Ep. 5 Commodity Market Implications of the Russia/Ukraine Conflict

[0:00] Introduction: Welcome to Relevant Risk from the Fryar Price Risk Management Center of Excellence, presenting conversations and analysis about risk and risk management for food and agriculture, supply chain decision makers from farmers to consumers and everyone in between. This is relevant risk.

[0:19] John Anderson: This is John Anderson with Fryar Center of Excellence in Price Risk Management at the University of Arkansas. Here with another Relevant Risk podcast and I have several guests today. And I think before we get to today’s topic, I want to introduce today’s podcast guests. And Andy, we’ll start with you, Andy Mackenzie.

[00:37] Andy McKenzie: Yeah. Hi. Good to be here. There’s interesting times afoot here.

[00:40] John Anderson: Absolutely. We’ve also got Alvaro Duran, Marat Alvaro, thanks for joining us.

[00:45] Alvaro Durand-Morat: Thank you. Thank you, John. And good to be here.

[00:47] John Anderson: And James Mitchell, who has been with us before. James.

[00:49] James Mitchell: Nice to be back. Nice to be hanging out with everyone this afternoon.

[00:53] John Anderson: All right. And the reason we have such a big panel today is we have a big topic.  We are talking about the Russia/Ukraine conflict and its potential for impacts on our agricultural markets. And I will probably say at the outset here, we are not military strategists. We are not foreign policy experts. We are economists. All of us are economists in the Agricultural Economics and agribusiness department with various kinds of expertise relevant to this topic.  But we really want to talk about ag market effects of this because Ukraine and Russia are both pretty strategic countries in our agricultural markets. And to to set the table a little bit for us here.  Go through a few facts related to these countries. Russia and Ukraine together account for about a third of world wheat exports Ukraine accounts for about 11%. Russia about 17%. They are Russia, the number two wheat exporter; Ukraine, the number four exporter. Ukraine also a fairly significant corn exporter, the number four corn exporter in the world accounting for about 16% of corn exports. Ukraine and Russia both are significant in the minor oilseed markets. Rapeseed and sunflower. Russia is the number one sunflower exporter, has about a quarter of the export market.  Rapeseed, they are number three and four: Ukraine and Russia.  Barley, they’re number three and four, Ukraine and Russia in terms of market share of exports. So if you talk about grains, minor or oilseeds, significant market. Russia is a major fertilizer producer, a major energy producer. The Black Sea region is strategically important in terms of all of those exports we just talked about, as well as trade for the region. So in terms of agricultural market significance, this is an important place in the world. Andy, one of the things that we’ve seen, and kind of want I want to start with, is because of the role that these countries play in the grain markets, there’s been a pretty significant grain market reaction to the events that that started on February 24th with the Russian invasion of Ukraine.  And one of the things that we’ve seen is an inversion in the market for some of our grain futures markets. So talk a little bit about what that is and what the significance of that is.

[03:20] Andy McKenzie: Yeah, I mean, even before we had this conflict start, there was tight supplies in most of the commodities. And when you have tight supplies, what happens is you get what are called market inversions. Now what a market inversion is. You’ve got futures contracts which have different delivery periods throughout the year. And if you see the closest contract in calendar time is at a higher price level than what we call the deferred contracts for later delivery periods; that’s what’s called the market inversion. Now, the way that those things occur is when you have short supply in the marketplace, what happens is that most of the trading volume in the futures occurs in that closest nearby contract. So it sort of takes all the action and it’s very price responsive. So if we see short supplies, what happens is those nearby contract prices are bid way up now cost of carry model, getting into a little bit of theory, will drag all of the prices up through time because it’s sort of connected through storage. But those nearby contracts are going to be the most responsive, and they’ll be driven up to the highest levels. My friends at White Commercial, they talk about the futures market as like this toddler, which has this insatiable appetite and needs instantaneous gratification. And in effect, that’s what they’re trying to get at, is these nearby contracts reflect that immediate gratification need. And when you have tight supplies, the market says, I need grain right now, sell it to me. And so that’s the sort of market signal we get. So for farmers, if they’ve got still a lot of storage in their bins, when we see this sort of inverse market and in particular the nearby contracts going up, that’s a signal to store if you have an inversion, you’re going to get penalized if you try to store through time.  Now it’s relative. All prices are going up, but you can get the best price possible. If you sell today rather than hold on to it. Now, having said all that, we are also seeing in the new crop futures really large price moves on the upside, too. So again, from a farmer’s point of view, this is a potential to at least sell, or book or forward contract or use futures to try to lock in some of those higher prices for the forthcoming harvest.

