effect takes effect everywhere serving as an “inspiration” to other food insecure, struggling citizens. Such incidents would be a serious blow to the cautious and tepid economic reopening and recovery.



Copyright 2020 Indo-Brazilian Associates LLC

Indo-Brazilian Associates LLC is a NYC-based think-tank and advisory service that provides beyond-the-horizon contrarian perspectives and risk assessments on energy investments, geopolitical dynamics and global urban security.

Sunday, April 26, 2020

How Autocracies Can Weaponize the Broken Global Food Supply Chain


WEAPONIZING FOOD

There is the real possibility that the global food supply chain could collapse if lockdowns remain in place and cross-border trade is blocked which will put many countries in an unspeakable predicament on how to feed its citizenry. More ominously is the possibility that many of illiberal democracies (de facto autocracies) may use this pandemic crisis as a pretext for a once-in-a-generation opportunity to suppress or even literally eliminate their real or imagined rivals based on political affiliation, racial, ethnic and/or religious minorities.

Because the world’s borders are shutdown it would be like “shooting fish in a barrel” to achieve these aims. The rest of the world is too preoccupied in saving their own citizens with its rapidly diminishing resources.

Already many governments, notably autocracies are using the pandemic as the perfect cover for rounding up rivals and dissents while suppressing/punishing ethnic and racial minorities within their borders. By controlling the food supply and logistics for use as weapon provides them a case insidious plausible deniability in arguing that the majority are suffering too despite the fact that the inequity of food distribution and access are widened during this crisis.

GLOBAL FOOD SECURITY

An overview of this is the following chart entitled The State of Global Food Security by The Economist Intelligence Unit, 23 March 2020 and presented by Statista, an online German statistical service.


VENEZUELA

This discriminatory food distribution has been practiced openly in the Maduro-led Venezuela in which his supporters received monies and access to food 9albeit paltry) vs. anti-Maduro supporters who were literally being starved to death unless they decamped to Colombia or Brazil. Since the pandemic forced lockdowns worldwide, the inability for Venezuela to sell oil has pushed Venezuela’s food crisis to the brink even for Maduro’s supporters.

This fall into the abyss is supported by The Economist Global Food Security Index 23 March 2020 and represented by Statista, which ranks Venezuela last as # 113 of 113 total countries behind war-torn countries like Yemen, Haiti, Congo and Chad justification for classifying it as a failed state.

INDIA

Since Modi came to power the world’s largest democracy has been run more like an illiberal and sometimes autocratic country with draconian policies against minorities, specifically aggressive attempts to legally marginalize Indian Muslims and the documented tacit approval of violence against them through the inaction by law enforcement during civil unrest. It’s a tactic to suppress a restive minority actual or perceived threat to the government that, if continued, could unleash a pandemic pogrom.

Under this leadership Indian Muslims have been demonized and marginalized, with an attempt to deny or strip them of their citizenship making them refugees within own country. The growing anti-Muslim sentiment promoted by the Modi administration in India has already intensified with them as the scapegoat for Covid-19 transmission. They have been reduced to nothing more than political cannon fodder.

Whether by default or design, India’s Muslim minority are highly vulnerable to being denied access to food supplies even if they have the resources to pay.

A quick-read yet comprehensive primer on the India’s agricultural operational dynamics can be reviewed in my earlier published article 17 April 2020 India: Bracing for the Covid-19 Viral Contagion, and underscores its dependency on labor in which agriculture accounts for 15% of GDP but because of its labor-intensive structure it makes up 50% of the workforce.

As articulated in the Financial Times article 22 April 2020, India’s Coronavirus Crisis Hits Country’s Farmers and Food Supplies since the 24 March lockdown through 3 May, migrant have workers returned to their home villages. For this reason crops are not being harvested forcing some farmers to stop harvesting and transporting crops. Sadly against a bumper crop, the cost of harvesting greater than the wholesale selling price.

According to The Economist Global Food Security Index 23 March 2020, India ranks 72 of 113; with respect to specific categories: Affordability 70, Availability 61, Quality & Safety 85.

The following is a chart Where Most Indians Are on Lockdown provided by Down to Earth Magazine 23 March 2020 and presented by Statista.


