Those are interesting figures and I thank you for them, but I think they underpredict the impact.
First, there’s no reason to believe we’ll keep as much as a quarter of Russian and Ukrainian wheat production. Peter Zeihan says Ukraine will be a net wheat importer for some years, and I’ve found him to be pretty careful and non-alarmist about claims like that.
Second, don’t forget the phosphate problem. As long as Russia can’t sell its phosphate because it’s been sanctioned out of SWIFT etc., 40% of the normal feedstock for fertilizers is out of play. This is going to push up prices and hit productivity seriously in a lot of wheat-growing areas that aren’t in the war zone. (As usual, the US will be far less impacted than most other places—we have large domestic phosphate reserves.)
Let me try to ballpark this based on your figures. I’ll steelman the case for low impact by choosing a low guess for the decrease in wheat yield due to not having phosphates, let’s say 40% . I know this is low because a lot of growing areas have tired soil that barely produces at all without fertilizers. Multiply this with the lost volume of Russian phosphate exports and it looks like world wheat production takes a 16% hit. Add that to the 8% from the lost wheat exports and we’re down 24%.
That’s best case. It’s more likely the impact is worse, producing a century-scale shock.
As long as Russia can’t sell its phosphate because it’s been sanctioned out of SWIFT etc., 40% of the normal feedstock for fertilizers is out of play.
Russia produced ~13 million tons of phosphate in 2020[1]. This is ~5.8% of global phosphate production (and <1% of global phosphate reserves). This is significant; this is not 40%[2].
Compare the following quote: “According to industry analysts, the rated capacity of global phosphate rock mines was projected to increase to 261 million tons in 2024 from 238 million tons in 2020[1]”
This is ~23 million tons increase in 4 years, or an increase in global capacity of ~5.75 million tons / year. Russia suddenly dropping entirely from global production would be losing ~2.3 years of growth, which doesn’t immediately sound catastrophic. Significant, yes. Catastrophic, no.
I got the 40% from one of Peter Zeihan’s talks. I don’t know where he got it from, but I have yet to catch him in a clear error on statistics I know how to check.
That’s fair about wheat import/exports – I don’t quite follow this guy’s estimate of only a 75% reduction in wheat exports from Ukraine and Russia, and plausibly it could be a lot worse.
The phosphate problem must depend on elasticity of phosphate supply (and a little of demand, though I checked and less than 10% of phosphate is used for non-agricultural industry, so there’s probably not a lot that can be substituted from other uses). I found conflicting accounts of whether Russia was the largest phosphate exporter, but like wheat, it’s not the largest phosphate producer. It produces about 13 million tons of phosphate, 5.6% of the world total, so I don’t find that immediately alarming – maybe it’s not too hard to increase phosphate mining by 5%? I wasn’t able to quickly find out how much of Russia’s production that it exports. I also couldn’t quickly find anyone giving an estimate of phosphate supply elasticity.
This paper says “Between 1961 and 2014 there have been two instances when the global phosphate rock prices spiked, in mid-1970s and 2007–2008 (Fig. 3a). Both events are linked to an economic trigger. The first instance was during the first oil crisis, and it was driven by the increase in energy prices (Mew, 2016). The second one is attributed to a combination of oil price increase, higher labour costs and insufficient mining capacity (Scholz et al., 2014).”
This chart shows up-to-date phosphate prices. It would be the one to watch to see how bad the phosphate shortage is getting. It shows a big spike in 2008 – about three times the current price. I don’t remember phosphate shortages in 2008 news, nor mass starvation, so I think we’re probably okay with prices under three times the current price.
I should have said 40% of the feedstock for exported fertilizer. I also should have explicitly noted that because a lot of wheat is still produced locally to where it’s consumed, the famine risk is limited to places that are dependent on wheat imports.
Unfortunately there are plenty of those. And they are generally places that are poor by other measures as well, making coping with economic shocks more fraught.
Your argument that 3X current phosphate prices is tolerable seems sound. On the other hand, anything that has to be mined has inelastic supply because the cost of the capital equipment—and in many countries the cost of the regulatory approvals—is so high.
Russia dropping entirely from the phosphate market would be wiping out ~2.3 years of projected growth. Significant? Yes. Catastrophic? I don’t think so offhand.
Those are interesting figures and I thank you for them, but I think they underpredict the impact.