[05:47] John Anderson: So the old crop, the old crop contract, the nearby contract, which is the old crop contract, has gone up dramatically. The new crop contracts are being pulled up by this, not as much, but still attractive prices in historic terms.

[06:06] Andy McKenzie: That’s, that’s correct. So, again, you know, it’s the market’s saying it needs grain. It needs grain now. And so that’s what pushes that nearby one up. But we also, you know, just the general constellation of all prices are on the rise. So, again, it’s a good time to try to book ahead for the next coming harvest.

[06:23] John Anderson: So most of our farmers now, I presume — and from the people I’ve talked to recently, they they have confirmed this, at least the ones I’ve talked to — not a lot of old crop out there in farmer’s hands, but there are pricing opportunities on the new crop that look pretty good.

[06:40] Andy McKenzie: Right. And of course, you know, that doesn’t take into account all the rising input costs that we have, too. But still, you know…

[06:46] John Anderson: We’ll talk about that in just a second.

[06:47] Andy McKenzie: And the market really doesn’t care, though, if somebody can make a profit or not. It’s just going to put the signal out. So if the price is relatively good right now because of the situation we’re in with Ukraine and Russia, then that is still a pricing opportunity to get rid of some of your sales.

[07:04] John Anderson: So I’m looking at the Arkansas Daily Grain Bids report from today.  Actually, this one’s from yesterday, I don’t have todays in front of me. Number 2 yellow corn quotes on the river, 6 — between 675 and 680 for the most part. That’s new crop. Soybean quotes on the river. Well, country elevators, 1450 or so, a little higher than that on the river. Those are historically really good prices for this time of year, good booking prices.

[07:40] Andy McKenzie: Those really are good prices. And like you say, from a historical point of view, we haven’t seen prices like that for quite some time, if, if, if ever. So yeah.

[07:49] John Anderson: Yeah. Well, I remember… and this is a time of year and again, from a risk management perspective, this is a time of year when I think a lot of farmers… The hard thing to figure out is how aggressive to be in your pricing when you haven’t even put a seed in the ground yet. Right. I mean, we don’t know but what we might get ten inches of rain in the next two weeks and not be able to get in the field for a month. Right. Booking when you have that production risk all in front of you is it is a challenge. It’s a tough decision.

[08:19] Andy McKenzie: It is a challenge. But I think you know, you can still book a certain percentage with some certainty or some knowledge that you’re going to get that production out. And you can always back it up with crop insurance. As well to try to help you on your production risk side.

[08:34] John Anderson: So one of my favorite lines on this topic was from O.A. Cleveland, who some of you listening to this might remember O. A. Cleveland as the longtime cotton specialist at Mississippi State University.  And I heard O. A. many times in producer meetings, say, if you like the price well enough to plant the seed, you should like it enough to price some of it when you plant. And I thought that was a really good perspective to have. If the price is enough to entice you to plant, it should entice you to book some of it, to take some of it off the table at that time. You don’t have to book at all, but it’s it’s good to book some of it.

