How Ukraine Affects You
Ukraine/Russia By the numbers:
Responsible for 13% of exported corn/Russia 2% (fb.org)
8% of wheat/Russia 20% (fb.org)
47% of Sunflower seeds and products/ Russia 29% (fb.org)
Supply Shortages:
94% of Fortune 100 companies see supply chain disruptions (Accenture.com)
55% have or will downgrade growth outlooks (Accenture.com)
What that means for you.
There’s no doubt Covid has changed everything from medicine to how we do business. More people are working from home. More people are changing jobs. Employers are struggling to find and keep employees during the “Great Resignation”.
Food products
Combine the effects of supply chain and employee shortages with war between two of the largest suppliers of food staples or energy products and inflation becomes supercharged. Food Price index rose 3.9% in February alone and 18.7% over the last year (fb.org). While 18.7% is a lot, 3.9% annualized is a whopping 48.6%. The effects of covid on our supply chain caused inflation last year, but this year Russia is the culprit.
Wheat, Sunflower seeds, corn and their byproducts can be found in most food products. While they are just a fraction of agriculture the effects will ripple through the entire food industry.
Energy
Russia is 2nd largest natural gas producer and third largest oil producer and the largest oil exporter. The US imports about 5% from Russia, but like food, oil/gas is a commodity dependent on production. Less supply means more demand for what’s available, resulting in higher prices. Employee shortages means less production, keeping prices high. For example, OPEC+ has been working to end production cuts, but lengthy shutdowns from a huge cut in demand in 2021 have proved challenging. In the US, there are over 9,000 open drilling permits, 3,500 approved in 2021 alone, but like OPEC+, there are challenges to overcome.
What can we do?
Don’t let rhetoric cause a knee jerk reaction and change course. It’s not as straightforward as the US and OPEC need to produce more or no one wants to work. Just 2 countries engaging in war has disrupted 15% to 77% of food staples and drastically cut the exports of one of the largest, if not the largest, exporter of oil and natural gas.
Staying consistent in our investing strategy, whether it’s staying to course and/or continuing to make contributions will allow us to keep receiving dividends/capital gains and ultimately more shares of the funds we’re invested in that we would otherwise miss out on if we switched to cash. Of course, there are valid concerns and reasons to change investing risk tolerances and objectives. Call Jeremiah to discuss those concerns.
Did you know…?
I was a Crew Chief on a KC-10 in the US Air Force Reserves from 2001-2005.
