Breaking Bread

The Salon de l’Agriculture that takes place at the end of February in Paris is one of the few places (in Paris at least) where you can witness French people tipsy at ten in the morning (they are normally more circumspect than their English and German speaking neighbours), and in general where the atmosphere is far more genial than the practiced nervy, combativeness of Parisien(ne)s. As with many events, this gargantuan festival (which I thoroughly recommend) resumed after an enforced break during COVID.

The Salon is remarkable not only for the displays of agricultural prowess, and the array of foods, wines and increasingly, beers on offer, but also as a political barometer. Since he was the mayor of Paris, Jacques Chirac embraced the event, and is still spoken of as someone who was truly attached to the ‘terroir’. Other politicians fared less well, notably Nicholas Sarkozy whose reply to an attendee at the Salon (‘casse toi pauvre con’) became infamous.

Contemporary French politicians still regard the Salon as an important stage, and a litmus test of their ‘closeness’ to the French people. My sense is that the younger generation of politicians fail this test, Emmanuel Macron has often looked awkward in a combination of suit and wellies, though at this stage I suspect French people accept him for the ‘intello’ that he is. In other countries, at similar events such as Ireland’s National Ploughing Championships, politicians such as deputy Irish Prime Minister Leo Varadkar have also looked ill at ease.

The point of raising the topic of food and agriculture is that it will become an increasingly important political issue, especially so in the context of the invasion of Ukraine. It is this event, rather than his performances at the Salon de l’Agriculture that has propelled Emmanuel Macron into a commanding lead in the forthcoming Presidential elections.

A critical part of the expectations set around the idea of the French president is that he or she can act commandingly on the world stage, and here Macron has delivered. The open question now is how he frames the mandate that the electorate will give him for his second term. He will be keen to take a second run at domestic reforms (pensions for example) and to also play an active part in the making of the ‘new Europe’ (he may well become President of the EU in the future). Once he is re-elected, one of the issues he will face is food price inflation and food security.

In recent notes (Ne vous melez pas du pain II) we have flagged how governments are trying hard to dampen the consumer impact of high commodity prices, as this has historically been fuel for popular unrest. To some extent policymakers can lay the blame for this on Russia and its president, but in many emerging countries where spending on staples makes up nearly 40% of disposable income (i.e. India, and large parts of Africa) this must be worrying from a humanitarian point of view at least.

Many industries are now feeling price pressure. In that respect, my own sense is that the spike in commodity prices is more likely to cause a recession (or demand shock) than an inflationary spiral (at consumer price inflation of 8% some might say we are there already), and there is a risk that markets and central banks overreact to this, having underreacted in 2021. One new trend we may see is popular fiscal activism, where the producers and potential beneficiaries of commodity prices spikes are hit with supplementary taxes.

In the longer term, the spike in food prices may do for food security and the food industry what the COVID epidemic did for digital commerce. COVID meant that we became used to shopping, working and being entertained from our homes. High food price inflation and the Ukraine are a reminder that food supply chains can not only be disrupted but can also become weaponized.

To that end, I can see a great many countries, especially those who do not have the agricultural arsenal of France and Ireland, examining their vulnerability to food security and acting accordingly to become more ‘autonomous’. Sadly, many of the poorer countries of the world that are exposed to weak food security (notably Nigeria, Egypt, Congo, Chad, Central African Republic, Afghanistan, and Somalia) do not have the wherewithal to become more ‘food’ autonomous.

Across developed countries, we can only speculate what this will provoke in terms of investment trends.  One will be a shift towards urban farming (underground farming for example), another is a drive towards ‘artificial’ and replacement foodstuffs (coconut sugar, oat milk) and most importantly of all a deeper emphasis on nutrition. 

We will also rightly hear more about food inequality – and how the food that different social groups consumer is a function of their education, conditioning and social status. An American dentist Mary Otto wrote an interesting book called ‘Teeth’ which shows the startling differences in dental health across social classes and reports that they spring from differences in education, diet, and upbringing.

The strategically important move will come from China, a large country with a relatively small amount of farmable land. China has, in general poor diplomatic relations with its neighbours and in certain cases food security might push them towards a more benevolent attitude to Indonesia and Vietnam and may see China launch a foods focused investment wave into South America.

Have a great week ahead,

Mike  

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