More than 50% of the sunflower oil consumed by people worldwide comes from Russia and Ukraine. There will be high prices and shortages due to lower food production in those two countries.
The invasion of Ukraine by Russia has accelerated the inflation process brewing since the declaration of the COVID-19 pandemic in 2020. The consequences of that debacle can affect food availability and the interest in Bitcoin worldwide.
The monetary expansion policy implemented in the United States in 2020 contributed to triggering the inflation process. That situation became more evident in December 2021 and has worsened by new record figures since February 2022.
The US Federal Reserve (Fed) discussed a transitional increase in inflation in 2021. However, the monthly report on the rise in the consumer price index (CPI) of January 2022 revealed an annual 7% increase in inflation in December.
The CPI reports for February and March 2022 revealed that the inflation record had increased. Behind the monthly figure reflecting an average, inflation is much higher concerning essential items like food and energy.
The policy to create inorganic money of the Fed contributed to increasing the number of US dollars banknotes in 2020 and 2021. In late 2021, the amount of money in circulation, including cash and certificates of deposit, grew by 41%.
The increase in inflation raised expectations that Bitcoin could be one of the highest beneficiaries. However, if the conflict worsens, many people will likely not view the crypto asset as their top priority.
There Could Be a Food Crisis Due to the War
Billionaire Andrei Melnichenko, a figure in the Russian fertilizer industry, said agriculture and food were casualties of this war. He added that the Eurasian country is a leading producer of phosphate and nitrogen, among other components of fertilizers.
Melnichenko stated that the war between Russia and Ukraine has caused the prices of fertilizers to increase rapidly. He considers that that will lead to further inflation in Europe and food shortages in the poorest countries.
The Food and Agriculture Organization (FAO) of the United Nations recently warned about the risks from the current conflict. He explained that Russia and Ukraine are among the leading producers of agricultural products worldwide.
Russia and Ukraine are among the leading exporters of wheat, corn, seeds, and sunflower oil. Since the Eurasian nation is the second-largest exporter of fertilizers worldwide, the conflict might lead to higher prices.
Significant increases in international prices led Argentina, a traditionally agricultural country, to shortages of oils, flour, and derivatives after the conflict in Ukraine started.
The current inflation and the likely escalation of the war in Eastern Europe might interrupt the supply of essential food products. That situation would also affect Europe, the Middle East, Asia, and Africa.
During a Food Crisis, the Priority of Bitcoin is Lower
Undoubtedly, Bitcoin has served as a store of value in countries with unstable economic situations. For example, Venezuelans have used the crypto asset to protect family income from hyperinflation.
However, the priorities change for ordinary citizens in severe food shortages. They will no longer be as interested in Bitcoin as investors, entrepreneurs, and those with access to capital.
People will buy and store flour and oil, among other non-perishable foods, above other goods. Investments in assets like Bitcoin would not have a place, as it is crucial to the behavior of the market in the coming months.
By Alexander Salazar
