Many of us think that the panic buying and shortages were the worst during the lockdowns especially the first phase of them. Governments and central banks in addition to being sure that those issues are behind us and rate hikes will be able to bring down inflation. What if all those thoughts were wrong. Then the shortages and inflation would still be high with the rise in interest rates and lower liquidity.
The problem that needs a focus right now is shortages and specifically food shortages. And the shortage is being faced in raw material as well as finished goods. Due to Russia – the Ukraine conflict this has amplified, Urea an important input for farmers have seen a price rise of 300% to $1000 per unit. This pattern of price rise has occurred in other inputs as well. It might lead to an increase of 50% to 100% cost rise for the sowing season this year during the months of July-August.
The problem is not only the price rise but due to a large number of sanctions and uncertainty the availability of inputs has become another major issue. Though current stock might be able to make most farmers sow this season any amount of panic buying or hoarding will make the problem worse. As food security is a national security issue and of utmost importance.
Everyone will be looking at sowing data for this season and making backup plans as the uncertainty and panic are at their highest levels.