Flows are shaped by friction. Newton’s First Law of Motion can also be applied to demand and supply.
“Every body perseveres in its state of rest, or of uniform motion in a right line, unless it is compelled to change that state by forces impressed thereon.” [Corpus omne perseverare in statu suo quiescendi vel movendi uniformiter in directum, nisi quatenus a viribus impressis cogitur statum illum mutare.]
Most of Ukraine’s grain is not moving. Many are actively working to slow or stop Russian fossil fuels (more). Docks at Shanghai and Yantian are tightly constrained by excessive density and insufficient domestic discharge (more). Slowdown in any part of a network tends to produce pockets of congestion (and more disruption) in related places. Friction is promiscuous.
And… the TSO pipeline continues to deliver Russian natural gas west across Ukraine. This week in 2021 the rate of flow was just under 201,000 million cubic meters. The flow continues at above 183,000 million cubic meters. War or a warmer spring or price-induced lower demand? I don’t know. Russia’s oil is also finding some (wide) cracks in sanctions.
And… two weeks ago Ukraine’s government reversed earlier bans on sale of barley, corn, and sunflower oil. Last year’s crop production was good and stocks remain strong. Flows continue to be seriously constrained by war-related shut-downs at Black Sea ports , but creative alternatives are struggling to emerge (more). Spring planting is, so far, reportedly ahead of last year.
And… while there is a real slowdown in China exports, capacity levels have not diminished, outbound operations persist, Pacific freight rates are off their highs, and other than Shanghai, China ports are seeing increased volume. (Newton’s Second Law at work?) US inbound flows are “pretty good.”
Friction fluctuates, so do flows. Momentum — mass with velocity — is stubborn. Sometimes for good, sometimes not so much.
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April 8 Update: Bloomberg surveys how grain flows are shifting in response to Black Sea (and nearby) friction. “Soaring freight costs, port closures and supply-chain constraints have slammed exports from the Black Sea. With the war threatening more than a quarter of the world’s wheat shipments and about a fifth of corn, the world is at risk of more severe food shortages and worsening hunger. Buyers are on the hunt for alternatives, and sellers are finding ways to fill the void.” Russian diesel is also being pulled through unusual places using unusual methods.
April 9 Update: Despite reduced flows of Ukraine’s grain, on April 8 the USDA projected, “The global wheat outlook for 2021/22 is for slightly higher supplies, increased consumption, lower trade, and reduced ending stocks. Supplies are increased by 0.7 million tons to 1,069.5 million on a combination of higher beginning stocks for Pakistan, Brazil, and Saudi Arabia and higher production for Pakistan and Argentina more than offsetting lower EU production. Projected 2021/22 world consumption is raised 3.8 million tons to 791.1 million primarily on higher food, seed, and industrial (FSI) use for India. Based on greater offtake from government stocks to food distribution programs, India’s FSI is raised 4.4 million tons to a record 100.9 million.” The next day Bloomberg offered a decidedly less positive assessment.