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FEATURED

From France to the Middle East to the US Midwest, drought levels that haven’t been seen worldwide in at least two decades are damaging prospects for replenishing depleted global wheat supplies and increasing food security risks for many countries.An aggregation of growing conditions in all the world’s wheat-growing regions shows soil moisture levels are at their lowest point since at least 2010, according to <a href="https://hub.gro-intelligence.com/plot-region/agriculture/0,World$%7B%22checked%22%3A%5B%22Wheat%22%5D%2C%22method%22%3A%22sum%22%7D_0?0,World" target="_blank" rel="noopener noreferrer">Gro’s Climate Risk Navigator for Agriculture</a>. Meanwhile, the Gro Drought Index, weighted for the world’s wheat acres in the Climate Risk Navigator, is showing the highest readings since at least 2003.&nbsp;&nbsp;<figure class="image"><img src="https://res.cloudinary.com/gro-intelligence/image/upload/v1653050302/new-website/Daily_Soil_Moisture_for_World_s_Wheat_Growing_Regions_e9187dd132.png"><figcaption>Soil moisture levels, aggregated for all the world’s wheat-growing acres, are at their lowest point since at least 2010, according to Gro’s Climate Risk Navigator for Agriculture.</figcaption></figure>Worldwide production of wheat, the most important crop affecting food security, is forecast to decline this year for the first time in four years. The global <a href="https://app.gro-intelligence.com/displays/wRDZv6bdV" target="_blank" rel="noopener noreferrer">wheat stocks-to-use ratio</a>, a key measure of available supplies, is projected to drop in 2022/23 to the lowest level in seven years, marking the third consecutive annual decline in wheat inventories.&nbsp;Tight global wheat supplies have pushed benchmark <a href="https://app.gro-intelligence.com/displays/wRL7prVqp" target="_blank" rel="noopener noreferrer">futures prices</a> on the CME up by 57% so far this year.&nbsp;Russia’s invasion of Ukraine in February exacerbated the world’s supply squeeze by halting shipments of wheat from the Black Sea region. Also compounding the problem are wheat export restrictions enacted by some governments, including <a href="https://gro-intelligence.com/insights/russia-enacts-partial-ban-on-grain-exports-in-another-hit-to-global-wheat-supplies" target="_blank" rel="noopener noreferrer">Russia</a> and <a href="https://gro-intelligence.com/insights/india-wheat-export-ban-risks-inflaming-food-insecurity-worldwide" target="_blank" rel="noopener noreferrer">India</a>, to control rising domestic prices.&nbsp;France presents one of the most worrisome pictures, as scant rainfall and high temperatures depress growing conditions in <a href="https://app.gro-intelligence.com/displays/oq1ZQZGRW" target="_blank" rel="noopener noreferrer">Europe’s top wheat</a> supplier. With Ukraine wheat sidelined by its war with Russia, drought hit countries across the <a href="https://app.gro-intelligence.com/displays/adGLEn0qZ" target="_blank" rel="noopener noreferrer">Middle East</a> and <a href="https://app.gro-intelligence.com/displays/EqZb7zwq3" target="_blank" rel="noopener noreferrer">North Africa</a> have been counting on France to help fill the supply gap.&nbsp;France’s durum and soft wheat crops, which are <a href="https://app.gro-intelligence.com/displays/eRJDp7LdV" target="_blank" rel="noopener noreferrer">harvested in July and August</a>, are currently in the key growing months that have the greatest bearing on final crop yield. But soil moisture readings for the country’s wheat regions are at their <a href="https://hub.gro-intelligence.com/plot-region/agriculture/1070,France$%7B%22checked%22%3A%5B%22Wheat%22%5D%2C%22method%22%3A%22sum%22%7D_0?0,World:14,Europe:1070,France" target="_blank" rel="noopener noreferrer">lowest levels</a> in at least 12 years, Gro’s Climate Risk Navigator shows.&nbsp;US wheat prospects are also at risk, as the <a href="https://gro-intelligence.com/insights/setbacks-for-us-wheat-crops-signal-lower-production" target="_blank" rel="noopener noreferrer">winter wheat and spring wheat crops</a> continue to face adverse conditions. Gro’s machine-learning <a href="https://app.gro-intelligence.com/displays/gRnmJ0PqY" target="_blank" rel="noopener noreferrer">US Hard Red Winter Wheat (HRW) Yield Forecast Model</a> is pointing to a double-digit yield decline, as <a href="https://app.gro-intelligence.com/displays/LRyp3Kwq3" target="_blank" rel="noopener noreferrer">hot and dry conditions</a> blanket the HRW growing areas in the southern Plains. Meanwhile, the US hard red spring wheat (HRS) crop to the north is struggling with spring planting because excessive rains are hampering sowing. North Dakota, the top HRS-producing state, is currently experiencing the slowest planting season since 2011.&nbsp;<figure class="image"><img src="https://res.cloudinary.com/gro-intelligence/image/upload/v1653050348/new-website/Gro_Drought_Index_for_World_s_Wheat_Growing_Regions_b62d5d9d4f.png"><figcaption>An aggregation of growing conditions in all the world’s wheat-growing regions shows the driest conditions since at least 2003, according to the Gro Drought Index, weighted for wheat acres worldwide using the Gro Climate Risk Navigator.</figcaption></figure>Elsewhere, Iran, the Middle East’s top wheat producer, is expected to see production drop 20% this year to 12 million tonnes, which is 17% below the 5-year average. Iran’s wheat-growing areas have experienced “severe” levels of drought since mid-2021, according to <a href="https://hub.gro-intelligence.com/plot-region/agriculture/1096,Iran$%7B%22checked%22%3A%5B%22Wheat%22%5D%2C%22method%22%3A%22sum%22%7D_3?0,World:12,Asia:1096,Iran" target="_blank" rel="noopener noreferrer">Gro’s Drought Index</a>, weighted for wheat acres in Iran using the Gro Climate Risk Navigator.Wheat production in Morocco is projected to be down 35% this year to 3.22 million tonnes, Gro’s model shows. Morocco, one of the top wheat producing countries in Africa as well as a large wheat importer, has experienced <a href="https://hub.gro-intelligence.com/plot-region/agriculture/1138,Morocco$%7B%22checked%22%3A%5B%22Wheat%22%5D%2C%22method%22%3A%22sum%22%7D_0?0,World:11,Africa:1138,Morocco" target="_blank" rel="noopener noreferrer">one of the worst droughts</a> in nearly two decades since late last year, as shown by the Gro Drought Index weighted for the country’s wheat areas.&nbsp;Gro’s Climate Risk Navigator for Agriculture enables users to evaluate and compare growing conditions anywhere in the world, in real time and on a historical basis. The application’s ability to weight growing conditions for a specific crop is a valuable function when crops are spread widely within a country and when yield forecast models aren’t available.&nbsp;&nbsp;-Related Insights<a href="https://gro-intelligence.com/insights/usda-forecasts-big-drop-in-us-winter-wheat-crop-confirming-gro-s-prediction" target="_blank" rel="noopener noreferrer">USDA Forecasts Big Drop in US Winter Wheat Crop, Confirming Gro’s Prediction</a><a href="https://gro-intelligence.com/insights/india-wheat-export-ban-risks-inflaming-food-insecurity-worldwide" target="_blank" rel="noopener noreferrer">India Wheat Export Ban Risks Inflaming Food Insecurity Worldwide</a><a href="https://gro-intelligence.com/insights/setbacks-for-us-wheat-crops-signal-lower-production" target="_blank" rel="noopener noreferrer">Setbacks for US Wheat Crops Signal Lower Production</a><a href="https://gro-intelligence.com/insights/russia-ukraine-tensions-could-spell-trouble-for-mideast-wheat-imports" target="_blank" rel="noopener noreferrer">Russia-Ukraine Tensions Could Spell Trouble for Mideast Wheat Imports</a><a href="https://gro-intelligence.com/insights/north-africa-wheat-imports-could-jump-as-region-battles-drought" target="_blank" rel="noopener noreferrer">North Africa Wheat Imports Could Jump as Region Battles Drought</a><a href="https://info.gro-intelligence.com/russia-ukraine-crisis-driving-global-food-shocks" target="_blank" rel="noopener noreferrer">(Whitepaper) Russia-Ukraine Crisis Driving Global Food Shocks</a>&nbsp;

