The world has seen a lot of change in the last few years, according to Dave Kohl.

From the COVID-19 pandemic, which upended whole populations and bent, if not broke, the global trading system, to the Russian invasion of Ukraine in late February, which now looks to remake global energy and farm commodity markets, Kohl said the effects of all of this are going to be deep and lasting.

“It’s called tail risk,” Kohl said during a recent hour-long online lecture in early April organized and sponsored by Northwest Farm Credit Services. “It’s basically a low-probability event that creates a lot of shock waves.”

“It seems like we get a decade of change in a matter of weeks,” said Kohl, a retired agricultural economist at Virginia Tech and part-owner of the Homestead Creamery in Wirtz, Virginia.

Top of his concerns is the Russian invasion of Ukraine, Kohl said, which puts at risk a good portion of the world’s grain and oilseed production in what he called “the breadbasket of Europe.”

“We could see a possibly 40%-50% reduction in production,” Kohl said. “Let’s put it into context. About 29% of the world wheat production comes out of Ukraine and Russia, 14% of the world’s corn, and 80% of sunflower exports.”

Kohl said it will be interesting to see how global food production changes because of the war, which he expects will have lasting effects for the next three to five years, especially on developing nations that are very dependent on lower-cost Russian and Ukrainian grain.

Russia’s economy is dependent on the exports of oil and gas, Kohl said, and while much of the West is slowly blocking imports of Russian crude oil and natural gas, the Russian government is making brisk sales of steeply-discounted oil to China and India, which are able and willing to pay in rubles, the Russian currency.

“Oil is going to China and India as low as $30-$40 per barrel,” Kohl said. “It’s giving them a tremendous type of advantage.”

According to data available from the New York Mercantile Exchange, benchmark West Texas Intermediate for May delivery finished the trading day at $98.26 per barrel on April 8. In the UK, benchmark Brent crude closed Friday trading at $102.40 per barrel on April 8.

Kohl said the other critical inputs to consider are nitrogen and potassium, both key components for synthetic fertilizer. The disruption of Russian fertilizer exports — Moscow had already blocked exports before the Ukraine invasion — and natural gas supplies to European fertilizer makers will likely cause years of disruption as markets adjust to limited supply and higher costs as well.

UK-based fertilizer trading firm Profercy’s World Nitrogen Index closed at 449.76 on April 7, down somewhat from recent trading but up significantly from around 180 at this time in 2021 and around 100 in 2020, according to data from the company’s website.

“One of the unfortunate things is much of our fertilizer and energy is produced in regions of the world that are very politically and militarily challenged,” Kohl said. “And so this is going to be with us for a while.”

He advised growers to take a close look at the agronomy practices and soil management. For example, Kohl said Homestead Creamery is working with local poultry farms to use their waste as compost as fertilizer.

“We want to improve soil health as well, so it fits right into our type of plan,” he said.

Kohl said that as globalization changes and the U.S. and China disentangle themselves from each other, trade priorities are going to be reshuffled.

“You have to be really careful in betting your farm and ranch with trade with China, because they can giveth the market, and they can taketh away,” Kohl said.

Finally, Kohl said he believes domestic U.S. inflation will likely to persist for a while, given that the federal government pumped the U.S. economy full of cash during the pandemic.

“You have $1.23 of money chasing 91 cents of goods. That says we’re going to have inflation,” Kohl said.

The only solution is to spend as much of that money as soon as possible, something Kohl said he’s seen people do as they travel to tourist spots and spend their stimulus checks and savings built up during the two years of COVID-19.

“It’s going to be interesting until they run out of that money,” he said.

Charles H. Featherstone can be reached at [email protected].