[09:12] Andy McKenzie: Yeah. Yeah. And these are these are, you know, looking it from the point of view of our friends in the grain elevator business. These are challenging times for them too. With these inverted market, it does penalize you somewhat on storage. And, you know, unless they’ve got in place what I would call good spread structure where they’ve already managed their futures positions to to make it profitable for them to store prior to these really large inversions, then, you know, it’s going to be challenging to say the least, because grain elevators derive their profits on upward movements and basis post-harvest.  With inverted markets, you’re going to see basis tend to decline in relation to the spreads. So, you know, again, for the elevator guys, it’s a signal for them to also sell if they can. The problem for those guys is, can you get everything sold immediately? Well, not probably likely because you have logistic problems and so forth. So, you know, they have to deal with that. The sort of relationship then between farmers and elevators because of this added risk and volatility for the elevator size side of the thing, we will probably see, you know, cash price bids relative to the futures, maybe cash not getting quite as high as the futures, obviously, because the basis is what the elevators are sort of protecting themselves on, and they’re maybe not giving as good basis numbers as what they would in a normal market. So you get that wider gap between the futures and the cash. But it’s not like farmers should be worried about that. You’ve still got good prices from a farmer perspective to get in on. And so I wouldn’t pay so much attention to the basis, but just look at the actual cash prices and see that as an opportunity.

[11:00] John Anderson: Very good. So from the grain producer perspective, the grain and oilseed market, good pricing opportunities right there. James Mitchell, from the livestock perspective, those prices are a challenge.

[11:14] James Mitchell: Yeah, it’s two sides of the same coin, right. High grain prices means high feed prices, which means expensive to put pounds on on livestock, right. I’d say that our producers have kind of been in that managing-high-feed-cost mindset for more than a year now. So we’ve seen these grain markets certainly take off, but we kind of knew we were going to be in a expensive situation in terms of feed costs. So I think, you know, the scenario being that I think farms, or at least, been thinking about that and have been implementing ways to try and manage that. One of those ways of doing that is if you’ve got high grain prices, that provides more incentive to put pounds on on cattle, on grass. So if you’ve got grass, the market’s going to reward you for being able to put some pounds on those animals outside of feedlots, for example, where you’re going to be feeding these higher grain prices. But but overall, yeah, it’s a high cost situation. For all of our livestock producers right now.

[12:18] John Anderson: So we do typically expect to see, again, the assumption that all economists love of ceteris paribus, all else equal — when grain prices go up, feeder and stock and cattle prices go down as buyers attempt to maintain some kind of profit margin. I know it’s early days in this particular episode, and we really already had fairly high corn prices baked in, as you said, I think. But are you are you picking up any talk about stocker prices or feeder prices retreating in response to grain prices in the last couple of weeks?

[12:53] James Mitchell: So I think in some there’s some regional cash markets where we’ve certainly seen some pressure on feeder cattle prices. But going back to discussions about futures, right, those futures market prices are still kind of reflecting the same dynamics that we’ve been talking about before. This whole conflict kind of came about, which is we’re in a very tight situation in terms of cattle supplies, and those prices are still reflecting that. I mean, you can have really high grain prices, but if you still don’t have a whole lot of animals, that’s ultimately what’s going to dominate in terms of support for prices. In terms of a real strong supply signal in that respect. But I would say, you know, the bigger issue — and we’re all well aware of this for cattle prices specifically — it’s not so much the decline potential in cattle prices that’s been the biggest issue that we’re hearing people talk about. It’s the volatility in all these markets. Right. So the conflict we’re talking about today is something that has a high degree of uncertainty from a day-to-day, you know, hour-to-hour, minute-to-minute perspective. And it can be really frustrating when you’re trying to watch these markets price in that uncertainty. And so you get big swings in prices and that can make it difficult to manage risks. You know, there’s volatility means those prices are going to swing really high up, which is not necessarily a bad thing. But they’re also going to be, you know, periods of swinging very, very low. And the idea of trying to manage through that becomes more difficult when we’re in such a highly uncertain scenario.

