This week has started out with a bang (no pun intended)! News over the weekend continues to flow out of the Russia/Ukraine War that does not look good for Putin as an explosion of the Kerch Bridge which connects Russia and Ukraine over the Crimean Peninsula. The explosion accounts for another setback for the Russian military because the Kerch Bridge is a major supply route for the war. Furthermore, it shows that the Ukrainians can strike deep behind Russian enemy lines. How does this affect the outcome of the war and how will Putin respond over the coming days and weeks are very important questions for many observers, especially macro traders and investors.
Although no one expects the war to end via peace negotiations anytime soon which would be the best case scenario. It’s hard not to feel that the next two months are critical moments in the war as the Ukrainians try to win the upper hand by regaining the territory of Kherson before winter sets in. Kherson is an important City that provides access to the Black Sea for the Ukrainians.
The question that looms for me as a trader is if Kiev (i.e. the West) does not gain control of Kherson and effectively access to the Black Sea, what will be the affects on the on-going food crisis that is underway in some of the poorest countries in Africa and Middle-East who depend on Russia and Ukraine for wheat and grain imports. Although, there was an agreement earlier this year between Russia and Ukraine that allowed cargo ships filled with wheat and grains free passage through the Black Sea; that agreement is extremely fragile. The food crisis may not be on many macro investors’ top of mind, but I would advise one should keep an eye on the alarming cost the war is having on geo-politics in emerging market countries in Africa and Middle-East. There are many lessons to be learned from the last food crisis in 2012 which led to the Arab Springs unrest and had huge implications and lasting effects that are felt to this day.
Global Food Inflation