According to the 2011 Indian census there are about 172 million Muslims in India who comprise 14.2% of the total population. To put this in perspective the Indian Muslim population is half the total US population. The following chart was created from the data from the 2011 Indian census of Indian states where Muslims are a majority or have a significant presence.

There are seven Indian states where Muslims are a majority or significant part of the total population in those states. 


State Total Population Muslim Population
Lakshadweep 64,473 62,268
Jammu and Kashmir 12,541,302 8,567,485
Assam 31,205,576 10,679,345
West Bengal 91,276,115 24,654,825
Kerala 33,406,061 8,873,472
Uttar Pradesh 199,812,341 38,483,964
Bihar 104,099,452 17,557,809
Total 472,405,320 108,879,168



Historically minorities in autocratic and similarly governed countries are vulnerable to direct or indirect food starvation whose situation is exacerbated during periods of dwindling resources, poor harvests, import restrictions, and logistics for delivery of foodstuffs to hard-to-access regions to where they’ve been forcibly relocated.

The question is whether the pandemic and concurrent recession are the accelerants for increasingly governmental discriminatory action that could backfire and result in heightened communal violence.


Copyright 2020 Indo-Brazilian Associates LLC

Indo-Brazilian Associates LLC is a NYC-based think-tank and advisory service that provides prescient beyond-the-horizon contrarian perspectives and risk assessments on energy investments, geopolitical dynamics and global urban security.


Tuesday, April 21, 2020

Gold to Surge in Flight to Safety Stampede



Present and near-future expenditures of trillions of US dollars in stimulus packages issued globally already add to the almost unsupportable pre-Covid 19 debt levels. The following provides a basic overview of the factors that make investment in a gold a serious consideration.

DEBT, DEBT, DEBT EVERYWHERE

IMF Warnings

With respect to a global debt overview provided by the IMF, according to the Financial Times article dated 14 April 2020 Coronavirus Poses ‘Serious Threat’ To Financial System, IMF Warns, the pandemic is a serious threat to the global financial system. It added that firms are more vulnerable today than pre-Great Recession 2008 particularly in piling on riskier debt such as junk bonds, leverage loans and private credit totaling $9 trillion. Furthermore the weakest link is emerging world debt.

Sovereign Defaults - Emerging Markets

Emerging market countries are highly vulnerable to defaults with the spread of pandemic on already weak public health systems. According to the Wall Street Journal article 29 March 2020, Coronavirus Heightens Risk of Emerging-Market Defaults, there are 18 countries who have US dollar denominated bonds trading at distressed levels with yield 10 points above US Treasuries.

Furthermore many emerging market countries are in deep debt to China. As articulated by the Wall Street Journal’s article 30 March 2020, Hidden Chinese Lending Puts Emerging Market Economies at Risk, factors complicating efforts to accurately quantify this debt outstanding is China’s opaque lending practices, lending in US dollars at commercial rates vs institutions like the World Bank which lend money at below market rates and lack of a repayment schedule.

Corporate Sector

The Economist provided an excellent comprehensive overview of the challenges the corporate sector faces in the 12 March 2020 article In a Sea of Debt. They focused on four elements described briefly as follows:

1.    Borrowing: Corporate debt has risen from 84% of GDP in 2009 to 92% in 2019 as a result of lower underwriting standards with total outstanding debt of $20.9 trillion. Almost 67% of non-financial corporate bonds are rated junk or BBB.
2.    Pandemic and oil slump: They ran a “cash crunch stress test” of 3000 non-financial, non-Chinese firms a 67% sales slump 13% of these firms would exhaust their cash on hand; 6 months 25% would run out of cash.
3.    Credit derivatives: These are the cost of insuring against default on investment-grade debt, have slumped badly. The possibility of issuing new debt is almost impossible.
4.    Institutional Resiliency: Most American bonds are owned by pension funds, insurers and mutual funds which can sustain losses but will be reluctant to buy more.