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Global Wheat Supplies Face New Threats as Drought Levels Rise, Gro’s Model Shows

China has agreed to import corn from Brazil, in a further sign of how the Russia-Ukraine war is reshaping global trade flows.&nbsp;China has more than doubled its annual <a href="https://app.gro-intelligence.com/displays/WdK0AbkqK" target="_blank" rel="noopener noreferrer">corn imports</a> in the past decade — largely for livestock feed — with most of the increased purchases in recent years coming from the US and Ukraine. Ukraine first began shipping corn to China in 2014 and by last year provided nearly one-third of all China’s corn imports. (To see monthly corn trade flows into China by origin click <a href="https://app.gro-intelligence.com/displays/adGQQBlRZ" target="_blank" rel="noopener noreferrer">here</a>.)&nbsp;However, with Ukraine’s grain exports blocked by war, China and other countries have been forced to seek out alternative sources of supplies.&nbsp;Beijing’s deal with Brazil will initially be aimed at replacing at least part of Ukrainian imports. But in the longer term it could potentially take export share away from the US and encourage further corn planting in Brazil. Roughly 25% of total <a href="https://app.gro-intelligence.com/displays/3dW77JWdD" target="_blank" rel="noopener noreferrer">US corn export volumes</a> currently go to China. US corn sales to China were valued at $5.1 billion for 2021.&nbsp;Brazil is the <a href="https://app.gro-intelligence.com/displays/3dW77bWdD" target="_blank" rel="noopener noreferrer">second-largest</a> corn exporter in the world, with most of its <a href="https://app.gro-intelligence.com/displays/EqZvvwxq3" target="_blank" rel="noopener noreferrer">shipments</a> going to Iran, Spain, Japan, Vietnam, and Egypt. Brazil’s <a href="https://app.gro-intelligence.com/displays/bR7EEjPdN" target="_blank" rel="noopener noreferrer">corn exports to China</a> have been small and erratic, with a shipment of 35,000 tonnes in April 2022 being the only shipment of note since 2019.&nbsp;China’s import agreement with Brazil still requires formal approval by China's Agriculture Ministry. Documentation on phytosanitary measures must also be finalized to meet Chinese requirements.&nbsp;&nbsp;Brazil’s corn harvest last year was less than a quarter the size of the US crop, making Brazil the third-largest corn producer in the world. But the Brazilian crops have struggled with dry conditions brought on by La Niña climate events. In 2020/21, corn production dropped by 15% from a year earlier. For this year, <a href="https://app.gro-intelligence.com/displays/pdo6bOy9L" target="_blank" rel="noopener noreferrer">Gro’s Brazil Corn Yield Forecast Model</a> is predicting production will increase by double digits, but will fall well short of current USDA projections.&nbsp;China’s own corn production helps determine the amount of corn it needs to import. <a href="https://app.gro-intelligence.com/displays/wRL7461qp" target="_blank" rel="noopener noreferrer">Gro’s China Corn Yield Forecast Models</a> offers in-season projections for the crop, which is harvested in September/October. Gro’s Chinese cash corn prices, and the price relationship among competing feed grains which can be viewed <a href="https://app.gro-intelligence.com/displays/LRypBDMq3" target="_blank" rel="noopener noreferrer">here</a>, also provide valuable clues to China’s corn supply and demand balance.-Related Insights&nbsp;<a href="https://gro-intelligence.com/insights/us-corn-crop-at-risk-of-substantial-prevent-plant-acreage-gro-s-model-predicts" target="_blank" rel="noopener noreferrer">US Corn Crop at Risk of Substantial Prevent-Plant Acreage, Gro’s Model Predicts</a><a href="https://gro-intelligence.com/insights/corn-prices-rise-as-prospects-weaken-for-brazil-us-crops" target="_blank" rel="noopener noreferrer">Corn Prices Rise as Prospects Weaken for Brazil, US Crops</a><a href="https://info.gro-intelligence.com/russia-ukraine-crisis-driving-global-food-shocks" target="_blank" rel="noopener noreferrer">(Whitepaper) Russia-Ukraine Crisis Driving Global Food Shocks</a>&nbsp;

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China to Buy Brazil Corn as Ukraine Exports Remain Blocked

Global vegetable oil prices have been on an upward trajectory for the better part of two years. The onset of the Russia-Ukraine war on February 24 caused prices to spike higher in volatile trading as Black Sea sunflower oil exports were halted by the conflict.In Gro’s latest Strategic Assessment, we address the impact of the Russia-Ukraine war on global vegetable oil markets. We show how vegetable oil supplies face renewed risks in several countries, which will continue to weigh on global markets, and how industry pressures may keep prices elevated for some time to come.You will learn:<ul><li>Why global vegetable oil production has struggled to keep up with rising consumption</li><li>How the Russia-Ukraine war and increasing demand for biofuels have exacerbated concerns about global vegetable oil supplies</li><li>How to monitor global production prospects to forecast potential impacts to the vegetable oil market</li></ul>&nbsp;<a href="https://info.gro-intelligence.com/russia-ukraine-war-vegetable-oil-prices" target="_blank" rel="noopener noreferrer">Download the Strategic Assessment</a>

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Fuel for the Fire: The Russia-Ukraine War and Vegetable Oil Prices

The 2022 USDA acreage report marks only the second time in history that US farmers will plant more soybeans than corn. In a tight corn market facing supply disruptions due to drought conditions in South America and the war in Ukraine, US corn production will be critical to ensure quality global supply.&nbsp;Join us Thursday, August 4, 11-12 PM EST for our highly regarded 2022 US Corn &amp; Soy Outlook webinar. In this webinar, Gro Intelligence’s Research Analysts will present Gro’s yield model forecasts for corn and soy ahead of the USDA’s first surveyed yields estimates for the year. We will also consider the long-term global impact and expectations for the upcoming South American growing season.

2022 US Corn & Soy Outlook and the Long-Term Global Impact

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Will has been a research analyst in agricultural commodities for over a decade. Before joining Gro, he was a strategist at Balyasny Asset Management with a focus on oilseeds. Prior to that, he worked at Yannix Management covering grains and oilseeds. At Perennial Management he was in charge of sugar research and trading as well as conducting coffee, cocoa and macroeconomic research. Will started his career at AIG in the Hedge Fund Strategies group. Will earned a Bachelor of Science & Engineering in Operations Research and Financial Engineering from Princeton University and is a CFA charter holder.

William Osnato

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Senior Research Analyst

Kelly has more than 10 years of experience in commodity analytics. Prior to joining Gro, Kelly spent many years working at a hedge fund and a commercial trading house. Kelly understands the ins and outs of commodity analysis but more importantly a client’s needs in regard to trading, hedging, and procurement decisions. Kelly holds a Bachelor of Arts degree from Lehigh University.

Kelly Goughary

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The Russia-Ukraine war is causing vast destruction and human suffering in Ukraine. It is also reverberating through global food supply chains by disrupting shipments of Black Sea wheat, vegetable oils, corn, barley, and fertilizers.<ul><li>Agricultural commodity prices have surged in volatile trading</li><li>Import-reliant countries are scrambling for alternative supplies</li><li>Energy prices have jumped, with crude oil topping $100 a barrel&nbsp;</li></ul>In this Gro Strategic Assessment, we quantify the impact the Russia-Ukraine war is having on global inventories of agricultural commodities. We also evaluate how much other world regions are able to increase their exports to help fill the supply shortfalls created by the war. <a href="https://info.gro-intelligence.com/russia-ukraine-crisis-driving-global-food-shocks" target="_blank" rel="noopener noreferrer">Download the full Strategic Assessment here</a>.