[14:27] John Anderson: Right. Good point. Good point. And that volatility has been really widely reflected throughout the economy. And we’ll talk about that a little more as we go on, specifically related to energy and its impact. Before we get to that, I want to bring Alvaro into the discussion. Alvaro, you really follow global rice markets closely. And Ukraine and Russia are not directly that involved in the global rice market, but wheat along with rice are the two major food grains across the globe. So talk a little bit, if you would, about the rice market implications of this and the broader grain markets generally.

[15:06] Alvaro Durand-Morat: Yeah, yeah. You’re right. And Russia and Ukraine, from the rice market specifically, they’re not big players. They are not. Russia is a producer. Ukraine doesn’t produce much They are importers of rice in particular. You know, if anything gets disrupted, it may have a marginal impact on countries such as India and Thailand that supply some rice to Russia. But again, we are talking about the two largest exporter of rice. So it is less than 1% of their exports, so really nothing massive there. I think most of the impact will come, or potentially will come, through energy and fertilizer, which we will talk later on. But I was checking today before coming and kind of following up on your numbers when when we started, some some facts about trade. So you talk about export wheat exports. So Russia being the largest, again depending on how many years back we go. I got USDA data for 2020, the largest exporter with like 19 to 20% of the market share of exports. The main markets there are Egypt, Turkey and Bangladesh. So we are talking about three countries that consume a lot of rice. So when I look at Ukraine, again 8% of export market share.  Where does that go? Egypt, Indonesia, Bangladesh, Pakistan, Turkey: all also main rice consumers. So usually when we do, again like like what I do modeling and you know cross price elasticities and things like that, we tend to assume that countries that consume rice such as Bangladesh, they are pretty inelastic.

[16:53] John Anderson: Right. You’re talking about a staple product in a low income country and that you’ve mostly rattled off.

[16:59] Alvaro Durand-Morat: Exactly. And again, we have to also consider that we are coming, trying to come out of COVID with prices of really high — prices at a record high, according to FAO last month. So I am looking forward to see what’s going to happen in the final consumption and the substitution effect that this may have. Because, again, we usually tend to ignore that. But this can be a massive shock on the wheat market. And in particular in a country such as Egypt or Pakistan, which they depend — I mean, wheat is their main staple. And Russia and Ukraine are main suppliers. So it will be interesting to see. And also looking at, you know, there seems to be not many options on the wheat side of things. I was looking also at the stocks. And although we have good global stock levels for wheat, as we do for rice and as we do for corn, the thing is that most of those stocks are in the hands of China. So when we look at — I was looking at corn stocks — 70% of the stocks are in China.

[18:02] John Anderson: 70%?

[18:03] Andy McKenzie: 70% of the corn global stocks. 50% of the wheat stocks are in China.  With rice, nobody knows but it is definitely above 60%. So there are not many other places that can supply wheat at this time of the year. The U.S., the E.U., India, maybe Argentina a little bit, but not much. I know that will come at a higher cost.

[18:26] John Anderson: Yeah. Well, you know, we had an analogous situation to this some some years back. You know, I’d hesitate to say how many because I know I’ll be wrong. But when China was holding massive stocks of cotton,  a large majority of cotton stocks were held in China, and it was really tough as an analyst to figure out what the implications of that….You know, we were saying, you know, those those stocks are held in strong hands. You’re not going to pry those stocks out of those hands very easily. So you can almost count them as gone in terms of what’s available to the rest of the world.

[18:56] Alvaro Durand-Morat: Actually, that’s that’s a very good point. And what we do, at least for the rice market we have been doing for the last several years, is to look at the stocks in the hands of exporters, because that’s what really exportable, right. I mean, China is very unlikely that they will turn the table with wheat and corn. They may do with rice, but with wheat and corn, I don’t see them doing that. So, again, that is very short, when we clean that stock. Yes, we have a shortage potentially, and all that will increase prices. So, again, I’m eager to see, again, all the sources that I follow in the rice market: they haven’t really talked about the potential substitution effect, but I think it will be interesting in the coming months and once we get all the data and we can do a serious analysis to see a substitution effect between wheat and rice.

