Asterisk: Your background is as an agricultural economist and, among other things, you’ve studied the former USSR. So to start out, I wanted to talk a little bit about why the Russian invasion of Ukraine caused such severe shocks to the global food system.
Mike: The conflict in Ukraine has had huge impacts across many supply chains, and it comes on the heels of the COVID pandemic, which had already disrupted them. Ukraine is a big exporter and an important supplier of food for a large number of countries in the Mediterranean. Russia is also a very big exporter — of grains as well as of fertilizers and fertilizer precursors in the form of natural gas, potassium, and phosphorus. So the disruption has been twofold: Sanctions in Russia have disrupted the supply. And, particularly early in the conflict, food prices spiked very sharply because of disruptions to the port of Odessa.
Only about 12 percent of grains are traded internationally. The majority of production remains within borders. But the countries that do import grains are reliant on them. They have very little slack. Lebanon, Egypt, Tunisia, and other Middle Eastern and North African countries were facing serious difficulties without Ukrainian shipments. Luckily, it’s now partially resolved.
This is a humanitarian concern that needs to be addressed today, but it’s also a warning sign that future global supply shocks can result in rapid disruptions of large magnitude. Somewhere between 2 percent and 3 percent of global calories were disrupted, but that led to a spike of about 40 or 50 percent in grain prices.
A: I’m thinking of the 2007 to 2008 global food-price spike, which involved a lot of things that were much less extreme than one major grain exporter invading another country that is an even bigger grain exporter, but still added up to this huge global disruption.
M: Many factors contribute to price spikes, which is what makes understanding and predicting them hard. Agriculture is what we call “lumpy”— it doesn’t have a continuous supply of crops because it’s seasonal. How much of a harvest is stored depends on a number of factors, and that in turn influences the impact of supply shocks. A 2 percent supply shock could be negligible if you have very high stocks and rock-bottom prices, or a 2 percent shock could be coming on largely empty stores, which was what happened in ’07 to ’08. And in that case, it’s critical because within a harvest, it’s very difficult to get extra food once it’s in the ground. With these complicated supply chains you’ve negotiated potentially a year or two in advance for your contracts for certain crops and the inputs needed for them. So to balance the supply and demand, you have to bring demand down. That can lead to some very high prices.
A: You mentioned COVID as a cause leading to this price shock, so let’s talk about what COVID did to the global food-supply chain.
M: First there was panic. Countries were looking to secure their own supply. Supply chains themselves were under threat because quarantine measures were being introduced with strokes of pens, and people were working at high speed to try to work out how they would function. Ports were disrupted. For example, crew changes couldn’t occur, and an entire bulk carrier can be taken out by having two or three key employees not available. At the same time, countries had to ensure that they had sufficient food supply for their own population, so many places imposed or considered export restrictions and bans just as a precaution — another thing that was linked to the 2007 to 2008 crisis. And then you can have a cascade where concerns about export availability cause exporters to cut back and importers to import more, which means those who are least able to afford it are left carrying the shock.
Now, these issues were resolved — maritime organizations managed to get people to ports, supply situations were fixed, and the EU and Japan said that they weren’t planning to impose export restrictions and that any orders placed would be honored. In the end, countries committed to meeting the needs of the market, which was another strategy that helped in the ’07 to ’08 crisis. But the concern is that this method only works when the few countries that can step up and make these commitments have the stocks to meet the shortage. If it was a very large shortage, that wouldn’t be the case.
A: How common do you think shocks like this are going to be in the future?
M: That’s a very difficult question. Historically, severe food shocks that have taken out, say, 3 to 4 percent of global calories have been quite rare. Shocks within a certain region can be very severe, but they tend to not be correlated to the global level. We can trade between surplus areas and deficit areas, and even between bread baskets and key producing regions.
But volatility is likely to rise. Climate change is already leading to more climate volatility, and we’re likely to see events that previously occurred once in 20 or 100 years occurring once every 5 or 10 years. That becomes much harder to manage through trade. And the second thing is that there are much larger shocks that could also occur, which I believe we’ll talk about later.
A: What policies do you think countries should adopt now to prepare for these shocks going forward?
M: There are a few options. Holding additional stocks is possible but expensive. So there are other potential reforms that could be quite valuable. If we can’t get more supply within a given year and we need to therefore cut back demand, we can try to put policies in place to make sure that the demand flex is in nonhuman consumption. There are many that could be cut down without reducing human caloric availability — animal feed, for example. There’s also a significant volume in biofuels. But this gets complicated — if you simply abolish the biofuels policy altogether, the land would probably fall out of use.
A: The policy being biofuel mandates.