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Russia-Ukraine Crisis Driving Global Food Shocks

Food price inflation is at its highest level in a decade. Successive years of poor growing conditions across several key commodities, coupled with strong demand, have pulled down agricultural product inventories worldwide to their tightest levels in years and driven prices higher. As many nations’ economies continue to recover from COVID-19, and issues ranging from labor shortages to intense drought emerge, the current period of high prices could be with us well into 2022 and beyond.&nbsp;One of the strongest signals for continued food inflation is a second consecutive year of drought in agricultural powerhouse South America, brought on by the return of the La Niña weather event. Big producers Brazil and Argentina are headed for smaller harvests of major crops, especially corn, soybeans, and sugar, Gro’s machine-learning models show. Even a robust US harvest from the upcoming season won’t be able to make up for the depth of South America’s current crop troubles.As a result, global supplies of many commodities will remain tight, and food prices, already soaring in most parts of the world, will remain elevated through yet another global crop cycle.Background&nbsp;A broad acceleration of food price inflation in the US has been underway since May 2020, around the beginning of the COVID lockdowns. Gro’s <a href="https://app.gro-intelligence.com/displays/adGLM2DqZ">US Food Price Index</a>, which reflects prices based on consumption of a wide range of food items, is up 30% from this time last year.&nbsp;<ul><li>The index’s increase signals a continuation of intense inflationary pressure on basic food necessities such as proteins and grains used in making a wide variety of packaged food products.&nbsp;</li><li>Rising US food prices have global impact, given the outsize role of the US in worldwide food and agricultural markets.&nbsp;</li><li>The <a href="https://gro-intelligence.com/models/us-ag-price-index">Gro US Food Price Index</a> updates daily and provides an inflation estimate for the current month, which is up to six weeks ahead of when official US government data becomes available.&nbsp;</li></ul>The biggest drivers of US food price inflation are meat and poultry.&nbsp;<ul><li>Wholesale <a href="https://app.gro-intelligence.com/displays/Vq6131NdW">US beef prices</a> rose 25% in 2021 from the previous year, while <a href="https://app.gro-intelligence.com/displays/wRDvQmzdV">poultry prices</a> doubled, putting sharp upward pressure on retail prices as well.&nbsp;</li><li>Since late December 2021, US pork cold storage levels fell to 21% below five-year average levels. As boneless hams require more labor to remove the bone, they were in even <a href="https://app.gro-intelligence.com/displays/VqeWwVZ9L">tighter supply.</a>&nbsp;</li></ul>Robust consumer demand as economies pick up steam is driving protein prices higher, while labor shortages have restricted protein processor production.&nbsp;<ul><li>Sharply higher animal feed costs have also pushed up protein prices.&nbsp;</li><li><a href="https://app.gro-intelligence.com/displays/kqzK7blRW">Corn futures</a> prices are up 5.5% so far in 2022, and up 35% year over year. <a href="https://app.gro-intelligence.com/displays/gR80VG8Re">Soybean prices</a> have risen even more, gaining 17% so far in 2022 and 38% compared with last year.&nbsp;</li><li>Droughts in Brazil, Canada, and the US, along with unprecedented demand from China, <a href="https://app.gro-intelligence.com/displays/o9vPWnKqb">tightened global supplies</a> of grains and oilseeds used in animal feed.&nbsp;</li></ul><a href="https://app.gro-intelligence.com/displays/eRJpoBodV">Milk prices</a> are up 31% year over year, also due to higher feed costs.<figure class="image image-style-align-center image_resized" style="width:75.58%;"><img src="https://res.cloudinary.com/gro-intelligence/image/upload/v1644416385/new-website/image1_738b8a06c2.jpg"><figcaption>Wholesale chicken breast prices have soared amid lower supplies and rising feed costs, contributing to a 30% year-over-year jump in Gro’s US Food Price Index.</figcaption></figure>Higher Prices WorldwideVegetable oils are one of the most common commodities around the world, used widely in cooking and as ingredients in nearly every packaged food product. But as global <a href="https://app.gro-intelligence.com/displays/oq1QMmKqW">vegetable oil supplies </a>tighten, <a href="https://app.gro-intelligence.com/displays/V9NBojk9b">prices have risen</a> substantially for more than a year, hitting profit margins of packaged food manufacturers.&nbsp;<ul><li>Gro’s VegOil Feedstock Price Index, which tracks price changes in various edible oils, is up 41.8% in January from a year earlier.&nbsp;</li><li>The index is part of Gro’s newly launched <a href="https://gro-intelligence.com/models/custom-price-indices">Custom Price Indices application</a>, which enables food manufacturers to create price indices of key ingredients, using customer-selected inputs and weights, and track inflationary pressures.</li></ul>Potato prices in the US are up 20% year over year, amid declining production and supply chain disruptions around the world.&nbsp;<ul><li><a href="https://gro-intelligence.com/insights/us-potato-production-decline-deepens-global-supply-shortage">US potato production</a> in 2021 was 7% below the five-year average as severe drought in several states resulted in the worst potato yields in years. The No. 1 producing state, Idaho, saw yields drop 9%.</li><li>Port disruptions and weak harvests created french fry shortages in markets from Japan to Kenya.</li><li>North American potato trade flows were curtailed after a potato wart outbreak prompted an export ban from Prince Edward Island, Canada’s largest potato producing province.</li></ul>Food inflation has taken hold worldwide, with year-over-year prices up 8% in Canada and 5% in Brazil, according to <a href="https://app.gro-intelligence.com/displays/oq1QB6vqW">Gro’s Food Price Indices for those countries</a>.&nbsp;<ul><li>Gro’s Brazil Food Price Index is close to its highest level ever, and is up 63% since the first set of COVID-related lockdowns in Brazil in May 2020.&nbsp;</li><li>Food price increases in Brazil have been exacerbated by the depreciation of the Real, which is down 15% over the past two years.</li></ul>Rising prices have prompted some countries to restrict commodity exports in order to maintain domestic supplies and quell food price inflation.&nbsp;<ul><li><a href="https://gro-intelligence.com/insights/indonesia-s-palm-oil-export-curbs-will-squeeze-global-supplies">Indonesia</a>, the world’s largest producer and exporter of palm oil, announced curbs on palm oil exports.&nbsp;</li><li>Other countries, including <a href="https://gro-intelligence.com/insights/russia-ramps-up-wheat-export-restrictions">Russia</a> and <a href="https://gro-intelligence.com/insights/argentina-to-cap-corn-and-wheat-exports-amid-forecast-for-record-crops">Argentina</a>, have restricted grain exports.&nbsp;</li><li>Such measures could further tighten global supplies and create additional upward pressure for food prices.</li></ul><figure class="image image-style-align-center image_resized" style="width:74.72%;"><img src="https://res.cloudinary.com/gro-intelligence/image/upload/v1644416608/new-website/image3_2e19cb459e.jpg"><figcaption>Tightening global supplies of vegetable oils, one of the most widely used commodities, have pushed prices sharply higher, hitting profit margins of packaged food manufacturers.&nbsp; Gro’s VegOil Feedstock Price Index, which tracks price changes in various edible oils, is up 41.8% in January from a year earlier.</figcaption></figure>Headed Into 2022: South America Drives Global MarketsBig agricultural producers Brazil and Argentina are headed for smaller harvests of major crops, especially corn, soybeans, and sugar, Gro’s machine-learning models show.&nbsp;<ul><li>The result will be a continuation of tight global supplies for many commodities.&nbsp;</li><li>Food prices, already soaring in most parts of the world, will remain elevated through yet another global crop cycle.&nbsp;</li><li>Brazil is the world’s largest soybean producer and exporter. It is also the No. 1 producer and exporter of sugar and Arabica coffee.</li><li>Argentina is the world’s largest exporter of soybean oil and soybean meal as well as a major supplier of corn to world markets.&nbsp;</li></ul>A return of the La Niña global climate event is bringing another year of drought to key growing regions in Argentina and southern Brazil.&nbsp;<ul><li><a href="https://app.gro-intelligence.com/displays/6qAxMrgd4">Gro’s Brazil Soybean Yield Forecast Model</a> currently indicates a sizable production decline.&nbsp;</li><li>Gro’s yield forecast models for <a href="https://app.gro-intelligence.com/displays/WdK0XbrqK">Argentina corn</a> and <a href="https://app.gro-intelligence.com/displays/V9NB6aD9b">soybeans</a> currently show both crops will be down by double-digit percentages year over year.</li><li>Gro’s forecasts for South America are based on our extensive platform of data analytics, indices, and machine-learning models that have proved to be more reliable than government estimates and are available weeks or months earlier than official reports.</li></ul>Gro’s new Strategic Assessment, “<a href="https://info.gro-intelligence.com/south-america-outlook-2022">2022: The Year South America Drives Global Agricultural Markets</a>,” which is available for download, offers an in-depth look at the current South American season’s prospects. &nbsp;<figure class="image image-style-align-center image_resized" style="width:75.04%;"><img src="https://res.cloudinary.com/gro-intelligence/image/upload/v1644416573/new-website/image2_5f2440a6b3.jpg"><figcaption>A second consecutive year of drought in southern Brazil is depressing yields and production forecasts for the country’s big soybean crop, as shown via the Gro Drought Index. Brazil is the world’s largest producer and exporter of soybeans.</figcaption></figure>ConclusionYears of major agricultural product inventory reductions coupled with strong demand have led to rising food inflation worldwide. An expected shortfall in South American production this season could exacerbate global supply shortages, prolonging inflationary pressures for food well into the new year.&nbsp;US farmers can be expected to increase their total planted acreage of corn and soybeans, despite sharply elevated fertilizer prices, as crop shortfalls in South America prolong high commodity prices. But even a strong US harvest later this year won’t be sufficient to offset the damage already done to South American crops due to drought, Gro’s models show.&nbsp;The result will be a continuation of tight global supplies for many commodities and persistent food price inflation through yet another global crop cycle. Additional increases in food prices in 2022 will hit consumers and further squeeze profit margins for food manufacturing and merchandising companies worldwide.