Governmental Debt

Domestically the authors of the Council of Foreign Relations 26 March 2020 article Why the Fed’s Bazooka Will Not Stop A Wave of Defaults, 26 March 2020 persuasively explain why the stimulus packages are not the solution as follows:

“For many cash-strapped companies, however, the Fed’s interventions will be of little or no help. The central bank’s corporate-debt buying will focus on companies with high credit ratings. But it is riskier-company borrowing that has skyrocketed of late. As the right-hand chart above shows, large shares of nonfinancial commercial paper issued since 2017 have come from lower-rated companies—much like in the run-up to 2008. This mirrors the pattern in corporate-bond markets, where junk-bond issuance has soared. All this suggests that Fed buying will not stem the rising tide in corporate defaults.”

As governments worldwide issue billions upon billions of stimulus aid, they are adding onto the pre-Covid 19 debt levels at an unprecedented rate. The information provided by the IMF in the following chart presented by Statista, an online German information service 17 April 2020, Next Stop: Debt Crisis? Shows a snapshot of government debt as a percentage of GDP in 2018:




Historically gold perform well in a world of debt and today’s debt at the governmental and corporate levels are unprecedented.

Oil Crash

Despite the OPEC+ agreement was nothing more than a political paper exercise meant to appease but not to resolve the production issue. Their efforts to create a soft floor backfired with the recent implosion of prices. With zero demand, the heavily-indebted oil are unable to sell to customers who themselves are heavily indebted and are hobbled by a strong US dollar making any oil purchases challenging.

The Fed’s Nuclear Option

Because of the unprecedented level of stress on the global banking system, there exists the unpalatable possibility of the declaration of a bank holiday by those at the highest levels of government.

The newly elected President FDR declared a bank holiday – suspension of all bank transaction - at 1 am on Monday, March 6 which would last 4 days, for the purposes of avoiding a financial panic and restore confidence. Below is the description of the Bank Holiday of 1933 on the Federal Reserve website:

“At 1:00 a.m. on Monday, March 6, President Roosevelt issued Proclamation 2039 ordering the suspension of all banking transactions, effective immediately. He had taken the oath of office only thirty-six hours earlier.

The terms of the presidential proclamation specified that “no such banking institution or branch shall pay out, export, earmark, or permit the withdrawal or transfer in any manner or by any device whatsoever, of any gold or silver coin or bullion or currency or take any other action which might facilitate the hoarding thereof; nor shall any such banking institution or branch pay out deposits, make loans or discounts, deal in foreign exchange, transfer credits from the United States to any place abroad, or transact any other banking business whatsoever.”

For an entire week, Americans would have no access to banks or banking services. They could not withdraw or transfer their money, nor could they make deposits.”

Admittedly although today’s dynamics and circumstances vary from those from the start of the Great Depression in 1929 to 1933, the commonality is that the banking system was under extreme strain. Although I doubt that the current administration would resort to such a maneuver, particularly so close to the presidential elections in November, a successor might, just as FDR did.

Golden Investment Possibilities

For the aforementioned reasons cash-rich investors who kept their “powder dry” gold may be offer the exceptional opportunity for both a safe and lucrative “flight to safety” investment.


Copyright 2020 Indo-Brazilian Associates LLC

Indo-Brazilian Associates LLC is a NYC-based think-tank and advisory service that provides prescient beyond-the-horizon contrarian perspectives and risk assessments on energy investments, geopolitical dynamics and global urban security.




The Urban Jungle Unleashed



While governments worldwide are rolling over lockdown periods consisting of self-quarantine and social distancing often in two-week blocks in an attempt to “flatten the curve” of Covid-19 there is emerging a “lockdown fatigue” backlash both in democratic and autocratic societies.

In the US there are protests in at least five states against self-quarantine and social-distancing which are viewed as a kind of government-mandated “house arrest” and perhaps un-American. This trend may signal a creeping desperation in the American psyche that could manifest overnight ignited by the government’s lack of credibility at every level and fueled by the sudden mass layoffs and depression-level unemployment levels affecting all white, blue and gray collar jobs most of whom do not have a savings cushion.

In autocratic countries, specifically Southeast Asia and parts of China, there are reports of social unrest. By their nature these governments imposed restrictions on freedom of speech and public gatherings while ruthlessly suppressing dissent. Since the arrival of the pandemic’s wrath they have added emergency powers with severe punishments for those who disobey the self-quarantine and social distancing mandates. Although the worldwide practice of self-quarantine and social distancing is useful to “flatten the curve” it’s an exceptionally convenient tool for these governments to control and monitor the citizenry even more effectively.

