Double exposure: How El Niño and the Iran crisis could reshape food security

Great.

No, thanks very much, Chris.

And I'm very much looking forward to the discussion today.

I think as Joe mentioned, yes, we're looking at a potential very large El Nino event, which has already started, is already affecting some areas, which I think Emerita is going to get into in just a few minutes.

But this is coming on top of a lot of other things that have happened this year.

We had several years following 2022 where global markets for grains and oil seeds generally were, prices were falling and we had sufficient supplies and markets were working better.

quite well, even if energy prices and fertilizer prices still were a little bit elevated.

That all changed this year, though, with following the conflict in the Persian Gulf and the closure of the Strait of Hormuz.

So next slide, please.

If we look at the two major events that have disrupted things, I would point first to the US-Israeli attacks on Iran, which culminated in the closure of the Strait of Hormuz.

And you can see on the chart on the left there, just in terms of the amount of supplies that are getting through the Strait of Hormuz, The region, of course, is very important for energy, petroleum exports, natural gas exports, but also fertilizers.

And we'll get into that in just a moment.

But things like if you're looking at nitrogen based fertilizers, it accounts for almost a third or as much as 40 percent of seaborne.

trade, very important for products like sulfur, which are important for phosphate production, fertilizer production, and natural gas, which is also an important nitrogen feedstock.

But then what we've seen in the last few months is another disturbing trend, and that's what's been going on in the Black Sea.

Of course, we've had a conflict there with for many years, but particularly since 2022 with Russia's invasion of Ukraine and the fact that trade was disrupted in 2022, that actually got back by the end of 2022, trade was flowing out of the Black Sea.

But we've seen increased hostilities with both Russian attacks on Ukraine ports, but also Ukraine attacks on Russian ports in the Black Sea.

And that's shifted a lot of the the trade to alternative routes.

So what's coming out of the Black Sea now is very much diminished.

Now, it mainly affects for agriculture, wheat and maize and things like sunflower oil.

But there is still a little bit of fertilizer exports as well, particularly nitrogen fertilizers out of the Russian ports, which have forced that to move north and out through the Baltic.

Next slide.

So if you look at the prices since 2020, and I mentioned what we saw in 2022 when we'd seen nominal record prices for many of these commodities, those prices had largely fallen.

over the next three years.

But since January, we see grain prices up around 23%, energy prices up 60%, and fertilizer prices up 8%.