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A Look at Rising Food Inflation

Agricultural powerhouse South America will have a greater-than-normal impact on global markets in 2022, a <a href="https://info.gro-intelligence.com/south-america-outlook-2022">new Gro Strategic Assessment</a> concludes.&nbsp;&nbsp;

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2022: The Year South America Drives Global Agricultural Markets

At the United Nations Security Council’s May 19 session on conflict and global food security, Gro Intelligence’s CEO, Sara Menker, spoke about the growing global food crisis, the confluence of unprecedented factors contributing to this crisis, and its disproportionate impact on lower-income countries.Watch the livestream <a href="https://media.un.org/en/asset/k10/k10mjpv1u3?kalturaStartTime=2120" target="_blank" rel="noopener noreferrer">here</a>.This transcript has been edited for length and clarity.Sara Menker: It is an honor to be here today to highlight and reaffirm that food security is, in fact, national security and global stability.&nbsp;Before I share some data-driven insights on the state of our global food systems, let me tell you a little bit about Gro Intelligence. Gro is a company founded to help tackle two of the greatest challenges we face as humanity: food security and climate change. We are a global company with offices in Nairobi, Singapore, and New York. Our team comes from over 40 countries that range from Ethiopia, where I am from, to Russia, Nigeria, India, the United States, China and Ukraine. We are a company of domain experts in software infrastructure, climate science, agronomy, trading, and financial markets. We combine that with world-class engineering and AI talent. We work with large and small companies. We work with financial institutions, and we work with multiple governments.I come here today to share insights from our data, with the underlying hope that all of us here with the power to change the course of history will choose to do so.&nbsp;I want to start by explicitly saying that the Russia-Ukraine war did not start the food security crisis. It simply added fuel to a fire that was long burning. A crisis we detected tremors from long before the COVID 19 pandemic exposed the fragility of our supply chains.&nbsp;I share this because we believe it's important for you all to understand that even if the war were to end tomorrow, our food security problem isn't going away anytime soon without concerted action.&nbsp;Now on to the statistics: Gro Intelligence estimates show that price increases in major food crops year to date has made an additional 400 million people food insecure. There are a few food security statistics shared so I want to define this as the number of people at $3.59 a day. To put this into perspective, that is equivalent to the number of people that China has taken out of poverty in the last 20 years. In five months, we have undone 20 years of progress.&nbsp;Furthermore, our economic shock models show that year to date changes in prices of agricultural products have already affected some economies by three to 5% of their GDP. Countries disproportionately affected are in regions such as North Africa, the Middle East, the Horn of Africa and West and Central Asia.&nbsp;And it can get much worse. Data shows the food security challenges we face will last several years.&nbsp;There are five major challenges occurring simultaneously that are each individually extraordinary. Lack of fertilizer, climate disruptions, record low inventories in cooking oils, record low inventories of grains, and logistical bottlenecks that have already started to unravel decades of global economic progress.&nbsp;Without substantial immediate and aggressive coordinated global actions, we stand the risk of an extraordinary amount of both human suffering and economic damage. This isn’t cyclical, this is seismic. It’s a once in a generation occurrence that can dramatically reshape the geopolitical era.FertilizersGlobal fertilizer prices have nearly tripled year on year and quadrupled over the past two years because of supply shocks driven by logistical bottlenecks, restrictions on natural gas which impact the ability to produce fertilizer, and sanctions and export restrictions amidst the Russia Ukraine war. This risks significant crop yield reductions in key producing regions, such as Brazil, the United States, and Western Europe later this year and next year, severely impacting global food security and inflation for the next three to five years at a minimum.ClimateGlobal drought conditions for wheat are the worst in over 20 years around the world. Major bread baskets such as the United States and Brazil, the world's two largest exporters of agricultural products, are also experiencing extreme droughts. For example, Brazil’s cropland soil moisture is at a 20 year low. Major grain importers in the Middle East and Africa are also experiencing record droughts. Namely, we have both major importers and major exporters experiencing exceptional drought conditions.Cooking OilsThe price of traditionally cheap palm oil has nearly tripled in the last two years. Driven by increased biofuels demand, drought in regions that produce alternative cooking oils such as Brazil and Canada, record import demand from China and the loss of nearly 75% of global sunflower oil exports due to the Russia Ukraine war. The recent export ban in Indonesia, the world's largest palm oil producer, who is responsible for 60% of global production has added significant upward price pressure to vegetable oils.GrainsOfficial government agency estimates from around the world put wheat inventories at 33% of annual consumption. Verifiable data from public and private sources that we as a company organize and then build statistical models to connect the dots between in our platform show that global wheat inventories are in fact closer to 20%, a level not seen since the financial and commodity crisis of 2007 and 2008. We currently only have 10 weeks of global consumption sitting in inventory around the world. Conditions today are worse than those experienced in 2007 and 2008. &nbsp;It is important to note that the lowest grain inventory levels the world has ever seen are now occurring while access to fertilizers is highly constrained, and drought in wheat growing regions around the world is the most extreme it’s been in over 20 years. Similar inventory concerns also apply to corn and other grains. Government estimates are not adding up.LogisticsRussia and Ukraine used to provide nearly a third of the world's wheat exports and are in the top five exporters of corn globally. Combined, they used to export 75% of global sunflower oil supplies. All Ukrainian ports remain closed, making it impossible to move any of Ukraine's harvested grain across its borders. Shifting to rail will move less than 10% of the prewar flow. It's not enough. Russian exports, which also include fertilizer, are limited because of Black Sea maritime hazards.Any one of the five things I outlined would be considered a major issue in commodity markets. The five combined are truly unprecedented.&nbsp;I come here today not to specifically offer or provide solutions, as there will be other venues to do so. But rather to X-ray and diagnose the problem for those of you in this room that have the power to change the course of our history. In a world that is increasingly isolationist, we need to come together. Food is personal. But our agricultural systems are global.&nbsp;There is no version of the world where every country has all the natural resources it needs to survive and thrive. One key takeaway from our data is how often we see repeated examples of cause and effect, highlighting surprising connections and interdependencies. For example, in the United States, the most self-sufficient country globally, a consumption-weighted basket of food - a grocery basket - has doubled in price since April of 2020. Price increases were driven by unprecedented demand around the world, which increased alongside climate related supply side shocks. We cannot solve food insecurity on a national scale anywhere.&nbsp;One thing we strongly believe is we can have a healthy economy and secure food system without degrading our environment. We have the capability to help everyone feel secure about having enough food. Data helps us navigate because we aren't blind to food security related risks and outcomes. We can't say we didn't know.There are positive solutions and approaches that can be offered and delivered but they will require coordinated global effort. We are all dependent on one another.What does the data tell us about risk and interdependencies? It tells us not unlike the global financial crisis of 2008 there are fault lines and tremor-like early warning signals that are seemingly disconnected globally, but they aren't.&nbsp;What does the data tell us about hope? It tells us that while the next few years are going to likely be difficult as a result of this statistically unusual confluence of the five challenges I shared, we can coordinate a global response, eschew a ‘to each their own mentality’ as to food security and climate risk, be willing to have constructive, albeit difficult, conversations, and jointly accept that what we have to address is less of a food shortage and more of a crisis of prioritization. As part of a broader response to this crisis, Gro Intelligence is collaborating with The Rockefeller Foundation to make real-time agricultural data on African countries publicly available to all. With support from The Rockefeller Foundation, Gro Intelligence has launched the Food Security Tracker for Africa, the first publicly available interactive tool that shows the supply and demand of corn, soy, wheat, and rice for 49 African countries. Visit the <a href="https://community.gro-intelligence.com/food-security-tracker-africa" target="_blank" rel="noopener noreferrer">Food Security Tracker for Africa here</a>.