The Growing Powderkeg

The elements for social upheaval are already taking place for the perfect crime storm. For this reason the disturbing lexicon creeping into mainstream media and often merely whispered is “social unrest”. With millions of workers suddenly unemployed with a paucity of cash on hand for emergencies and little savings there are growing pressures in their ability to buy food from an increasingly vulnerable narrowing and brittle supply chain.

A frightening descriptive overview of the increasing cascade of risks to the “farm to table” food supply chain can be viewed below as follows:

1.    Fewer farm workers and laborers [mostly from Mexico] to harvest labor-intensive work because of stricter visa requirements and the risk of higher infections because of the nature of the work and crowded housing that cannot adhere to social distancing.
2.    Fewer food processing workers because of Covid-19 illness.
3.    Fewer plants in operations because of shutdowns for cleaning which means less total nationwide food processing.
4.    Fewer truckers, an older demographic [55 is the average age] that is susceptible to the Covid-19 virus, to transport goods.
5.    Fewer trucks because of potential lack of spare parts because of limited imports from China and domestically because of vehicle plant closures.
6.    Fewer open food markets whether corporate and independently owned because either fewer workers are willing to work in a high-risk environment even with safety equipment or temporary closures because workers have become infected with the virus.

The food supply chain fear is compounded because the unemployed may not be able to buy despite a present-day bountiful food inventory. The next level of fear is that even those with ample savings may not be able to buy any food at all if the food supply chain breaks. This not so far-fetched and near future scenario would trigger a volatile powderkeg of desperation for survival.

Government unemployment offices and systems will continue to be overwhelmed resulting in administrative bottlenecks and delay in issuing checks whose amounts are probably insufficient to cover basic necessities.

Even by some miracle a vaccine was developed and distributed today and Covid-19 “disappeared” only a fraction of the laid off workers would be rehired because of the global economic demand destruction.

Law Enforcement and Security Readiness

Every society has its breaking point. In New York, the NYPD is under-staffed and compromised by at least 20% because of Covid-19 related sickness or self-quarantine of personnel which means fewer officers are available to patrol the already desolate streets.

There are ominous and growing security gaps featuring desolate streets, a handful of stores providing essential services and considerably reduced police presence.

The new army of the desperate include the newly unemployed and more disturbingly released prisoners who form prison gangs for self-protection. For the new dystopian urban cities these prisoners, possibly collaborating with the newly unemployed who intimate are familiar with their neighborhoods and vulnerable neighbors, will by necessity form wolf-packs to intercept and rob the locked down citizenry who venture to these essential services stores, banks/ATMs, etc.

Law enforcement is ill-prepared for the late spring and summer explosion of social unrest and violent crime as people are already fatigued of lockdowns particularly with warmer weather arriving soon with the traditional outdoor holidays of Memorial Day weekend and Fourth of July. Hot weather comes short tempers.

The Spark

The warmer spring weather will beckon and even compel people to go outdoors and congregate in open spaces. Although many will adhere to social distancing there will be more of these anti-social types who won’t.

In the US there are two scenarios which can provoke widespread civil disobedience:

The first is the resurgence of infections after governments ease restrictions and re-impose self-quarantine mandates.

The second is from the demographic bookends: young people who are naturally insubordinate to authority and who still feel invincible and the elderly who, in fatalist fashion, figure the end of days are near and fear not that they’re exposed to the virus.

The Aftermath

We’re doggy-paddling in that uncomfortable and perilous gap between the pandemic’s outbreak and the distribution of a vaccine. How long that gap will be is anyone’s guess although the general consensus is 18 months; and that’s assuming the scientific community has found a solution to defeat a dastardly clever and adaptable virus. After its development it must be produced at scale for billions of people worldwide.

Growing societal chaos fueled by the aforementioned reasons could worsen due to incompetent, dysfunctional and, in many countries corrupt governments not to mention a breakdown of government services because government employees themselves are adversely impacted by Covid-19. Such chaos could easily derail even a modicum of badly needed economic recovery.

A stalled economic recovery could plunge the global economy into a deep recession or even depression. This time around, thanks to the emergence of megacities and a world of urban living, unlike shantytowns in the first Depression, the second Depression will feature shantycities – favelas on steroids.


