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Chapter 1: What is the main topic discussed in this episode?
Hello, everyone. I'm Kimberly Adams. Welcome back to Make Me Smart, where none of us is as smart as all of us. The ongoing war with Iran is having all sorts of humanitarian and economic repercussions in the region and globally. And while Iran has reportedly said ships not connected to the U.S.
or Israel can go ahead and go through the Strait of Hormuz, most international shippers just don't want to take that risk. And as you've also probably heard, this trade route is crucial to global energy markets. And it also plays a critical role in global food supply chains. And it's that food side of things that we're going to talk about today.
And here to make us smart about this is Michael Wurst. He's a senior fellow at the Council on Foreign Relations, where his work focuses on the intersection of food security, climate change, migration, and emerging countries. Michael, welcome to the show.
Chapter 2: What humanitarian and economic repercussions are caused by the war with Iran?
It's a great pleasure to be on. Thank you so much.
Big picture, what's been the impact so far of this war on global food supply chains?
The impact is complex, to say the least, because as you've mentioned, there is an impact on global fertilizer market. About one third of fertilizer that is used globally is going through the Strait of Hormuz with countries like Iran, Qatar, Saudi Arabia and Oman being important producers. This is relevant because about half of the food that is produced worldwide depends on fertilizer use.
Secondly, the energy prices are skyrocketing.
fertilizer production is extremely energy intensive so that increases the volatility of fertilizer prices even more and something that is not often looked at the countries that are more exposed to those increased food and fertilizer prices especially in africa and southeast asia are also countries that have a lot of labor migrants in the gulf regions millions of them and their remittances will go down the moment energy prices skyrocket the economic situation is more difficult
So it's a complex layered system that is interconnected where people all over the world within a few weeks will be impacted by the war in Iran.
So many threads to unpack there. And I want to lock in on what you just said about within a few weeks, because each of those different things that you just mentioned kind of has a different timeline for how it shows up in the global food supply chain. So energy costs. Walk us through that timeline and how that shows up in food costs, and then we'll get to the fertilizer question.
The energy cost is more indirect. As I mentioned, fertilizer is extremely energy intensive, but also energy prices are relevant because they impact agricultural supply chains because the cost for, for example, farm operations, irrigation, transport costs. storage, food processing is all increasing.
And that's particularly important for a region like the Gulf and Northern Africa, where people are consuming very high levels of wheat produced carbohydrates, about 200 pounds a year per capita. So that reason is extremely import dependent. And so the increasing energy prices have cascading effects
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Chapter 3: How does the closure of the Strait of Hormuz affect global food supply chains?
Yes, so the region produces a lot of the organic ingredients of fertilizer, especially for nitrogen fertilizers, which is mostly ammonia and urea. That region is an important exporter, but also a lot of fertilizer transits through the region. It's, as I mentioned, about one third of the global production. Those interruptions are important.
They are not hitting markets immediately, but they obviously will be important soon. for the next agricultural production season. And especially if we are looking at compounded effects and the high likelihood that we will have a lot of droughts this year because of the El Niño phenomenon that is rated about at a 60 to 70 percent probability that there will be
increased climate impact on agricultural production later this year, these issues are compounding effects that are basically adding upon each other and result in critical shortages, not only for fertilizer, but down the road during the second half of the year also potentially with regard to food shortages in the parts of the world that are highly dependent on fertilizer use.
You mentioned that North Africa and parts of sub-Saharan Africa are very dependent on fertilizer and energy from these regions. What other parts of the world are really going to feel this impact first?
This is mostly a problem for Southeast Asia and East Asia and a lot of sub-Saharan African countries. Europe and the United States, not only because there are more financial resources, are a little more shielded. But it's important to recognize that the ripple effect of higher food prices will also make it much more important to provide humanitarian aid.
And they will exacerbate a situation that is difficult to begin with because we have over 730 million people worldwide. that are suffering hunger or food shortages. And we have a number of especially African countries where we have situations that the World Food Program classifies as situations where people live in famine or close to famine.
So the ripple effects of the issues that we're talking about now, they will be even more severe in these situations where people are under a lot of strain already.
So it's important to keep in mind that this is not only an issue for the production side or for higher gas prices at the gas pump when we're filling up our cars, but that this is a global phenomenon because of the interconnected markets.
And are we seeing any kind of global reaction thus far to this aspect of the war, the way that it's likely or it is already impacting food supplies?
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Chapter 4: What is the relationship between energy prices and fertilizer production?
I imagine folks are going to hear this and understand that there are long-term solutions, but what is the average person hearing this supposed to do with this information right now?
I think it is time to really very basically revisit the direction of where our country's politics has gone here in the United States, where the Europeans stand with regard to international cooperation.
And it is time to bring in emerging countries, including China, into the equation and figure out a way to recognize that national interests cannot be defined within national borders alone, but need to go beyond and expand.
Keep an eye on a global public good that is international trade, food, sustainability and collective action that we need to be able to pursue in the case that we want to have a livable economic and climate environment 20 years from now.
Well, I appreciate all this information. I know it's pretty heavy, but it's good that we have this information to hopefully get some solutions down the road. Thank you so much for joining us, Michael Wurz, who is a senior fellow at the Council on Foreign Relations. Really appreciate your sharing your expertise.
Thank you so much.
That's it for today. But before we go, I know conversations like this are hard, but they are important. And every episode of Make Me Smart is basically one big group project to try to get these important conversations to you. We all bring what we know, we learn from each other, and hopefully leave a little bit smarter than when we started. And your support helps make that possible.
It keeps these conversations nimble and the reporting thoughtful, even when, like today, the news is a lot. So if this show adds something meaningful to your week, we'd love your help keeping it going. Donate now at marketplace.org or click the link in the show notes.
Now, one of the other things that we love about this show is we can handle the heavy things, but also we do try to have a little fun. And that's why we do Economics on Tap every week. And tomorrow, we're going to be having my annual cherry blossom party on Economics on Tap.
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