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Gro's CEO, Sara Menker, Briefs the United Nations Security Council: Conflict and Global Food Security

During the United Nations Security Council’s May 19 session on Conflict and Global Food Security, Gro Intelligence’s CEO, Sara Menker, spoke about the growing global food crisis, the confluence of unprecedented factors contributing to this crisis, and its disproportionate impact on lower-income countries. Watch the livestream <a href="https://media.un.org/en/asset/k10/k10mjpv1u3?kalturaStartTime=2120" target="_blank" rel="noopener noreferrer">here</a>.As part of a broader response to this crisis, Gro Intelligence is collaborating with The Rockefeller Foundation to make real-time agricultural data on African countries publicly available to all.&nbsp;With support from The Rockefeller Foundation, Gro Intelligence has launched the Food Security Tracker for Africa, the first publicly available interactive tool on key agricultural commodities for 49 African countries. The tool aims to create data transparency for countries where this has previously been lacking, in light of the unprecedented challenges connected to the current global food crisis.&nbsp;Understanding the impact of the global food crisis&nbsp;Environmental, economic, and political shocks are driving rapidly rising food prices and limiting access to major crop staples. The resulting crisis has had a disproportionate impact on lower-income countries. In a <a href="https://www.nytimes.com/2022/04/05/opinion/ukraine-war-food-crisis.html?partner=slack&amp;smid=sl-share">recent op-ed for The New York Times</a>, Gro Intelligence’s CEO, Sara Menker, and Dr. Rajiv Shah, President of The Rockefeller Foundation, showed how rising wheat prices have caused the price of bread, an essential staple, to roughly double in Sudan.Understanding the supply and demand of major crops – corn, soy, wheat, and rice – across Africa on a real-time basis helps acknowledge the full impact of this crisis. Supply and demand balance sheets, which incorporate monthly historical and forecasted supply and demand of major crops, transform all of the forces that drive a commodity’s price into an actionable end-of-year supply number. These “ending stocks” estimates for a commodity help forecast price and identify future areas of risk.&nbsp;Currently, this data is not easily accessible in one location, leaving a large gap in the coverage of supply and demand for principal food crops in Africa. As a result, companies across the global agricultural supply chain face a major blind spot. Donors are unable to accurately direct funds. And governments lack essential knowledge as they scramble for alternative sources of supply amid the current global food crisis.&nbsp;“By combining cutting-edge technology and humanitarian relief efforts and leveraging the private sector for public use, our collaboration with The Rockefeller Foundation will help strengthen food security initiatives, address inequities, and build a sustainable world for all,” said Ms. Menker. “With this new tool, governments, companies, and humanitarian organizations will be better equipped to anticipate food shortages, direct relief, and improve strategic planning in response to the unprecedented level of supply and demand shocks that have caused global food insecurity.”&nbsp;&nbsp;By combining data on drought, crop conditions, prices, supply and demand all in one place, users will be able to develop more effective solutions and emergency response plans to the growing shortages of key agricultural commodities across the continent.Leveraging the power of the Gro platform“To create a more comprehensive picture, the Gro team, which includes both domain experts and technologists, leveraged our platform and the scaling power of our machine-learning models to quickly and accurately provide needed data,” said Will Osnato, Senior Research Analyst at Gro Intelligence. “With support from The Rockefeller Foundation, we will offer agricultural balance sheets that denote supply and demand of corn, soy, wheat, and rice for the next year. In addition, the tool has been tested and reviewed by our analyst team and methodologies are made available to fully encompass the transparency and objectivity of our platform.”Alongside real-time supply and demand balance sheets, Gro’s Food Security Tracker for Africa makes key metrics for 49 African countries publicly available for the first time, including:<ul><li>Gro’s Production Forecast – Production estimates are calculated using Gro’s machine learning-based yield forecasts, which incorporate real-time environmental data and historical production data to predict supply.</li><li>Gro’s <a href="https://gro-intelligence.com/models/stocks-to-use-vs-price" target="_blank" rel="noopener noreferrer">Stocks-to-Use Ratio</a> – A country’s reserves of a specific crop is an indicator of food security. A stocks-to-use ratio shows the relationship between stocks and usage.&nbsp; Gro’s Stocks-to-Use Ratio is calculated as total food calorie stocks at the end of the marketing year – a period of one year designated by the growing season of a specific commodity. This number is then divided by total food calorie demand (domestic consumption + exports) across each of the four crops in the selected region.&nbsp;</li><li>Cropland-Weighted <a href="https://gro-intelligence.com/models/gro-drought-index" target="_blank" rel="noopener noreferrer">Gro Drought Index</a> (GDI) – The proprietary Gro Drought Index is the world’s first high resolution global agricultural drought index. The GDI measures drought severity on a scale from “0” (no drought) to “5” (exceptional drought). The index is global, offering data on the continent, country, state, and district level. The values shown on the tool are weighted by cropland area at the district level for each country.&nbsp;</li><li>Crop-Area Weighted Vegetative Health Index (NDVI) – NDVI is a key satellite-based indicator of plant health, used to forecast crop production, supply, and price. Lower NDVI signals lower levels of production, suggesting higher risks of food insecurity.</li><li>Prices – Price series were selected based on Free-on-board (FOB) export prices from the largest import supplier for the selected country. If the country is not a significant importer, then representative global prices were selected.</li></ul>About this partnership&nbsp;Gro Intelligence’s partnership with The Rockefeller Foundation represents a unique opportunity for the advantages of cutting-edge technology to advance humanitarian relief programs. When the private sector is leveraged for the public sector, it can help food security initiatives, address inequities, and build a sustainable world for all.&nbsp;&nbsp;About Gro Intelligence&nbsp;Gro Intelligence works with companies, financial institutions, humanitarian organizations, and governments on forecasting risks to food security that may result in food or hunger crises.&nbsp;&nbsp;Our food security platform serves as a single source of truth and an early warning hub that provides up-to-date information, insights, and analysis across the value chain. The platform predicts future trends and promotes proactive, evidence-based decision making to guarantee the food security of our partners.See more on our work with the public sector <a href="https://gro-intelligence.com/agriculture/public-sector-overview" target="_blank" rel="noopener noreferrer">here</a>.For more information visit the Food Security Tracker for Africa <a href="https://community.gro-intelligence.com/food-security-tracker-africa" target="_blank" rel="noopener noreferrer">here</a> or contact us at <a href="mailto:support@gro-intelligence.com">support@gro-intelligence.com</a>.