M: Yes. This is where governments mandate that a certain volume of their fuel has to be from biofuel sources, typically instead of diesel or petrol. These policies were introduced for a number of reasons. Yield growth was outstripping human demand for crops, so governments created additional demand. There are complex arguments about whether this is good for the climate and whether it’s sensible to maintain this land under crops at all, but it does potentially give us a cushion for climate shocks. For example, if key grains are being made into these biofuels, we could feed them to humans during a crisis.
A: What about financial technologies — things like reforming futures markets to increase price stability?
M: I think there’s some potential there. Futures markets allow farmers to prepare for shortages in the short run. They can sell their crops ahead and use that money to buy inputs — in essence, it gives farmers access to capitalization to respond to where deficits are and target where their crops are most needed. But financial instruments will likely only be useful in the case of small shocks; they’d be overwhelmed by very large ones.
A: I have a grain futures question I’ve been dying to ask someone. The 2022 wheat futures started spiking right around February 24, when Russia invaded Ukraine. This is confusing because warnings of an invasion began in late 2021. You’d think if anybody would be paying attention to that and pricing that into their purchases earlier, it would be the people trading on these markets. I’m very curious why that didn’t happen.
M: The markets were creeping up a bit before, but just a bit. And the only explanation is that traders were assigning a low or a fairly low probability to an invasion — closer to 30 percent than 70 percent. I myself was looking at the Metaculus question of whether Russia would invade, and one of the factors I looked into was how those markets were moving.
A: It’s one of the very few cases where you can take a Metaculus question and compare it directly to a real market. Naively, you might expect that the real market would beat Metaculus, but in this case, Metaculus outperformed the futures markets.
M: I think the market struggles with these weird tail risks. In January and February, the U.S. was releasing huge amounts of information daily saying, “In the next few days Russia will be doing this …” — and then Russia did it. The level of confidence that the invasion would occur should have been closer to 70 percent than 30 percent. Markets aren’t perfect.
A: Speaking of undervaluing tail risk, let’s talk about ALLFED. At ALLFED, you mostly think about much more extreme scenarios, things like nuclear winters. I’m interested in how the response to supply shocks is different in that sort of scenario. What would the immediate impact be on food systems and how would we make sure there’s enough food?
M: ALLFED began when our founder, David Denkenberger, read an article on how mushrooms would thrive in a nuclear winter. David thought to himself almost as a joke, “Why don’t we just eat the mushrooms?” So he tried to calculate how many mushrooms we’d need to eat to sustain the population. It turns out it’s a lot. And then he thought, “Okay, what can we actually do?”
ALLFED itself now looks at understudied food shocks. We don’t just study very high-magnitude shocks, but much of what we do looks at large disasters because they’re so neglected. The primary threat class is abrupt sunlight reduction scenarios (ASRS): things that disrupt the amount of sunlight arriving at the Earth’s surface. There’s three main possibilities, which would be a volcanic eruption, an asteroid impact, or a nuclear winter. In each of these cases, material is ejected high enough into the atmosphere such that it will persist for an extended period of time because it rises above the level where moisture naturally occurs, so it won’t get rained out. As they diffuse, these materials would persist for years and result in a loss of agricultural output — around 5 to 10 percent for the solutions we’re talking about to be necessary.
The eruption of Mt. Tambora in 1815, for instance, led to the year without summer in 1816, when global temperatures decreased between 0.4 and 0.7 degrees Celsius. There are interesting anecdotes in relation to it. Frankenstein was written because of the terrible summer that year — Mary Shelley spent much of her holiday in Geneva indoors because of it. And lots of J. M. W. Turner’s paintings have a unique style because of what happened to the sky.
Tambora was classified as a VEI-7 (volcanic explosivity index) eruption, but there is also the possibility of a VEI-8 eruption. This level of eruption hasn’t occurred in the history of agriculture.
These scenarios could last for up to a decade. In a nuclear winter, the disruptions would get steadily worse up to about year two and three before gradually recovering up to about year 10 to 12. Over that kind of period, it’s not just an issue of food equity. Even if we perfectly distributed and shared our food, which is an impossible task, there wouldn’t be enough. So we need to find ways of producing that food.
A: Let’s walk through some of those. Let’s say we do everything right — what are the mainstays of our diet? Where are our calories coming from?
M: The specifics would vary significantly depending upon your location, but almost certainly the vast majority of it would still come from plants grown on land. We would have to shift to simpler products, but it would still be largely crop based. We like to think in terms of resilient foods — foods that are less affected by the loss of sunlight than average. There would be a shift to cold-tolerant varieties of outdoor crops, and to potatoes and wheat rather than soybeans and maize. We’d want to deploy greenhouses as deeply and widely as possible to raise temperatures and increase yields. We’d also have to radically drop the amount of meat simply by necessity.
