Covering COVID-19 is a daily Poynter briefing of story ideas about the coronavirus and other timely topics for journalists, written by senior faculty Al Tompkins. Sign up here to have it delivered to your inbox every weekday morning.
This is a story that may seem to only affect farmers, but you will feel the effects of it. There is a global shortage of fertilizer that will drive up food prices and lower crop sizes. This won’t resolve quickly or easily.
Prices for the ingredients that go into synthetic fertilizers have in some cases tripled since the start of the pandemic. Several compounding problems contribute to the shortage, including the Russian invasion of Ukraine, supply chain issues caused by storms and high natural gas prices. Look at the price trend for anhydrous ammonia, a key fertilizer ingredient:
For the first time ever, farmers the world over — all at the same time — are testing the limits of how little chemical fertilizer they can apply without devastating their yields come harvest time. Early predictions are bleak.
In 2021, Russia was the world’s top exporter of nitrogen fertilizers and the second-largest supplier of both potassic and phosphorous fertilizers, according to the U.N. Food and Agriculture Organization.
The Bloomberg story includes reporting about how less fertilizer will cause smaller harvests:
“My biggest concern is that we end up with a very severe shortage of food in certain areas of the world,” Tony Will, the chief executive of the world’s largest nitrogen fertilizer company CF Industries Holdings Inc., said.
There’s also a growing concern less fertilizer use will result in lower-quality crops. Just ask Gary Millershaski, who farms nearly 4,000 acres of wheat and roughly 3,000 acres of corn and sorghum in southwest Kansas. Also, chairman of the Kansas Wheat Commission, Millershaski said the commission’s “biggest fear” this spring is that farmers may have skipped applying nitrogen as the wheat emerged from winter dormancy several weeks ago. If they did, it could hurt protein content of the grain and result in a “lower class of wheat.”
With nearly half of U.S. wheat exported to other countries, that’s a problem that will impact consumers the world over. The harvesting of hard red winter wheat, the most widely grown class in the U.S. and the grain that’s used to make all-purpose flour, will begin in June.
Some farmers will use slow-release fertilizers this year to try to use less than they usually would. Others are changing to crops that need different levels of nitrogen and less fertilizer.
Manure is in high demand
Reuters says some farmers are turning to more natural fertilizers, including manure:
Some livestock and dairy farmers, including those who previously paid to have their animals’ waste removed, have found a fertile side business selling it to grain growers. Equipment firms that make manure spreading equipment known as “honeywagons” are also benefiting.
Not only are more U.S. farmers hunting manure supplies for this spring planting season, some cattle feeders that sell waste are sold out through the end of the year, according to industry consultant Allen Kampschnieder.
“Manure is absolutely a hot commodity,” said Kampschnieder, who works for Nebraska-based Nutrient Advisors. “We’ve got waiting lists.”
Manure is problematic, however, because runoff can pollute waterways. But demand for honeywagons is so great that farm equipment manufacturers say they are producing them as fast as they can.
To give you an idea of how big the demand is for manure fertilizer today, Iowa usually uses 14 billion gallons of manure a year. This year it may spray 15 billion gallons on fields. That would be enough to cover 108,000 golf courses or fill 280 million bathtubs. It’s a lot of manure.
Why does Biden want to increase farm subsidies? How would it affect farmers?
President Joe Biden’s latest plan to help Ukraine has implications for American farmers to the tune of a half-billion dollars in increased farm subsidies. The president’s goal is to encourage U.S. farmers to increase wheat, corn and soybean production to make up for what Ukraine used to export. Prior to Russia’s invasion, Ukraine produced 10% of the world’s wheat.
But do farmers need that kind of encouragement when commodity prices are already at sky-high levels?
Under the Biden administration’s proposal, $100 million would go toward providing a $10-per-acre payment to farmers who plant a soybean crop after a winter wheat crop in 2023. Another $400 million would fund a two-year increase in loan rates for U.S. producers to encourage them to grow more select food commodities, including wheat, rice and oilseeds like soybeans, sunflowers and canola.