[19:50] James Mitchell: Alvaro, I’d say what you’re what you’re saying, I think is a really important point, was when this all happened, our minds immediately went to kind of wheat/corn implications because that’s a big producer of those those commodities. But I mean, because of these substitution effects that you’re talking about, it really shows just how connected all of our agricultural markets are. And if something happens, at import, that impacts a big wheat producer, that’s going to impact all of our markets. So thinking about, you know, the impacts on Arkansas rice markets based off something that’s happening in Eastern Europe is is something that’s kind of interesting to to think through.

[20:28] Alvaro Durand-Morat: And I think, I’m sorry, I think going back to your point on on the on the meat side of things.  Also, I mean, looking at prices going up, so what is this substitution that may potentially come there? Right. Final consumption of meat. That’s another huge uncertainty that adds to all the volatility in the market.

[20:48] James Mitchell: But yeah, I think just the nature of having four of us in here that all specialize in different areas, talking about the implications from one event just speaks to how interconnected all of our markets are across the globe in terms of agriculture.

[21:02] John Anderson: And at this point, we’ve really only talked about the output side of the market. You know, the the grain and seed issues that have come up. This is as big an issue, maybe even a bigger issue, on the input side of the market. And Alvaro, you started to talk about that a second ago with fertilizer and and how the cost of production side is going to influence production decisions that our farmers are making this year. Andy and I got into that just a second ago as well. Russia is a big deal in the fertilizer world. A couple of numbers to start us off. Russia’s global fertilizer production, they account for 9% of the production of nitrogen, 10% of phosphorus and 20% of potassium. About two thirds of all of that is exported. So pretty big chunk of export. Belarus, there adjacent to Russia and possibly affected by sanctions on Russia as well, accounts for about 17% of potassium, and they export almost all of it. So those are big numbers in the fertilizer world. Those numbers, by the way, come from an article on fertilizer prices by a colleague of ours, Aaron Smith, at UC-Davis. And I’m going to put a link to Dr. Smith’s fertilizer market summary on the website with this podcast. It’s a really good, he’s got some really good figures in there, like the ones I just went through. But Alvaro, talk about how this fertilizer situation might affect our production decisions.

[22:29] Alvaro Durand-Morat: Well, again, as you said, Russia is the largest exporter of, you know, nitrogen, phosphorus and potassium together. So it’s by far the largest… And in particular, again, the commodity that I follow closely is rice. And rice is an input intensive crop, right. Not only on fertilizer, but on on fuel. So I think there will be, sadly, a double impact on the on the cost of production there. Now, with that said, again, that’s a situation in the U.S. Rice, again, is primarily produced in Asia, where, you know, in some cases it’s never fertilizer. So we can see actually a again, kind of a more intense pressure on US and EU and countries that rely heavily on fertilizer and inputs to produce rice relative to other countries that really rely primarily on labor and that are smaller scale and therefore have lower intensity. So again, these may exacerbate the issues of competitiveness that, you know, the U.S. rice industry has been dealing with for many years. So, again, it’s all remains to be seen, but there will be most likely a kind of a heterogeneous effect across regions based on the intensity of the input use.

[23:46] John Anderson: James, this also brings me back to something that you said in your earlier comments about the value now of of grass. As grain goes up, grass is worth more. Grass also takes fertilizer.

