Global conflicts could lead to food crises should they escalate. U.S. looks to forge new trade relationships.

The U.S. agricultural industry should prepare to navigate challenging geopolitical and market conditions through 2024, including the potential for global food crises should multiple conflicts drag on or escalate in the summer months.

Frank Kelly, founder and managing partner at Fulcrum Macro Advisors LLC, a political risk advisory firm based in Washington, said there is no shortage of pressures on U.S. farmers from international events.

Presenting to approximately 250 attendees at the 2024 Iowa Farm Bureau Economic Summit in Ankeny last week, Kelly said the war in Ukraine is the most prevalent threat to global food security and the agricultural industry moving forward.

“I worry about Russia and Ukraine, particularly now that we’re in the summer,” Kelly said. “I don’t see either side breaking through. What worries me, does [Russian President Vladimir] Putin do something to try and change that calculus? Does he now go for critical food?”

Creating a food crisis as part of a conflict tactic by cutting off agricultural shipping or damaging crop fields, for example, could have worldwide implications, Kelly said. “They could create a migration crisis in Africa where you’re forcing these starving people into Europe …, tipping the economic balance for Europe …, making it too costly for them to support Ukraine.

“These are the things that are absolutely on my mind.”

In addition to global conflicts, Kelly discussed the world’s political climate, U.S. agricultural export potential, trade relationships with multiple countries, the rise of India and the struggles of China, all of which are contributing to an unpredictable future. 

But where there are challenges also lies opportunity, he said.

“When you get down to it, we’re seeing these huge geographical, geopolitical shifts,” Kelly said. “The landscape is changing. There are no dull days. You wake up and it’s just a new headline.”

Forging relationships

For the U.S., those opportunities come in the form of solidifying current trade relationships with the EU, Australia, South Korea, Mexico and Japan, while developing new trade relationships in multiple regions such as Indonesia or Vietnam, as well as in Africa. “We have lots of opportunities for trade agreements,” Kelly said.

Africa “is the next big marketplace we have to reach,” he said. 

“My prediction is we’re going to be doing more outreach there.” 

Critical minerals the U.S. desires are available in Africa, he said, while in turn, the U.S. is able to provide crucial food to the region.

Further developing free trade relations with India is key, Kelly added. While China is seeing its population decline, India is booming in both population and industrial growth. 

“China is in a spiral demographically,” Kelly said. “It’s really stunning to think we thought … a year or two ago [China] was going to be the largest economy in the world …, and now we’re seeing and finally paying attention to the rise of India, which is now the largest country in the world and it’s very young.

“The economic development in India is breathtaking. They’ve built, in the last four years, 75 airports. But that also means they need to eat. They’re looking to the open market.”

The U.S. provides security in agricultural trade. “If you’re trading with the U.S., you know what you’re getting …, a very sophisticated agricultural system with all sorts of safety nets,” Kelly said.

Commodities, farm bill

A driver of the international economy through 2024 and beyond will be commodities, in particular necessary minerals for technological advances, Kelly said. Where will critical minerals used for semiconductors in phones, drones, airplanes, electric vehicles, solar panels or wind turbines come from? “The battle is out there politically, globally, for that,” he said.

Water remains in enormous demand, not only for drinking water and agriculture but also for technology such as the cooling of data center computers and equipment. “Internationally this is a huge problem,” Kelly said.

Shipping of commodities will continue to be a challenge as global shipping choke points see conflicts, Kelly added. Seven of the top 15 shipping ports in the world are Chinese, and increasing political tensions disrupt available global shipping channels. The Panama Canal has seen slowed traffic due to low water levels exacerbated by drought.

“The supply chain really is risky here in so many ways,” Kelly said.

Back home, Iowa and U.S. farmers eagerly await the passage of a new farm bill. Kelly said he anticipates, with limited time remaining in 2024 to address the critical issues, an extension of the current bill may be forthcoming with final action coming after the election.

“If you ask me to bet five bucks right now, I’d put five bucks it gets punted to next year,” he said.