The Agriculture Department claims the proposal would help stabilize rising U.S. food prices and provide food for foreign countries in need, by helping American farmers grow 50 percent of the wheat normally exported by Ukraine, among other things. That plan, however, would probably also require the U.S. to step up funding for federal aid programs that buy and ship U.S. commodities abroad. Otherwise, wealthier countries like China would likely buy up the extra supply on the open market.
A White House fact sheet claims new subsidies would make it easier for farmers to get crop insurance and loans that would, for example, help offset the high fertilizer prices that make planting more acres riskier right now.
Farming economists generally are bullish about subsidies but this time have been muted because the incentive proposal is so complicated and there is a good deal of uncertainty about whether farmers need a greater incentive to plant fencerow to fencerow.
Watching the Fed tomorrow: interest rates will rise
The Federal Reserve Board starts meeting today, and tomorrow will announce how much it is increasing interest rates. Wall Street is counting on a half-percent increase. Five to six .25-point hikes are expected before the end of year. There are some predictions of a .75 point increase this time, which would shock the stock market but might be more effective than a yearlong slow move toward the inevitable.
A 50 basis point increase would be the biggest single increase in 20 years.
All of this is an attempt to get inflation under control. It will affect everything from home mortgage rates to credit card interest over time.
The Fed’s goal is to have inflation running no higher than 2% a year, but inflation is now running at 8%. Energy and food prices make 2% a tough target to hit and very low unemployment means employers have to pay workers more, which drives up prices everywhere.
It might be a good time to brush up on your understanding of how the Fed manages the nation’s money supply. The Fed rate (formally called the Federal Funds Rate) is the cost that banks pay the federal treasury for overnight loans. The Fed sets the rate goal but technically it is up to individual lenders to institute the rates. The government can influence what banks charge by controlling the money supply, so it is a bit of a carrot and stick act.
As those rates rise, the banks charge their customers more or less through higher or lower interest on debt. Investopedia explains:
The federal funds rate is one of the most important interest rates in the U.S. economy. That’s because it affects monetary and financial conditions, which in turn have a bearing on critical aspects of the broader economy including employment, growth, and inflation.
The rate also influences short-term interest rates, albeit indirectly, for everything from home and auto loans to credit cards, as lenders often set their rates based on the prime lending rate. The prime rate is the rate banks charge their most creditworthy borrowers—a rate that is also influenced by the federal funds rate.
Investors keep a close watch on the federal funds rate. The stock market typically reacts very strongly to changes in the target rate. For example, a small decline in the rate can prompt the market to leap higher as the borrowing costs for companies gets lower. Many stock analysts pay particular attention to statements by members of the FOMC to try to get a sense of where the target rate may be headed.
New York City raises its COVID-19 alert
New York City raised its COVID-19 alert level to medium on Monday, but hospitalizations and deaths have not risen. This is not the emergency that it was two years ago when New York City first raised its COVID-19 alert status, but it is a reminder that the virus is still here and still spreading.
Ice cream shops suffering shortages and price hikes
Axios Tampa Bay reports that ice cream shops around the country are having problems getting ingredients, flavors and cups. And even when they can get what they need to keep going, the costs are so high the shops say they have to raise their own prices or go under. Axios explains:
Shipping prices for ingredients have doubled, and delivery times have tripled in some cases.
It’s not just the ice cream. Practically everything you need to serve it is in low supply, too — spoons, cups, lids, pint containers and straws.
Dairy Mix — which supplies soft-serve and regular ice cream mix to 250 mom-and-pop shops across the state and to chains like Dairy Queen, Culver’s, McDonald’s and Wendy’s in Florida and Georgia — anxiously awaits monthly shipments of an essential ingredient, a blend of stabilizers that comes from the Midwest.
The powder binds ice cream to give it body and texture. Without it, you’d have grainy mush. When Dairy Mix has a hard time getting it, that means a lot of empty cones across the state.
“Styrofoam cups are our number one [item in short supply],” says Mortin Meyer, the owner of Dairy Kurl in Clearwater. “They’ve been a nightmare to keep in stock.”
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