[23:56] James Mitchell: Yes, exactly. But to my earlier point, too, I think this was, the fertilizer markets, another thing where prices were already getting really, really high and so at least we’ve been thinking about this for a couple months or, you know, or even more in terms of the potential implications of these high fertilizer prices. So this is just really just pouring more fuel on the fire, so to speak. But yeah, you know, it does have important implications for for our hay producers, Arkansas being an important hay producer, certainly. And so as we kind of wrap up the winter feeding season and shift mindset to, you know, summer grazing, hay production, it’s one of those scenarios where those that have it are going to be glad they do and those that don’t are going to be very, very you know, down about being in a tight situation. You know, the initial reaction that some people might get is, okay, I’m just not going to fertilize my fields Okay, well, great. Then you’re just not going to have any hay. So, I mean, you can’t not fertilize. I mean, I think really what’s going to come down to you from a hay perspective is being very, very precise on where you’re putting fertilizer. You know, we’re really having a good understanding of the soil profile of your hay fields. And maybe not fertilizing, you know, pastures that your grazing and fertilizing just your hay fields. So being very creative this season on how we manage this is going to be important. It’s not as simple as just, well, I’m not going to fertilize.  Well, no, it’s going to take more than that to get through this, and it’s going to come down to being a very skilled hay producer. Right. So cattle producers are really in the grass business. That’s the, that is the name of the game, if you’re in the cattle, cattle businesses, you are a hay, you are a grass farmer. And so important implications there. You know, we’re getting into a drier situation in Arkansas, specifically south of the River Valley particularly. So that could also kind of make things even more difficult. I said how, you know, higher grain prices tend to support, you know, grazing operations to add some more pounds on cattle outside of feedlots. You know, I don’t want this to come across as, you know, benefiting from someone else’s misfortune. But for most of the South, we’re in a pretty good position, drought-wise relative to our neighbors out west. And so there are some implications where if we’ve got grass this summer, there are going to be some prices that are going to be very supportive of grazing it. So something to look forward to, especially.

[26:30] John Anderson: Now on the fertilizer point, as we as we sit here in northwest Arkansas and record this, a lot of our producers have access to chicken litter. I’m guessing that the value of chicken litter is going up and availability is probably getting spread pretty thin.

[26:45] James Mitchell: I was going to say, it’s not even really the value of chicken litter, it’s can you even find to get it?

[26:49] John Anderson: Can you get it, yeah.

[26:49] James Mitchell: Which is usually no, not necessarily a problem with how much chicken litter, how much how many, I mean, poultry houses we have in Arkansas. But it’s it’s getting to a point where it’s, if you’ve got it, don’t tell anyone because you’re the only one that’s going be able to find it right now.

[27:03] John Anderson: Yeah. And those are the stories I’ve heard in the last month or so. Again, this this this situation really predates the Russia/Ukraine event with fertilizer prices. But I was hearing if you didn’t already have a source found for chicken litter, you weren’t going to find it.

[27:16] James Mitchell: That’s the one key implication there to think through, though, is so… chicken litter has become really, really valuable. So if you can find it great, but be very studious about kn+owing what’s in that chicken litter.

[27:29] John Anderson: Great point.

[27:30] James Mitchell: That way you’re not paying for something at a high price that’s not going to give you any benefit at all when you put it on the field. So that’s probably one of the most important things that we can think about is across the board chicken litter is going to be extremely valuable, but just make sure that you’re buying something that’s actually going to give you benefits in your in your fields.

[27:48] John Anderson: Good point. And I think our agronomy friends would also want us to point out that soil testing has a lot of value in a situation like this so that you put out only what you know you need.

[27:56] James Mitchell: This is, that’s my to my point. I’m being very precise on what we’re putting on our fields this year, knowing, you know, a soil sample will pay for itself this year with, no doubt, with how high fertilizer prices are. So if, you know, if you haven’t done soil tests in a while or maybe you’ve never done one, this would be the year to do it. Get with your, you know, in Arkansas for us, get with your county extension agent and they’ll be able to help you get that soil test done and submitted so you can have a, get a better idea of what your soil profile looks like this year.

[28:28] John Anderson: So the last major topic I want to bring up is, is one that Alvaro, you touched on this also: energy. Russia is a major energy producer. According to data from the Department of Energy, Energy Information Administration, Russia is the third largest oil producer. They are also, according to EIA, our third largest source of imports of crude oil and petroleum products behind Canada and Mexico, actually bigger than Saudi Arabia now, which is an interesting… that’s a recent development. So we’re recording this on March 8th. Today, President Biden announced that we would be halting oil imports from Russia. I think crude oil futures — I think the nearby hit 130, $130 a barrel today, Andy, if I remember that right. Certainly we’re well over 120 a barrel, which is the first time since 2008 we’ve been at those price levels.  Alvaro, elaborate a little bit more, if you would, on on the energy intensive ness of our production systems now and maybe what  this implies.