Copyright 2020 Indo-Brazilian Associates LLC


Indo-Brazilian Associates LLC is a NYC-based think-tank and advisory service that provides prescient beyond-the-horizon contrarian perspectives and risk assessments on energy investments, geopolitical dynamics and global urban security.

Friday, April 17, 2020

India: Bracing for the Covid-19 Viral Contagion


India’s indefinite nationwide lockdown will exacerbate India’s pre-Covid 19 economic slowdown.

India’s weak healthcare system, extreme urban pollution, high urban density, and citizenry with underlying health issues are deadly conditions for a conflagration of a novel pandemic.

The fragmented structure and impending unraveling of India’s food supply chain will result in shortages thus dramatically higher food prices.
  
India is among the emerging countries that are bracing for the pandemic onslaught which has only recently touched their shores. It’s only a question of the severity of the economic and human cost. The Indian government’s mandated full country lockdown for 21 days, set to expire 15 April, was recently extended indefinitely.

The emerging pandemic storm is an imminent threat to India, a country of 1.4 billion citizens. Virology experts estimate they are two weeks behind the US and four behind Italy’s apex infection points. India’s woeful healthcare facilities with respect to qualified and available medical professionals and necessary equipment are more under-prepared than their western and American counterparts particularly since they are already burdened with handling known, endemic and treatable diseases.

Socio-Economic Demographic Primer

According to the 22 February 2020 IMF report, India has the world’s 5th largest economy as measured by nominal GDP. Nonetheless it faces a daunting task in containing the Covid-19 virus which thrives under conditions that categorize India.

According to the report India’s Smart Cities Missions, June 2017, these are some critical data. Of the total population of 1.4 billion:


·         380 million are urbanized (31%).
·         833 million are rural (69%).
·         632 million live in poverty – 25% of the world’s poor.
·         Almost two-thirds of statutory towns in India have ‘slums’ and a total of 13.75 million households live in them.
·         About 36 per cent of households in these settlements do not have basic facilities of electricity, tap water, and sanitation within their premises.
·         India also records the world’s largest number of homeless persons (at least three million in urban areas according to independent estimates).”
·         Historically there is a large rural to urban migration in search for work.

Water scarcity [especially potable] and urban density by the lower socio-economic classes including many migrant workers, make it difficult to maintain good hygiene and social distancing.

Economic Update

In 2019 India’s economy slowed considerably to 4.7% with a stubbornly high unemployment aggravated by the sudden internal exchange policy eliminating large dominated currency in 2016.

According to the BBC News article dated 3 April 2020 Coronavirus: India’s Bailout May Not Be Enough to Save Economy the Indian government has pledged a $23 billion relief package aimed specifically at the informal industry (such as migrant workers) that consist of 94% of the working population through direct cash transfer and food security measures.

Additionally India will receive $1 billion from the World Bank for scanning, contact tracing, lab diagnoses and set-up of isolation wards according to the Wall Street Journal article 9 April 2020, “IMF, World Bank Face Deluge of Aid Requests”. However as the pandemic is at the brink of engulfing the Asian subcontinent these aid packages are too little, too late to prevent an overwhelming contagion.

Although the confirmed Covid-19 cases to date are low, the paucity of testing kits and testing has grossly under-stated those who are infected.

Health Care Primer

The following are key points discussed which I paraphrase with respect to India’s health care dilemmas according to the 12 June 2019 article entitled India’s Ailing Health Sector in The Diplomat:

·         Over 50% of health professionals in India — including doctors, nurses, paramedics, and midwives — do not have proper qualifications while 20 percent of adequately qualified doctors are not part of the current workforce. Of the currently working health professionals, around 25 percent do not possess the necessary qualifications as laid down by professional councils.
·         The geographical distribution is a problem with two-thirds of doctors, nurses, and midwives working in urban areas where only 29 percent of Indians live. In many villages, the density of healthcare professionals lags behind many African countries.
·         India’s low spending on healthcare. Despite being the world’s fifth largest economy, public health spending has languished at under 1.5 percent of GDP, one of the lowest rates in the world. For comparison, the United Kingdom shelled out 9.6 percent of its GDP in 2017 on health. The United States’ health expenditure is 18 percent of GDP.
·         The high cost of medicines in which an overwhelming 70 percent of healthcare expenses in India are paid by Indian patients out of their own pockets, one of the highest rates in the world.