First, there’s no reason to believe we’ll keep as much as a quarter of Russian and Ukrainian wheat production. Peter Zeihan says Ukraine will be a net wheat importer for some years, and I’ve found him to be pretty careful and non-alarmist about claims like that.
Second, don’t forget the phosphate problem. As long as Russia can’t sell its phosphate because it’s been sanctioned out of SWIFT etc., 40% of the normal feedstock for fertilizers is out of play. This is going to push up prices and hit productivity seriously in a lot of wheat-growing areas that aren’t in the war zone. (As usual, the US will be far less impacted than most other places—we have large domestic phosphate reserves.)
Let me try to ballpark this based on your figures. I’ll steelman the case for low impact by choosing a low guess for the decrease in wheat yield due to not having phosphates, let’s say 40% . I know this is low because a lot of growing areas have tired soil that barely produces at all without fertilizers. Multiply this with the lost volume of Russian phosphate exports and it looks like world wheat production takes a 16% hit. Add that to the 8% from the lost wheat exports and we’re down 24%.
That’s best case. It’s more likely the impact is worse, producing a century-scale shock.
Russia produced ~13 million tons of phosphate in 2020[1]. This is ~5.8% of global phosphate production (and <1% of global phosphate reserves). This is significant; this is not 40%[2].
Compare the following quote: “According to industry analysts, the rated capacity of global phosphate rock mines was projected to increase to 261 million tons in 2024 from 238 million tons in 2020[1]”
This is ~23 million tons increase in 4 years, or an increase in global capacity of ~5.75 million tons / year. Russia suddenly dropping entirely from global production would be losing ~2.3 years of growth, which doesn’t immediately sound catastrophic. Significant, yes. Catastrophic, no.
https://pubs.usgs.gov/periodicals/mcs2021/mcs2021-phosphate.pdf
Admittedly, “phosphate production” != “phosphate production for fertilizers”.
I got the 40% from one of Peter Zeihan’s talks. I don’t know where he got it from, but I have yet to catch him in a clear error on statistics I know how to check.
That’s fair about wheat import/exports – I don’t quite follow this guy’s estimate of only a 75% reduction in wheat exports from Ukraine and Russia, and plausibly it could be a lot worse.
The phosphate problem must depend on elasticity of phosphate supply (and a little of demand, though I checked and less than 10% of phosphate is used for non-agricultural industry, so there’s probably not a lot that can be substituted from other uses). I found conflicting accounts of whether Russia was the largest phosphate exporter, but like wheat, it’s not the largest phosphate producer. It produces about 13 million tons of phosphate, 5.6% of the world total, so I don’t find that immediately alarming – maybe it’s not too hard to increase phosphate mining by 5%? I wasn’t able to quickly find out how much of Russia’s production that it exports. I also couldn’t quickly find anyone giving an estimate of phosphate supply elasticity.
This paper says “Between 1961 and 2014 there have been two instances when the global phosphate rock prices spiked, in mid-1970s and 2007–2008 (Fig. 3a). Both events are linked to an economic trigger. The first instance was during the first oil crisis, and it was driven by the increase in energy prices (Mew, 2016). The second one is attributed to a combination of oil price increase, higher labour costs and insufficient mining capacity (Scholz et al., 2014).”
This chart shows up-to-date phosphate prices. It would be the one to watch to see how bad the phosphate shortage is getting. It shows a big spike in 2008 – about three times the current price. I don’t remember phosphate shortages in 2008 news, nor mass starvation, so I think we’re probably okay with prices under three times the current price.
I should have said 40% of the feedstock for exported fertilizer. I also should have explicitly noted that because a lot of wheat is still produced locally to where it’s consumed, the famine risk is limited to places that are dependent on wheat imports.
Unfortunately there are plenty of those. And they are generally places that are poor by other measures as well, making coping with economic shocks more fraught.
Your argument that 3X current phosphate prices is tolerable seems sound. On the other hand, anything that has to be mined has inelastic supply because the cost of the capital equipment—and in many countries the cost of the regulatory approvals—is so high.
See also my sibling comment at https://www.lesswrong.com/posts/CLXkgEerPi9MpJCem/moloch-and-the-sandpile-catastrophe?commentId=rsJMhBmsQjxZhZLHL
Russia dropping entirely from the phosphate market would be wiping out ~2.3 years of projected growth. Significant? Yes. Catastrophic? I don’t think so offhand.