[29:38] Alvaro Durand-Morat: Well, that’s a tough question. Again, all I can say is that, of course, with these energy prices, it is impacting not only agriculture, everything right, from think about transportation cost and everything in between. So again, it’s a very complex question that I can say for for agricultural, for rice in particular, it will be particularly painful because again, you know, rice needs water and water needs to be pumped, at least in this part of the globe. So, yeah, so farmers rely on fuel or on electricity and both are going up. So, again, not a good prospect on that side. But other than, again, I think this is such a widespread impact The impact of energy prices that it will be felt all throughout the supply chain.

[30:32] John Anderson: So, James, in the meat world, we pay attention to energy prices in a lot of cases for the impact that it’s going to have on consumers. Any thoughts on what we might see there?

[30:44] James Mitchell: Well, I would — to Alvarez point — I think high energy prices, being the token livestock economist in the room, it’s going to that’s going to impact us from, you know, the guy where that that calf hits the ground all the way through the supply chain to the consumer. So, you know, the processing business is an energy intensive business. That’s going to be impacted, raise the cost of production there. The cattle trucking business getting them from sale barn to feedlot to processors is going to be impacted. You know, consumer-wise, I think, you know, fuel prices are probably the single biggest, you know, challenge that consumers will feel in our wallets from this. It’s going to be and it already has been. Right. I filled up yesterday and already can tell: yeah, that’s getting more expensive, you know, so it’s going to be felt. And so consumers will certainly notice these impacts on energy. What does that mean for, you know, food consumption?  Well, there is substitute-ability there and so how that plays out. Again, it’s so hard to predict any of this because we’re again learning minute by minute as things go. But I would say, you know, from a broad, big picture economy perspective, we’re all watching fuel prices. And that that tends to give us a pretty good indicator of how everything else is going to look moving forward.

[32:06] John Anderson: Yeah. And fuel will influence everything else.

[32:10] James Mitchell: Yeah, absolutely.

[32:11] Alvaro Durand-Morat: And also, again, there is an endogeneity.  I was reading a report about the fertilizer markets. And to produce fertilizer, you need energy. They are super energy intensive. So again, there isn’t endogeneity where I think 90% of the cost of producing nitrogen fertilizer is energy. So with energy prices going up, so there is you know, all these effects are kind of feeding each other and well, you know, and that is reflected, as James said, in, you know, FAO record number, historical number, for the food price index last month. And that wasn’t accounting for the conflict yet, so.

[32:44] John Anderson: Right. Good point. So probably more upside in those numbers, unfortunately, Gentlemen, I appreciate the conversation. I think we’re drawing close to the end of our time. I do want to emphasize, obviously, the Russia-Ukraine conflict conflict is a massive humanitarian crisis. And we certainly don’t want to minimize that. We haven’t really spoken to that here, not because that’s not important but because that’s not really our area of expertise. But we certainly are cognizant of the massive suffering that this event has caused. We will be doing what we can to figure out the implications of this event and communicating that as time and circumstances allow.  For now, gentlemen, I appreciate you being here. And this has been the Relevant Risk podcast.

[33:38] Conclusion: Thanks for listening to the Relevant Risk podcast. A production of the Fryar Price Risk Management Center of Excellence in the Department of Agricultural Economics and Agribusiness within the University of Arkansas system. The Fryar Price Risk Management Center of Excellence carries out teaching activities through the Dale Bumpers College of Agricultural Food and Life Sciences at the University of Arkansas in Fayetteville, and research and extension activities through the University of Arkansas System Division of Agriculture. Visit Fryar, Dash Risk Dash Center dot UADA dot Edu. For more information. Thanks for listening!