The following chart entitled The Countries with the Highest Density of Doctors provided by OECD on 19 March 2019 and presented by Statista, an online German statistical service, highlights the dearth of doctors in India per 1,000 inhabitants:






Food Supply Logistical Labor: A Double-Edged Sword

India’s requires highly labor-intensive work for harvesting and transporting foodstuffs employing millions of workers. However the methods in combatting a pandemic through lockdowns and social distancing threatens India’s ability to feed its citizenry. The Wall Street Journal article 8 April 2020 India’s Food Supply Chain Frays as Workers Stay Home, provides a background summary on how India feeds itself:

·         India’s food industry is highly fragmented consisting of millions of small farmers, selling through millions of middlemen who then deliver to millions of tiny shops.
·         Every food industry is labor intensive including the wheat industry, high mechanized in western countries.
·         Already there are fewer farm workers (particularly for the current wheat harvest), fewer trucks arriving to load and deliver foodstuffs to distribution warehouses and fewer warehouse laborers to unload and reload foodstuffs for local delivery.
·         The entire process is labor-intensive because wheat is harvested by hand, sacks of foodstuffs are unloaded and loaded on trucks using lines of men not forklifts, and local deliveries of perishable items are done by bicycle, not refrigerated trucks.

In other words the pandemic has made a robust food industry that provides employment to millions is at risk into a fragile one. It’s an industry that is dependent on millions of people in face-to-face transactions making it almost impossible to maintain social distancing to contain the virus.

Pollution + Novel Virus = a Lethal Combination

India’s high pollution serves as an accelerant for this particular novel virus. According to the IQ Air Report, India has 14 of the top 20 most polluted cities in the world. In the following chart entitled Study: Pollution Kills 8.3 Million People Annually from the Global Alliance On Health and Pollution published 20 December 2019 and provided by Statista, an online German statistical services which also includes poor water sanitation and contaminated indoor air.



The present-day health figures, even for young urbanites, are not encouraging because many Indians already have underlying health issues such as hypertension, respiratory problems, high rates of smoking and compromised immune systems caused by pollution.

In every country the Covid-19 virus has caused a high human toll and devastated their economies. India will be not be any different. Nonetheless because of the aforementioned factors plus weak surveillance, lack of voluntary reporting, and sheer size of the population, the full extent of the pandemic will not follow the usual timetables as played out elsewhere.

Copyright 2020 Indo-Brazilian Associates LLC

Indo-Brazilian Associates LLC is a NYC-based think-tank and advisory service that provides prescient beyond-the-horizon contrarian perspectives and risk assessments on energy investments, geopolitical dynamics and global urban security.



Thursday, April 16, 2020

Global Food Insecurity


Extreme meteorological changes are adversely impacting crop growth worldwide which reduce export revenue especially for emerging countries.

Labor shortages for spring harvests and logistical challenges in transporting goods to markets are complicated by governmental restrictions to combat Covid-19.

This myriad of problems are rapidly resulting in strong upward pressure on food prices.

Increased food prices are an economic hardship and internal security problem for emerging countries with low foreign reserves, a strong US dollar and highly subsidized food essentials.

For more particulars please refer to the full published article on Seeking Alpha.


Indo-Brazilian Associates LLC is a NYC-based think-tank and advisory service that provides prescient beyond-the-horizon contrarian perspectives and risk assessments on energy investments, geopolitical dynamics and global urban security.







Tightening Food Supply Chain to Spike Prices



The domestic food supply chain is endangered because of a compounding cascade of problems at each link that will result in a food price spike.

Increase of coronavirus infected food workers are causing growing labor shortages at each stage of the food supply chain.

According to government sources, although there is no evidence coronavirus can be transmitted through food, any perception of a tainted food supply could result in panic.

The ever-tightening of the food supply chain from harvesting to processing to transport to endpoint sales to consumers is a disconcerting development that could adversely impact the American consumer as early as late spring or early summer.