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New Agricultural Data Tool Can Help Fight the Growing Food Crisis in Africa

As part of our continued effort to help organizations tackle the growing effects of climate change, Gro has joined the stakeholder Forum of the <a href="https://www.fsb-tcfd.org/">Taskforce on Nature-related Financial Disclosure (TNFD)</a>, a market-led initiative aimed at developing a risk management and disclosure framework to help organizations manage and report on nature-related risks.As a TNFD Forum member, Gro will be working alongside 400 other organizations to help financial institutions and companies assess nature-related risks and opportunities and incorporate these assessments into their long-term strategies and risk planning.Leveraging the Gro platform to manage climate change impactsAccording to the World Economic Forum (WEF) report, published in collaboration with PwC, over half the world’s total GDP is dependent on nature and its services, and the three largest nature-dependent industries are construction, agriculture, and food and beverage.Under all climate change scenarios shown by the Intergovernmental Panel on Climate Change, these industries will increasingly face significant risk of physical climate impact in coming years. To manage that risk, companies must first measure it.&nbsp;Gro works directly with companies in both the agricultural and the food and beverage industries to help form a clearer picture of the effect that extreme weather volatility is having, and will continue to have, on the places and ecosystems that they care most about. Our customizable models and applications, such as our Climate Risk Navigator for Agriculture, leverage real-time data and long-term climate indicators to accurately measure and assess climate risk.&nbsp;"If we have these persistent shocks that are occurring from a climate standpoint, it doesn't mean we can't manage them. It just better mean that we know how to measure them consistently and for the whole world and every day,” Gro Intelligence's CEO, Sara Menker, said recently at the 2022 World Agri-Tech Innovation Summit.About The Taskforce on Nature-related Financial DisclosuresThe potential social and economic effects of climate change are staggering, but through its work&nbsp; the Taskforce on Nature-related Financial Disclosure is supporting a shift to nature-positive outcomes by helping organizations manage nature-related risks and recognize that nature can also be used to reduce climate risk and deal with the causes of climate change.The TNFD aims to release a framework for reporting and managing nature-related risks by Q3 2023.&nbsp;Please reach out to us at <a href="mailto:support@gro-intelligence.com">support@gro-intelligence.com</a> to schedule a conversation with our team and learn more about our work with the TNFD.

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Gro Intelligence Joins The Taskforce on Nature-Related Financial Disclosure Forum

The Russia-Ukraine war has caused unimaginable human suffering in Ukraine and has set the stage for a food and hunger crisis that is reverberating far beyond Europe’s borders. Russia and Ukraine provide nearly a third of global wheat exports, 76% of global sunflower oil exports, and are major suppliers of barley and corn. Russia is the world’s largest exporter of fertilizers.&nbsp;Monitoring the Impact of the Russia-Ukraine War on Wheat SupplyShipment disruptions from the critical Black Sea region must be closely monitored to address the impact of the food crisis.&nbsp;The Gro team is providing the <a href="https://earthobservations.org/geoglam.php">Group on Earth Observations Global Agricultural Monitoring (GEOGLAM) initiative</a> continued coverage of crop conditions within Russia and Ukraine for key crops wheat and corn, as well as any updates from the Russia-Ukraine war that may impact exports. Each month, the Gro team reports on regional growing conditions, weather, and climate and provides yield estimates for corn and wheat.&nbsp;Gro’s crop projections are based on Gro’s extensive satellite imagery, precipitation and temperature forecasts, and the Gro Drought Index, which measures the severity of drought on a scale of 0-5 for every region in the world. Our research analysts also leverage Gro’s Yield Forecast Models for wheat, specifically, to see the impact of climate conditions on production.On Wednesday, March 30th, at the monthly GEOGLAM meeting, Gro reported favorable conditions for winter wheat production in Russia, with those conditions continuing through April. In Ukraine, Gro reported drier than average conditions for winter wheat. In addition, farmers are facing both the disruptions from the ongoing war and fertilizer shortages. The former Minister of Agriculture said Ukraine is expecting to lose <a href="https://www.reuters.com/world/ukrainian-agriculture-minister-submits-resignation-aide-2022-03-24/">2.5 million hectares of winter wheat due to the war</a>, which will be felt worldwide.“Each country's food security is deeply entwined with that of other countries, and the Russia-Ukraine war does more than affect the crops in Ukraine alone,” said Kristina Yamamoto, Gro’s Senior Geospatial Analyst who assists with our collaboration with GEOGLAM.“GEOGLAM provides a forum for discussion with regional agricultural experts as we work together to monitor global crop conditions. Sharing information with partners across the world strengthens all of our work, and this tenet rings especially true in times of crisis.”Partnering with GEOGLAM to Improve Global Food SecurityGro For Good partners with GEOGLAM to provide crop monitoring for key growing regions and crops worldwide, with the goal of improving global food security and forecasting the impact on food price inflation and political stability.&nbsp;Gro For Good and GEOGLAM have been working together for over three years. Funded in part by NASA Harvest, and in conjunction with the University of Maryland, <a href="https://nasaharvest.org/project/geo-global-agricultural-monitoring-geoglam-initiative">GEOGLAM was launched in 2011</a> as part of the G20 Action Plan on Food Price Volatility, which also includes the Agriculture Information System (AMIS). GEOGLAM advances existing programs through coordinated Earth observation and research and development activities.“Providing access to information has always been at the heart of Gro's mission, and the goals of GEOGLAM and Gro align well,” Yamamoto said. “A key to solving complex global issues is building connections - from data to regions to people. Everyone at GEOGLAM is dedicated to collaboration and sharing knowledge - it's a powerful program, and we are pleased to participate.”Continuing to Support Global Food Security Amid Conflict and Climate ChangeAs a continued effort to tackle global food security in a time of conflict and climate change, Gro For Good is offering to partner with humanitarian organizations on a pro bono basis to help identify and strategically tackle current crises and those yet to emerge. We will not only offer access to our models and data free of charge but our team will also make themselves available to further explain, contextualize, and help navigate the unprecedented impact of this crisis.&nbsp;&nbsp;&nbsp;Gro For Good provides free Premium access to academics, NGOs, and those working on global food security and climate change for the public good. We are committed to collaboratively building solutions to some of the world’s most pressing challenges.Please reach out to us at <a href="mailto:support@gro-intelligence.com">support@gro-intelligence.com</a> to schedule a conversation with our team or <a href="https://info.gro-intelligence.com/gro-for-good" target="_blank" rel="noopener noreferrer">apply to the Gro For Good program</a> today.

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Gro For Good and GEOGLAM: Improving Global Food Security