The grain surplus we have now goes to feed cattle for a start, but if there’s a shortage for humans, it would be, quite frankly, gross to feed that to cattle rather than a person. So we would be destocking sharply. From preliminary calculations, we could maintain dairy stocks if we used material that’s inedible to humans — residues, grasses, things like that. There’d be less after the disaster, but there would be some, and dairy is the most efficient conversion of that material into human-edible food. And then beyond that, you could have things at the margins such as seaweed, cellulosic sugars, and single-cell proteins.
A: What are cellulosic sugars and single-cell proteins?
M: Cellulosic ethanol is produced when you break down cellulose (the stringy fiber of a plant, typically inedible) into its sugars, primarily glucose and fructose, and then ferment those into ethanol fuel. Although the technology exists, it’s just far too expensive to produce fuel in any kind of competitive way compared with conventional biofuels, which are created by fermenting maize. So these programs were scaled back in the U.S., and these advanced biofuels were not adopted as planned. But facilities such as a paper mill contain something like 80 percent of the material you need for this process. In a disaster, all we’d have to do is take a paper mill, complete the pulping process, and then add an enzyme to that pulp. Producing food this way would be expensive today because sugar is cheap, but perfectly affordable for the majority of people after a disaster.
Single-cell proteins are produced when you feed bacteria on a number of feedstocks, including natural gas or hydrogen. These are very high in protein. There are proposals now for pilots to produce fish feed and chicken feed this way in countries like Qatar and Saudi Arabia, which are energy rich but lack natural resources in the form of food. And if these are viable commercially today, that will make it much easier to scale them up in a disaster if they are needed.
A: Presumably the reason we want these things is because a diet of just potatoes and wheat is not nutritionally complete. How much more expensive is it to achieve nutritionally complete diets compared with simply producing the minimum number of calories we need to survive?
M: What we have looked at so far is the cost of producing different foods at current prices and input costs. At current costs, the cheapest way of getting enough calories should be about 50 U.S. cents per capita — that’s at 2018 prices. Obviously you can’t spend all of your budget on food, but if you are making a dollar a day, you could afford the calories. The cheapest diet that also supplies sufficient macronutrients — that is, fat and protein in addition to carbohydrates — would be 80 cents to a dollar. So that suggests if you’re making about $1.50, you could afford it. A diet that is truly nutritionally complete, including all necessary micronutrients, might be somewhere closer to $2.00 or $2.50. A good part of sub-Saharan Africa would struggle to meet that and, in fact, struggles to meet that today. And a disaster would significantly reduce food affordability.
Many low-income countries might struggle to subsidize their entire population, so this would likely require international cooperation and transfers. But then the second problem is just how large the disruptions are going to be postwar. There may be the kind of panics we’ve seen from the conflicts in Ukraine, but it would be orders of magnitude higher. And so this could rapidly jam up the supply chains needed to supply or actually produce these foods.
Will there be international cooperation? Will people trade? Will supply chains break down from instability? There are a lot of questions regarding economics, sociology, and other factors here.
A: In a post-disaster world, what do you think will happen to the cost of energy and other inputs? What are the biggest bottlenecks?
M: Right now, agriculture, forestry, and fishing together are something like 3.5 to 4 percent of global gross domestic product. We’re not devoting massive resources to agriculture today. For many of these, we would expect resources in the system to approximately double for half the output, which would result in food on average being four times more expensive to produce. In some cases, we’ve done quite detailed estimates — do we have enough nails, do we have enough wood, could we substitute different materials? What’s the cheapest greenhouse we can produce en masse? What’s our plastic-extrusion capacity? Do we have enough rope for the seaweed farms? We’d be all right if food production only requires 10 to 20 percent of a certain resource, or if that resource can be scaled up quickly. Perhaps the only saving grace of an ASRS is that the main climate impact arrives at some point between eight months to a year after the event, so we’d have enough time to start. You can take some actions if you use that time well.
A: All right. Let’s talk then about international cooperation — what would be necessary and what are the major obstacles to it going smoothly?
M: One of the key problems we would face in a disaster is that our resources may not be very useful where they’re currently located. Farmers very carefully tailor their crops to their local conditions — the soil, the amount of light they get, whether they’re on the different slopes of a hill. But in an ASRS, that expertise would be diminished by the climate shock. We may have a situation where the countries in high latitudes have cold-resistant crops, but their ground is frozen solid. Meanwhile tropical countries that are cultivating hot-temperature crops would be simply too cold for a yield to occur. This may lead to a collapse in agricultural output, which modeling on nuclear winter suggests is almost guaranteed in the more severe scenarios — assuming we don’t respond by moving the cold-tolerant crops, either within or between countries. For example, India grows a variety of crops across its own territory. China as well, with wheat and potatoes in the north and rice in the south.