Food Supply’s Current State of Affairs

Present-day the nation’s food supply is plentiful across all categories. In certain sectors there is an abundance of perishable foods and milk as articulated in The New York Times article 11 April 2020: Dumped Milk, Smashed Eggs, Plowed Vegetables: Food Waste of the Pandemic. However farmers are forced to destroy them because of structural shortcomings specifically the inability to convert large production to meet smaller quantity packaging at the retail level. A brief summary that explains these issues is as follows:

·         Production: Because these perishable foods are for businesses and schools, the quantities produced and type of packaging required are far greater than for consumers. Retooling the machines for the consumer market will require millions in investments.
·         Alternate sources: Food banks have limited refrigeration capacity and exports are not feasible and cost prohibitive because of cross-border constraints because every country is trying to handle the pandemic.

Food Supply Chain’s Links Under Strain

The number of all workers infected with Covid-19 virus is growing. For those in professions in which social distancing at work and/or in the home are problematic, the rate of infections is greater.

The New York Times article 9 April 2020 Poultry Worker’s Death Highlight Spread of Coronavirus in Meat Plants reported the increasing number of sick food industry workers because of the Covid-19 virus as well as walkouts protesting the lack of safety gear and cleaning supplies. These are low wage earners who intimately handle our food through cutting, deboning and packaging. For this reason many food processing plants throughout the country owned and operated by the largest companies in the industry such as JBS USA [OTCMKTS: JBSAY], Tyson Foods [NYSE: TSN], Cargill are temporarily shut down for disinfecting.

A descriptive overview of the increasing cascade of risks to the food supply chain can be viewed below in the “farm-to-table” summary:

1.    Fewer farm workers and laborers [mostly from Mexico] to harvest labor-intensive work because of stricter visa requirements and the risk of higher infections because of the nature of the work and crowded housing that cannot adhere to social distancing.
2.    Fewer food processing workers because of Covid-19 illness.
3.    Fewer plants in operations because of shutdowns for cleaning which means less total nationwide food processing.
4.    Fewer truckers, an older demographic [55 is the average age] that is susceptible to the Covid-19 virus, to transport goods.
5.    Fewer trucks because of potential lack of spare parts because of limited imports from China and domestically because of vehicle plant closures.
6.    Fewer food markets open, corporate and independently owned, because fewer workers are willing to work in a high-risk environment even with safety equipment.

Food Quality Risk

In addition to the aforementioned fundamentals, the catalyst driver for a spike in food prices may occur as a result of whether Covid-19 infected food processing handlers can pass along this virus to the food supply. In the previously indicated New York Times article Poultry Worker’s Death Highlight Spread of Coronavirus in Meat Plants, an unnamed government official stated, “There is no evidence that the coronavirus can be transmitted through food, but public health experts have advised consumers to wipe down packaging because the virus could survive on those surfaces for days.”

Despite assurances from government officials, the scientific community is learning something new about this insidious virus daily.

The food quality risk is compounded by the following report How Safe is US Food? 22 January 2020 by PIRG [“Public Interest Research Group, a confederation of U.S. and Canadian non-profit organizations that employ grassroots organizing and direct advocacy for change”] and presented by Statista, an online German statistical service.



The hidden risk can be found in the report’s description on the data. To paraphrase the report’s further explanation (the full explanation can be accessed through the Statista link), is that 1 in 6 Americans contracts a foodborne illness annually. Furthermore although recalls have fallen since 2016, hazardous meats and poultry recalls (Class I) have increased 85%, which refers to foods that pose serious health risks.

This begs the question: with Covid-19 running rampant particularly in a labor-intensive sector, to what extent is America’s food supply reasonably safe?

Recommendation

Food prices will increase as the domestic food supply tightens for the aforementioned reasons notably perishable items, meat, pork and poultry. I project that the food supply chain disruptions will be uneven and quite volatile throughout the late spring and summer which is why such an investment is more suitable to the intrepid, quick & nimble investor.

For these reasons I recommend investments through the Chicago Mercantile Exchange (CME) specifically livestock.

Indo-Brazilian Associates LLC is a NYC-based think-tank and advisory service that provides prescient beyond-the-horizon contrarian perspectives and risk assessments on energy investments, geopolitical dynamics and global urban security.