At the 2022 World Agri-Tech Innovation Summit, Gro Intelligence’s CEO, Sara Menker, discussed the impact of the Russia-Ukraine war on major commodities wheat, vegetable oils, and fertilizer, and showed how drought and future climate scenarios will rewrite our global food systems. <a href="https://info.gro-intelligence.com/world-agri-tech-summit" target="_blank" rel="noopener noreferrer">Download the full presentation</a>In the Context of the Current Russia-Ukraine CrisisMenker framed her remarks within the current Russia-Ukraine crisis - new fuel on a fire of ongoing inflation, drought, and food security risk.“Three of the major stories from the Russia-Ukraine war that we're all discussing right now are vegetable oils, wheat, and fertilizer,” Menker said.As the crisis cuts off critical supplies of these commodities from the Black Sea region, it further exacerbates issues we are already facing – high prices and tight global supplies, Menker said.Soaring Commodity PricesUsing Gro’s Vegetable Oil Feedstock Price Index, developed with Gro’s <a href="https://gro-intelligence.com/applications/custom-price-index-application" target="_blank" rel="noopener noreferrer">Custom Price Index Application</a>, Menker showed how vegetable oil prices have essentially more than doubled since the start of the COVID-19 pandemic in 2020.&nbsp;The average food price index in the US is up close to 29% year over year. Looking at the mix of ingredients in a product - everything from onions to celery to wheat to oils - shows that this is a structural problem, not cyclical.Worsening Drought Is Impacting World Food SuppliesUsing <a href="https://gro-intelligence.com/models/gro-drought-index" target="_blank" rel="noopener noreferrer">Gro’s Drought Index</a>, which measures drought on a scale of zero-to-five every day for every square kilometer on earth, Menker presented a macro look at current dry conditions globally.Several major agricultural producing regions currently show levels of extreme to exceptional drought, including Brazil, which is currently coming out of a growing season that took quite a hard hit this year, the US, which is going into the winter wheat-growing season for the summer, Northern Africa, and the Middle East.&nbsp;Comparing current conditions to the 10-year average for the 10-prior years, for exactly the same point in time, shows that drought conditions in North America, South America, North and East Africa, and the Middle East are significantly worse than normal.&nbsp;“The question becomes, how are we going to repurpose our systems, to calibrate for the realities that we currently live in? How are we going to think about innovation to manage these risks?” Menker asked.“If we have these persistent shocks that are occurring from a climate standpoint, it doesn't mean we can't manage them. It just better mean that we have our eyes open - that we know how to measure them and [that] we know how to measure them consistently and for the whole world and every day,” Menker said.&nbsp;“We want to do that at the most micro-level possible and extend it into macro-level insights. So we can contextualize and understand the world because ultimately, if there's anything we've learned over the last couple of years, it is that we live in a very interconnected global food system. And it is incredibly fragile.”Seeing Around the CornerTo manage the fragility, Gro provides the ability to see around the corner. We can now use data to understand what's coming over the next 10, 20, or 30 years to better manage, move supply chains forward, and change the trajectory.“This is the magic and the abilities that we now have in terms of being able to combine complex datasets from hundreds of supercomputing labs and convert them into insights that we can understand,” Menker said.Using Gro’s <a href="https://gro-intelligence.com/models/land-suitability-ranking" target="_blank" rel="noopener noreferrer">Land Suitability Model</a>, Menker looked at how peas and the suitability of growing peas in Europe might change over time, under different climate change scenarios.&nbsp;“What makes me hopeful is we can't say we don't know. And we can't say we didn't know. So the only thing left is for us to be able to take some form of action,” Menker said.&nbsp; <a href="https://info.gro-intelligence.com/world-agri-tech-summit" target="_blank" rel="noopener noreferrer">Download the full presentation</a><a href="https://gro-intelligence.com/contact" target="_blank" rel="noopener noreferrer">Talk to our team</a><a href="https://gro-intelligence.com/open-positions" target="_blank" rel="noopener noreferrer">See open positions</a>

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Gro Intelligence’s CEO, Sara Menker, at the World Agri-Tech Innovation Summit

Russia’s invasion of Ukraine is creating extraordinary shocks for world food prices and supplies. Outside of the human suffering directly resulting from armed conflict, these shocks have reverberated far beyond Europe’s borders and will lead to other humanitarian crises around the world.&nbsp;&nbsp;Gro Intelligence is offering to partner with humanitarian organizations on a pro bono basis to help identify and strategically tackle current crises and those yet to emerge. We will not only offer access to our models and data free of charge but our team will also make themselves available to further explain, contextualize, and help navigate the unprecedented impact of this crisis.&nbsp;&nbsp;&nbsp;Please help us get the word out and share with organizations that can benefit from this or that can help advance humanitarian efforts. We believe that taking actions informed by real-time insights today can result in significantly better outcomes for the world in the coming months.&nbsp;We have put together a <a href="https://gro-intelligence.com/russia-ukraine-war-and-the-humanitarian-food-crisis">Russia-Ukraine humanitarian resources page</a> for humanitarian organizations to track the implications for global food security on a real-time basis. We are also providing free access to our Food Security Risk Management Toolkit to any humanitarian organization.&nbsp;This resources page incorporates all of the real-time models included in the toolkit we launched for <a href="https://gro-intelligence.com/russia-ukraine-war-impact-on-global-agricultural-markets">companies and asset managers</a> facing volatile market conditions.The current conflict has not only illuminated the interconnected nature of our food systems but has yet again exposed the fragility of them. The Gro Intelligence team has spent the past few weeks supporting our customers and partners in navigating the volatility and uncertainty around global agricultural markets. We have fielded calls from companies, funds, journalists and governments seeking everything from data to advice.We have seen firsthand the power of having a platform with real-time insights at global scale covering markets ranging from wheat to fertilizer and vegetable oils and topics ranging from inflation to economic shocks.We also recognize our role as an objective and often the only provider of these real-time insights at scale, and given the difficulty of the times, we must transparently extend beyond providing this data and insights to a select few.Please reach out to us at <a href="mailto:support@gro-intelligence.com">support@gro-intelligence.com</a> to schedule a conversation with our team.<figure class="image image_resized image-style-align-center" style="width:75.13%;"><img src="https://res.cloudinary.com/gro-intelligence/image/upload/v1648753138/new-website/Ukraine_Wheat_Infographic_Vertical_March_15_2022_1_1_db6211c1ca.png"></figure>

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Supporting Global Food Security Amid Russia-Ukraine War

