Navigator: New Chokepoints and New Themes
We have a new Chokepoint and a New War. It is the Sea of Azov and the Black Sea. It is the first offensive ever to be based 100% on Drones (with a few missiles thrown in for effect). It has global implications.
This all smacks of a perfect storm for food prices. Food inflation will be rise due to falling Russian grain export. A reduction of high cost of inorganic fertilizer, due to Gulf disruption, leading to reduced use by farmers. Greater use of crops for biofuel. and El Nino effects.
The macro inflation and monetary policy implications are clear to even my dog. But I’m creating a food inflation theme with long commodities (like wheat, coffee and cacao) and short some of the processed food producers. Their margins will be squeezed - even if they spend more on packaging than ingredients.