A potential Russian invasion of Ukraine and other global flashpoints have real implications for the corn industry.
Heightened tensions in Eastern Europe have dominated the news lately, as Russia seems poised to invade Ukraine.
As a result of this and other global flashpoints, the unstable geopolitical climate is creating uncertainty in the world of agriculture, and growers are already feeling the effects.
So in this episode, we’re talking to Colonel Mark Purdy, the Executive Vice President and Chief Operating Officer at Aimpoint Research, about how food security is vital to national security.
We’ll sort out the context of the showdown in Eastern Europe, explore scenarios for what’s likely to happen, and provide some insight about what this could mean for growers here in the U.S.
Most importantly, we’ll revisit how food power is vital to national security in the U.S.
Mark Purdy:
When it comes to the stability of society, I call it food power. Our center of gravity in the United States is not only the ability to produce food for our population, but our national security, if you think about center of gravity, is our ability to overproduce.
Dusty Weis:
Hello and welcome to Wherever Jon May Roam, the National Corn Growers Association podcast. This is where leaders, growers, and stakeholders in the corn industry can turn for big-picture conversations about the state of the industry and its future. I'm Dusty Weis, and I'll be introducing your host, Association CEO, Jon Doggett. From the fields of the corn belt to the DC beltway, we're making sure the growers who feed America, have a say in the issues that are important to them, with key leaders who are shaping the future of agriculture.
Dusty Weis:
Heightened tensions in Eastern Europe have dominated the news lately, as Russia seems poised to invade Ukraine, and the unstable geopolitical climate is creating uncertainty in the agriculture world as well. In this episode, we'll be talking to Colonel Mark Purdy, the executive vice president and chief operating officer at Aimpoint Research, about how food security ties to national security and what these global flashpoints can mean for growers here in the US. But if you haven't yet, make sure you're subscribed to this podcast in your favorite app, also make sure you follow the NCGA on twitter @nationalcorn. And sign up for the National Corn Growers Association newsletter at ncga.com.
Dusty Weis:
With that, it's time to once again introduce Jon. Jon Doggett the CEO of the National Corn Growers Association. And Jon, for the vast majority of American consumers in this day and age, we take it for granted that, when we go to the store, there's going to be food on the shelves and it's going to be safe to eat. But that convenience and security are due of course, to the hard work of growers, but also to the high standard of security that we enjoy as American citizens.
Jon Doggett:
You know Dusty, when I first came to Washington DC in the 1980s, Kika de la Garza, a Democrat from Texas was the chairman of the house ag committee. And he used to tell the story that people called the submarine story. And the chairman told the story that he went to some submarine base and he was on this sub and they took him out and he thought it was great. He asked the captain of the submarine, "How often do you have to fuel up?" And he said, "This is nuclear boat, we can go for forever." He said, "Well, what about air?" He said, "Well, we can scrub the whatever out of the air and we don't really need to worry about air." "And what about water?" "Well," he said, "We can take the salt out of the water and we're all good for water." The chairman asked the captain, "So what is your limitation?" And the captain said, "The limitation is how much food we have on the boat."
Jon Doggett:
Like I say, the chairman's told that story many, many times, but I think it's a good illustration about the importance of food and the importance to our national security. It's been a while since we've had that discussion and it's gotten a lot of attention here in the last few months, and it's a real threat to lives and to peace, as we look at what's going on in Eastern Europe. The continuing military standoff along the border between Russian and Ukraine, it has a lot of far-reaching business implications as well. We're talking about crude oil being near a hundred bucks where I saw something this morning, some of the analysts were talking about 125 bucks for a barrel of crude, and that's going to impact how we raise food in this country and how food gets distributed around the world. We thought this is an important moment, and we wanted to bring back a guest who we know is an expert on a lot of these things. And we've talked in the past to Colonel Mark Purdy, and Mark's going to be with us today.
Dusty Weis:
Yeah, Colonel Purdy is the executive vice president and chief operating officer at Aimpoint Research, a strategic consulting firm that specializes in applying a military tactical mindset to business problems. He's a former Army colonel who graduated from West Point Academy and served as the director of war games at the US Army War College. His experience ranges from leading combat units to managing multi-billion dollar security assistance portfolios.
Jon Doggett:
Mark has also helped us here at NCGA by overseeing some strategic planning exercises that we've done. And he traces his roots back to a family farm in Ohio, where they grew sheep, corn, soybeans and hay. Mark, thanks for joining us again.
Mark Purdy:
Well, great to be with you here and especially glad to be here to talk about something that has really been my why, behind what I do, for not only almost 30 years in the military, but definitely here at Aimpoint, in that food security being something that's foundational to national security. Great to be here with you and thanks for having me back.
Jon Doggett:
Well, thanks. Let's start with the Ukraine, and that's what everybody's been talking about. I flipped on the news early this morning and that's about all I saw. How did we get to this point? And why would Russia want to invade the Ukraine?
Mark Purdy:
Jon, I'm glad you picked such a simple topic to start off here with Ukraine. So Ukraine and why would Russia do this? This dates back not decades, and arguably not even back centuries, but millennia, but it's within the Russian sphere of influence. Just in recent history, this was part of the former Soviet Union and that buffer state there, and that has been the case. There are a lot of ethnic Russians in Ukraine, and so the tie there, it's not a simplistic geography or demographics there, for one.
