MANHATTAN (KSNT) – Professors from Kansas State discussed the impact of the ongoing conflict between Ukraine and Russia on Monday, explaining how the war is effecting the world market.
On the first day of K-State’s ‘mini-conference’ discussing the agricultural and economic ramifications of the Ukraine/Russia conflict, Dr. Brian Briggeman and Dr. Allen Featherstone gave presentations virtually to help answer some of the questions surrounding the uncertainty coming from the overseas conflict.
Featherstone mostly spoke to the agricultural disruptions caused by the conflict. Ukraine and Russia both produce huge amounts of wheat which is a large export for both countries. In terms of global rankings, Russia is the third largest producer of wheat while Ukraine is the eighth. He said that major disruptions can be expected regarding the world wheat, corn and soybean markets due to the conflict.
“Certainly in terms of the wheat and corn market, I think we’ll have major ramifications especially for the U.S. and a lot of the world,” Featherstone said.
Featherstone also touched on how global trade could be disrupted by the damage caused to southern Ukrainian sea ports.
“With regards to the damage that could occur on these sea ports, in terms of how quickly the trade could go back to normal after hostilities cease. Certainly I would spend a lot of time… a lot of effort to thinking about ways the supply chain could be put back together if there was some destruction of those sea ports.”
Briggeman’s presentation focused on the inflation aspect of the recent conflict and how it has been compounded when considering the COVID-19 pandemic. Supply chain disruptions, stimulus money given out during the pandemic, the rising costs of energy and food and other factors have all contributed to current inflation rates according to Briggeman. War is also a major contributor to inflation as shown during World War I when inflation caused aggregated price levels in the U.S. economy to go up by 22%.
“Inflation is rising… especially see it in energy and durable goods,” Briggeman said. “Definitely supply chain issues are only worsening with this conflict. The question is how long is this going to last?”
Briggeman likened the current rate of inflation to that experienced in the U.S. during the 1970’s when a variety of factors caused inflation to spike. He went on to say that the inflation seen during that time was followed by a “double-dip” recession that Americans had to struggle through before the economy could regain its footing.
“The Feds showed us how you fight inflation,” Briggeman said. “You target the money supply, you let interest rates rise until you get it under control and what the Feds did during that time, they caused a double-dip recession in the 80’s and it was painful for a lot of folks. Today, we’ve never seen this amount of debt that we have now.”
Briggeman did remark that the U.S. dollar is on firmer footing now with low unemployment numbers and strong wage growth. However, the immediate future of the world’s economy is uncertain with the new conflict which will continue to have negative implications on global trade the longer it goes on.
“It’s a unique situation we’re in, coming off of shutting down the economy and now we’re looking at inflation, we have all this debt that’s out there and now we have this conflict,” Briggeman said.
Briggeman began to end his part of the discussion by talking about the end of the current high inflation rates. When thinking back to past periods of time with high inflation, Briggeman’s conclusion was not a positive one.
“The question is, will it take a really tough recession in order to get inflation under control?” Briggeman said. “My hope is no, but I don’t know, if I’m going to be perfectly honest. If history is our guide, with that runaway inflation, it did, it took a double-dip recession and a lot of turbulence in order to get through that period of time. I hope that doesn’t have to happen.”