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The impact of geopolitical conflict is often not as direct and obvious as it seems. In the complex system of economic globalization, the impact will not only be amplified, but also may last for a long time. Recently, the food and Agriculture Organization of the United Nations (FAO) issued a report on the importance of Russia and Ukraine in the global Shenzhen Agricultural Products Group Co.Ltd(000061) market and the risks brought by the current conflict, expressing its concern about the impact on the global Shenzhen Agricultural Products Group Co.Ltd(000061) market.
Russia and Ukraine are both important producers and net exporters of Shenzhen Agricultural Products Group Co.Ltd(000061) in the world. In 2021, Russia and Ukraine ranked among the top three in the world in terms of important Shenzhen Agricultural Products Group Co.Ltd(000061) exports of barley, corn, rapeseed, sunflower seed and sunflower oil. At the same time, Russia is also the world's largest exporter of nitrogen fertilizer and the second largest exporter of potassium and phosphorus fertilizer. Many countries, including the least developed countries (LDC) and low-income food deficit countries (LIFDC), are highly dependent on food and fertilizer imports. FAO predicted that the conflict between Russia and Ukraine would lead to the increase or outbreak of seven types of risks.
The first type of risk - trade risk. Affected by the conflict, Ukraine closed its ports, stopped oil crushing, set up licenses for exports, and could not even guarantee the harvest of crops, while Russia's exports were subject to sanctions.
The second type of risk - price risk. The trading activities of Shenzhen Agricultural Products Group Co.Ltd(000061) and fertilizer directly related to Russia and Ukraine may shrink significantly, which increases this risk. FAO found through model calculation that due to the difficulty of establishing new trade relations in a short time, insufficient supply and market expectation will push up 8-22 percentage points again on the current high international grain and fertilizer prices. The rise of international oil prices will keep the international food and fertilizer prices high after the emergence of new supplies.
The third kind of risk - logistics risk. The conflict may lead to the destruction of infrastructure such as inland transportation, ports, warehousing and Shenzhen Agricultural Products Group Co.Ltd(000061) processing, while the decline of warehousing and logistics (especially cold chain logistics) capacity has a much greater impact on perishable crops than industrial finished products. The conflict has a great impact on the insurance industry. The increase of trade insurance rate in the Black Sea region will further push up the logistics and transportation costs of Shenzhen Agricultural Products Group Co.Ltd(000061) exports from Ukraine.
Fourth, production risk. FAO was also relatively optimistic about the agricultural production of Russia and Ukraine in 2022 / 23 last year. However, the conflict may make it impossible for farmers to complete agricultural planting, field management and harvesting, as well as some key public agricultural services (such as large-scale combined harvesting). According to FAO estimates, 20% ~ 30% of winter Cereals, corn and sunflower seeds in Ukraine may not be planted or harvested; The sanctions imposed on Russia will compress its Shenzhen Agricultural Products Group Co.Ltd(000061) international market, reduce farmers' income and lead to conservative planting decisions.
The fifth type of risk - humanitarian risk. Since 2014, the conflict in eastern Ukraine for more than eight years has led to the displacement of millions of Ukrainian residents. This round of conflict will further affect economic activities, reduce the purchasing power of local residents, and lead to food crisis and malnutrition. The sharp increase in refugees has put great pressure on neighboring countries and further pushed up international food prices. FAO analysis shows that the global undernourished population will increase by 8 million to 13 million in 2022 / 23, with the largest increase in Asia Pacific, sub Saharan Africa, the Near East and North Africa.
The sixth type of risk - energy risk. Russia is a major global energy exporter, and many developed countries have adopted an energy intensive agricultural development mode. The agriculture of these countries directly uses energy by using oil, gas and electricity, and indirectly relies on energy by using fertilizers, pesticides and lubricants. The rise of energy prices caused by the conflict will lead to the rise of agricultural costs, which may encourage people to reduce the use of energy intensive agricultural products and increase the global food risk in the coming years. The rapid rise in energy prices will promote the development of bioenergy and change the use structure of Shenzhen Agricultural Products Group Co.Ltd(000061) (especially corn, sugarcane and oil crops), resulting in more Shenzhen Agricultural Products Group Co.Ltd(000061) being used to produce biomass fuels.
The seventh type of risk - foreign exchange, debt and growth risk. The sharp decline of the Ukrainian currency hryvna against the US dollar will greatly increase the cost of its post-war economic and social recovery. The sanctions against Russia have also led to the sharp depreciation of the ruble, which is conducive to the price reduction of Shenzhen Agricultural Products Group Co.Ltd(000061) exports and restricts the growth of investment and production. The depreciation of the Russian Ruble will also lead to the weakening of the economies of Central Asian countries through the reduction of cross-border remittances. For many developing countries, agriculture is the pillar of their economy. They need to borrow US dollars to import foreign seeds, pesticides, chemical fertilizers and other resources to develop agriculture. The conflict has led to the continuous appreciation of the US dollar against other currencies, increased the import cost of relevant factors, and will have a huge impact on the agriculture of developing countries around the world. The weakness of agriculture in various countries will have a negative impact on global food security, reduce capital investment in development, and may lead to a widespread increase in military spending due to insecurity.
Shenzhen Agricultural Products Group Co.Ltd(000061) has two important attributes of society and economy. The country is based on the people, and the people take food as their heaven. Agriculture has experienced long-term development, which is not only the basic guarantee for people's survival, but also the source of income for agricultural practitioners. Although agriculture is mainly used for food or raw materials and is in a relatively low position in the global value chain, it is not low in dependence on various factors and agricultural materials. As an important category of global economic and trade activities, Shenzhen Agricultural Products Group Co.Ltd(000061) trade has closely linked all countries and spawned a large number of professional service providers or participants, including logistics, finance and insurance. As the saying goes, the conflict between Russia and Ukraine has a great impact on the global economy and society, and touches the nerves of all parties through the international commodity market prices. The impact on the least developed countries and low-income food deficit countries is more obvious. The detailed division of labor within and among industries and the close linkage with transportation, energy, finance and other fields have formed a complex feedback network. At the same time, due to the complex agricultural production process, the input of crops in the market is difficult to change quickly according to needs, resulting in a long response and adjustment cycle of agriculture. Even if the negative impact caused by the destructive impact or restrictive measures on agriculture and Shenzhen Agricultural Products Group Co.Ltd(000061) trade is cancelled, it will take a long time to return to the original level. It is worth noting that Shenzhen Agricultural Products Group Co.Ltd(000061) as an important commodity related to the national economy and the people's livelihood, its stable and sustainable trade often implies mutual trust among relevant participants. Once this trust relationship disappears, even if the production capacity is restored and the demand market is still in existence, the trade links between suppliers and demanders may be difficult to reach the original level due to doubts or concerns about the basis of cooperation. (the author is a researcher of the Research Institute of the Ministry of Commerce)