Gro Intelligence’s CEO, Sara Menker, joined Societe Generale’s Michael Haigh on Tuesday, March 1, to discuss global agricultural markets amid heightened volatility.&nbsp;This interview has been edited for length and clarity.Inflationary Pressures and Market RiskMichael Haigh (Societe Generale): We're going through something I've never had to experience in the last two and a half years in energy markets. We have an energy crisis that started with people worrying about a lack of investment in oil and gas, because everybody wants to move into more sustainable energy, and hence higher prices. Now we have this shock from Russia in Ukraine. So the impact on agriculture is quite dramatic at this point in terms of fertilizer. Can we talk about that? Inflationary pressures that are coming into agriculture? What types of inflationary pressures do you think we're experiencing?&nbsp;Sara Menker (Gro Intelligence): It's very rare in markets to see both supply and demand side shocks occurring at exactly the same time. That's the environment that we're in, across products - in proteins, in grains, and in grains that feed into protein. There are all these interdependencies across these products.&nbsp;You also then have fertilizer and the cost of fertilizer, which is hugely tied to natural gas prices and natural gas infrastructure. As an input cost, in the U.S., over a third of the cost of production goes into fertilizer. It's not an inconsequential piece of the profitability component for the farmer.There are two types of inflationary pressures:&nbsp;<ol><li>Markets where we have huge amounts of concentration risk, in terms of where certain products are produced or consumed, specialty crops that we actually are not tracking. In which case, a single thing that goes wrong in that one market leads to very long term outcomes.&nbsp;</li><li>Other markets, such as grains and oilseed markets. South America is having a second year of consecutive drought. And both Brazil and Argentina, in terms of corn and soybean production, are the areas to watch. Because, in the market that we're in, if you look at the USDA estimates versus our real time yield models and estimates for Brazilian corn and beans, and the same for Argentina, we expect pretty significant downward revisions on production estimates from the USDA. That can add significant inflationary pressures. On the seed side, you're still tied to the biofuels conversation. And on grains, it's a bigger grain market conversation, but also again, tied back to fuel through ethanol. The connection back to the energy markets and the interconnection between ag and energy is increasingly hard to actually untangle.</li></ol>Biofuels present an interesting conundrum, I think, to the agricultural world, because biofuels use agricultural products for the production of fuels. It goes back to sunflower oil. Vegetable oil prices have been under significant pressure.We did a really interesting exercise recently. We looked at all of the commitments that have been made over the next few years over biofuels and the adoption of biofuels and the estimated increase in biofuel production over the next three years. What does that correspond to in terms of the amount of food needed for people? So really taking the full supply chain into account.&nbsp;From a calorie standpoint, how many calories are we extracting on an average caloric consumption basis over the next three years? It's the equivalent of calorie consumption for 1.9 billion people. Brazil and the US produce 89% - 90% of the world's ethanol so those two markets are the largest agricultural producers.We're going to be confronted with some really tough realities around how that translates into our food systems. On one side, we're increasing biofuel production to reduce a carbon footprint.&nbsp; But on the flip side, there's this unintended consequence around potentially keeping food prices elevated for some time to come.Haigh: One of the things that we are asked to do, when we think about forward thinking on the commodity complex, is to forecast prices. Unfortunately, we get that wrong most of the time, but we kind of cover ourselves by saying, 'Okay, what could go wrong to the upside and the downside.' Are there any downside risks?Menker: I would say the crop in Russia and Ukraine is something to watch right now. Our models indicate that those are going to be very healthy harvests. We saw this happen in 2014, prices were up 25%, and then just came crashing right back down. I would say that's one downside risk.&nbsp;The second is at what point does demand actually start to drop? What's that tipping point of price? Understanding elasticity is a really important component. Because if you look at the markets - and when I say the markets, I'm talking about the companies that are producing products that we as consumers consume - they're operating on very thin margins right now. And those margins are supported by much higher demand numbers.&nbsp;So a world of much thinner margins, combined with a slight drop in demand, I think, can actually lead to a significant precipitous drop in prices and demand. That is a very realistic conversation we need to be having, what that tipping point is when demand will actually start to turn.Impact of Russia-Ukraine Conflict on Global Ag MarketsHaigh: Ukraine and Russia are members of bread basket Europe. How do you see this playing out?&nbsp;&nbsp;Menker: I think we start with the more macro landscape of where Russia and Ukraine, in the Black Sea region as a whole, stand in global agricultural markets. Combined, they produce about 14 to 15% of global production and supply almost a third, about 29 to 30% of global wheat exports. Another key product is sunflower oil. They're actually about 75% of global exports of sunflower oil supplies. Then there's fertilizer, which is tied to natural gas, and fertilizer prices are quite high already. Major buyers of Black Sea wheat are North Africa, the Middle East in particular, and Egypt.&nbsp;One of our models is the Gro Drought Index. It measures drought on a scale of zero to five on a consistent basis for the whole world every single day. And then you can weight the location of that drought by a particular crop. So you can weight the drought index to wheat-producing regions in these countries.One of the big red flags we see is that North Africa and the Middle East today are experiencing droughts that they haven't experienced in over 20 years. So they have extremely high levels of drought, as well as very large dependence on imports from the Black Sea region.&nbsp;From a trade flow standpoint, Egypt is going to have to start looking elsewhere. Iran looks like it's going to import almost up to 40% more wheat this year than it did last year. There is a relatively tight wheat market. If you look at global stockpiles, we're looking at 10+ year lows in terms of availability of supply.&nbsp;On the more positive side, it looks like both Russia and Ukraine will have pretty good harvests and crops. There's always a trade to be had. The question is for what price, both from the underlying commodity standpoint, as well as the shipping costs.&nbsp;The big buffer to sanctions has actually been China, in my opinion. China, and being able to export that wheat into China as an option, changes the dynamics quite a lot.With China, the one thing to keep in mind is that this has been part of its broader five year plan, which is this idea of what they call absolute food security. In the Chinese context, food security is not self-sufficiency. This notion of absolute food security, which they introduced about three or&nbsp; four years ago, is this idea of diversifying trading partners, such that you don't have over dependence on a single trading partner.Future Land Suitability and Supply Chain ResiliencyMenker: Russia and Ukraine are great examples of where warming temperatures have resulted in land becoming more suitable to grow crops that weren't suitable to grow. Some of these newer frontiers will also be driven by not even investment but a natural progression as temperatures increase.Whereas in some economies, such as Sub Saharan Africa, unfortunately, the shocks have been net negative and are projected to be that - unless we make investments in some of these areas that are net calorie importers around innovations to manage those shocks.We want to understand the spatial distribution of outcomes, and then say, okay, given that distribution of outcomes, how do we repurpose our world to accommodate for what that reality is under different climate scenarios. The experiences are going to look very different around the world. It will look different in Africa than it will look in North America, but more importantly, it will look very different in eastern Texas versus Western Texas.&nbsp;Climate change is also going to be about the predictability of those outcomes increasing or decreasing. So, volatility. Volatility itself is bad because that itself will impact crops very differently. Some regions are certainly going to show significantly more volatility in the outcomes than other regions are, in terms of stability.Longer term capital allocation in our food systems and agricultural markets becomes a very important conversation to have to be able to mitigate climate change in a world where we continue to be as short term as we are. We have to change that quite a bit for us to be able to build resiliency into the system.&nbsp;I think there's a lot of conversation around climate change and carbon -&nbsp; and carbon sequestration and regenerative ag that are quite exciting. However, the science is still very early in terms of being able to measure sequestration at the field level and scale that at a global level to be able to generate and create the right carbon credit markets that we need, etc.&nbsp;But the first set of satellites that are actually going to be able to detect methane and other types of emissions are just going to be launched later this year in Q3/Q4. That, to me, is exciting.&nbsp;No matter what we do as corporate citizens today, and whatever we do to reduce our carbon footprint, the outcomes from a physical climate standpoint, from now until 2016, are largely predetermined. But we are going to be able to innovate for the future in such a way that we can be resilient to the changes that are coming.&nbsp;It will be a journey to generate the right amount of data, be able to calibrate it, do something with it, but at least we're starting to make progress on the science front that will help us to systematically look at and measure all of this consistently across the world.&nbsp;Moving Capital Markets Forward with Data InfrastructureMenker: Better available, standardized data serves two main purposes:<ol><li>It reduces volatility in the markets because more people have access to that flow of information, whether it's supply and demand balances on natural gas or oil or understanding power, etc., on a real time basis.&nbsp;</li><li>It allows for much longer term capital allocation to occur and for markets to think on a longer term basis.&nbsp;</li></ol>In agricultural markets, very little of that data infrastructure existed, and more importantly, very few agricultural markets are even traded on formal exchanges because agriculture really represents 10s of 1000s of different products. Each one has a very different set of biological rules that govern how they grow and how they’re produced. And the demand side is very much fragmented as well.&nbsp;So I set out to build Gro, which is a platform that ingests all of the disparate data sets that have anything to do with global agriculture, not just exchange traded ones. And then not only to standardize and normalize that data and make it more real time, but also to take that data and convert it into insights and knowledge.&nbsp;In our case, our challenge was taking in very, very large amounts of data, distilling it into some set of much smaller set of data sets that people can consume and understand - to be able to understand supply and demand balances on a real time basis for every combination of agricultural product everywhere on earth, every single day. Everything from the grain markets to specialty crops like black pepper, vanilla, fresh produce, proteins, dairy. It's the full ecosystem and supply chain, not just a specific part.&nbsp;What we've done is leverage vast amounts of environmental data that comes from satellites, weather stations, etc - combined with fundamental ground truth data, whether it's from government agencies, private companies that report yields in different countries, etc. - to create machine learning based yield forecast models that help us forecast supply every single day throughout the growing season for every district that grows that crop.&nbsp;We've been able to leverage ground truth. You always want to keep yourself accountable because ultimately agricultural production and yields manifest themselves in physical outcomes, physical outcomes that we can measure.&nbsp;That is our edge. It's leveraging our understanding and the domain expertise that exists within our team to build the right types of models, to generate the insights that we need as a world, and to be able to move capital markets forward.Driving Dialogue Across the EcosystemMenker: We work with corporates, financial institutions, and public sectors/governments.Corporates - If you think of Corporates, it's again across the supply chain, so input companies, companies that are in the middle of the supply chains, processing, trading the physical products, etc. And then at the edge, retail, people who are distributing fresh produce or proteins on supermarket shelves.&nbsp;Financial Institutions - On the financial sector side, there are three categories:<ol><li>Lenders, who are designing credit models or looking at credit portfolios to assess risks for lending that occurs, again, across these products.&nbsp;</li><li>Insurance companies that insure a lot of agricultural products against oftentimes weather related risks and outcomes</li><li>Asset managers, everything from quant funds to macro funds to equity funds that could be using our data as signals to trade markets.&nbsp;</li></ol>Public Sector - Governments use our platform and customized versions of our platform for managing national strategic reserves. Lots of countries are net importers of products and don't have infrastructure to support the knowledge that they need. Public sector is also in the form of nonprofits, public institutions that are supporting oftentimes initiatives in developing markets.The role of Gro is an objective arbiter of dialogue, of conversation, of truth, of knowledge, and honesty of what these answers are, to be able to ask some of these hard questions. We have data to support the conversations in the dialogues that we foster. Then you can start to drive change.It's about bringing many of the players across the ecosystem - some of the world's largest businesses and asset managers and governments, but also small nonprofits, academia, really small companies as well - to be able to have that full ecosystem-based and systems-based approach to driving that dialogue.

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Gro’s CEO Sara Menker at Societe Generale: Market Risk and the Agricultural Sector

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