If we shifted wheat and potatoes to the global tropics, we could significantly increase output. That may well require the movement of the seeds, as well as assistance for farmers who have never grown these crops before, and potentially also the inputs and machinery necessary to support them. And the other benefit we’d have is that if fertilizer output survives the disaster, we would likely have enough fertilizer for all of our area to be intensively farmed, simply because so much of our farming area would be nonviable. But we’d have to transport the fertilizer. At the moment, the U.S. applies fertilizer more intensely by a factor of 10 than they do in many parts of Africa, and that would have to change.
A: So the U.S. might want to send seeds to Tanzania or Guatemala or somewhere. How would they ensure that they get crops back at the end of that?
M: Yes. There are real challenges with this, particularly depending upon the nature of the disaster. The global financial system and even basic communications may be severely damaged. Money and contracts may have little value. What if there’s less food output than expected? Would there be trust in this scenario, especially given that a conflict may have damaged many of these key economies significantly? The next issue is that countries may want to retreat into autarky — trying to feed themselves instead of participating in risky trade agreements. To avoid this, we advocate that countries think about these scenarios in advance, particularly where partnerships already exist. The EU has partnerships into Africa and the U.S. has the U.S.-Canada-Mexico trade agreement. These existing structures could at least be the seed of future agreements.
A: What’s the likelihood of an ASRS occurring from a volcano?
M: A VEI-7, something like Tambora, has about a 15 to 20 percent probability of happening per century, and that would cause crop losses in the range of 5 to 20 percent. VEI-8 events are less frequent, but have occurred once in somewhere between every 17,000 to 50,000 years.
A: And the last thing I wanted to talk about is your report on U.S. domestic policy levers for preparing for an ASRS — things that a government could do a bit more unilaterally than trying to set up international trade agreements.
M: The U.S. is in a unique position simply because it has the volume of resources and the degree of agricultural diversity to allow it to respond largely within its own borders. It stretches from a cold north to quite a hot south, it’s a major agricultural exporter, and has many other relevant industries. But this only matters if these resources can be deployed effectively, which may require significant preparation.
So let’s think about policy. Let’s think about any industry that’s commercially viable today and could be of use in the disaster. The government could use pilot schemes and licensing to promote viable industries around seaweed, single-cell proteins, et cetera. And beyond that, the U.S. has some in-house expertise that could be developed and expanded upon — for example, the USDA has climate-modeling data and translates it into actionable advice for farmers in the U.S. Farmers will need to know what’s going to happen to their land, and we have projections for this. Nuclear-winter modeling exists. Volcanic modeling is also now starting to arrive in high detail.
The difficulty is that these models are typically at a global level — predicting regional differences is far harder. Any advances we can make ahead of time would be very valuable. Beyond that, there’s many different recommendations that are hard to break out individually. For example, just how is the U.S. going to communicate with its population?
A: I got a real World War II vibe, actually, as I was reading — there’s all this advice on how to save food and do more domestic vegetable gardening. It feels very 1943.
M: The experience of World War II is a very interesting one in terms of food, because many countries saw their food output fall sharply. And the tragic thing is, in many cases this was a deliberate and cold choice. There were some real crimes committed during the war, but there are also some real achievements. People switched entire agricultural industries at short notice. Mauritius, for example, was heavily focused on exporting sugar and importing food that they needed, and suddenly shipping was constantly attacked and there was no market for their sugar. So they had to quickly switch to supplying their own domestic markets. Australia — similar issues with meat and milk. The experience of World War II is one of the reasons why I am hopeful something can be done. It’s not always the case that people fall apart. Countries made significant sacrifices on behalf of each other.
A: Are there any major pragmatic and logistical lessons from how countries in World War II handled food shortages that have informed your policy advice?
M: One of the key lessons is the importance of a palatable diet. In the United Kingdom, it was decided that potatoes and carrots were the most efficient way to feed people. But if you were doing hard work, you couldn’t eat enough potatoes in a day and digest them to meet a 4,000-calorie workload. Fat was one of the things most complained about — people were constantly chafing at fat restrictions. So producing a diet that people want to eat is also an important part of this.
Second, the availability of shipping and logistics is very important. Refrigerated shipping was a severe bottleneck in many wartime cases. Potatoes are very difficult to move, whereas bulk grains are easier; in general energy-dense foods are easier to move than energy-light foods. We have an advantage today, which is that the sheer volume of shipping we have available is far beyond anything in World War II. It’s not the case that it’s all atrophied — we do produce more food per capita than ever before, which is an incredible achievement. The challenge today is making sure that we can get it to people. And the challenge in the future will be making sure we can always produce that food.