Mark Purdy:
Two, when you take that into consideration, we had the overtures of Ukraine possibly joining NATO. I think it's a little bit when you back an animal in a corner, they're probably going to do something and take action. While we can line up some of the near term cost being substantial for Russia, President Putin is doing some long term calculus here when he comes to contemplating what inaction might cost the nation of Russia of over the next century, and what action would cost in the near term or near decades. That's why this is definitely a heightened sense of tension and why you think a lot of the predictions, or at least cautions of some of our leaders, the President in the United States and others, are saying that this is a real problem and has potential.
Dusty Weis:
Mark, I've heard Ukraine referred to as the breadbasket of Eastern Europe as well. Not that I'm trying to shoehorn agriculture into this stage of the conversation, but I really wonder what sort of role that has? The fact that this is a very rich, fertile farming region that's in play here and certainly served to provide food for a lot of the Soviet Union. Do you think that's part of the enticement that's in play here too?
Mark Purdy:
Well, I think it's certainly a factor. When you think about resources, and back to Jon's point about the submarine, and that is certainly a national and global piece. If you have control of those resources, whether it's fuel, whether it's certain minerals, oil, but food is definitely important. Russia being able to control that, Russia being a large producer of wheat, Ukraine being home to some of that most fertile black soil, and the production power of Ukraine is not fully realized, that would certainly be a resource that Russia could enjoy if they did have control over that region.
Jon Doggett:
It's been a long time since we saw a war in Europe on the scale that is a possibility here. It's hard to imagine what that impact's going to be, so Mark, what does a Russian invasion of Ukraine even look like if it does happen?
Mark Purdy:
Yeah, that's a great question. As I'm looking at a lot of the headlines and digging a little deeper from a national security perspective, the Europe that we knew back in the 80s, 70s, really post World War II, it's not the same Europe that was fairly stable at the time. We had, of course, two world powers, as well as NATO, poised at one another. The Soviet Union and NATO across the line, but there was a lot of stability that came with that. I think over the past decades we've seen how difficult things are to operate in the EU, and different militaries, Russia is not the former Soviet Union, but they've invested quite a bit within their military. So I think not only can we see maybe some hearkenings back to pre World War II and just the fragmentation of Europe, that's possible, although this has unified NATO in a way that we haven't seen in several decades.
Mark Purdy:
Back to what does an invasion look like? It's going to be different. This is where we'll see, and have seen the cyber component of it, information warfare. We're seeing that to where Russia is making intelligence evident on the news, and the United States and allies have as well. That's something that, if you think about it, we really haven't seen in the past. The stuff that was intelligence and was secret, stayed secret, but we're seeing this information warfare play out right in front of us on the news, as well as the cyber, so that's something different. Then I think we'll definitely see some conventional combat as we look at the tanks and the infantry and the anti-tank weapons on both sides, as well as the aircraft and helicopters, but then there'll be a lot of unconventional warfare, should this come to pass.
Jon Doggett:
The US and its NATO allies, they're in an odd position. Ukraine is not a NATO member, but it's petitioned the alliance for membership. How does that play into this? And what courses of action does the US have at this point? Do we defend Ukraine, even though it's not an NATO member? Or is there a lot of pressure from the NATO allies for us to get more involved or less involved? How does all that play with Ukraine not being a NATO member, but kind of wanting to be a NATO member?
Mark Purdy:
Well, I think we definitely want to play a part in Ukraine's defense, that's part of the global competition and our way of life and the leadership role that the United States has played in the world. I think that there's an impetus and that that's seen as a requirement. And when we think about NATO, and as I said before, Ukraine's petition to be in NATO may have been the impetus for a lot of Russia's actions at this point. I think the Article 5 requirements, so an attack on one is an attack on all, is not a requirement in Ukraine. But if this spills over and what does spill over mean, when we talk about this next generation of warfare? Is a cyber attack a spill over? Is some of these other guerrilla actions a spill over, or is it just defined by conventional attack?
Mark Purdy:
That's where I think we get into some new waters, and things are going to get dicey here if there's actually a full scale war in Ukraine. I believe that we'll attempt to keep that arms distance, supplying logistics and arms and weapons and advice, but it's real easy for this to spill over and then we're into again, Article 5 and the other aspects of NATO.
Jon Doggett:
It makes you nervous when you realize that most of those troops from Russia are within 30 miles of the Ukraine border. And most of those troops are 19, 20 and 21 years old, and they have weapons. And knowing a lot of 19, 20 and 21 year olds, that's a little disconcerting to me. How much of an accident is there to happen here?
Mark Purdy:
Well, I think you've hit on it right there. I mean, when you get down to the tactical commanders on the ground, in all armies, in our army in the United States, as well as some to a lesser degree, but most nations around the world, those commanders have authority on the ground. We already saw today where there's accusations back and forth between Ukraine and Russia, that they're violating the ceasefire from the conflict around the 2014 Crimea. And then also the insurgent or unconventional warfare that's been taking place there.
Mark Purdy:
There's already the accusations and the gray areas and ambiguity that again, would the license either side or license Russia, at least enough of a license in their mind, to take action. And then you have this other factor of these young commanders there or maybe it's not the young commanders, but they don't have the full picture in mind of what their tactical actions could cause at a strategic or global level.
Dusty Weis:
I know you don't have a crystal ball and certainly the situation is changing day by day, even hour to hour right now, but what do you think is looking like the most likely outcome at this point? Is a full-scale invasion a given?
Mark Purdy:
I don't think it's a given. Again, there's calculus that Russia's playing right now, that Vladimir Putin has in his mind, and I'm not saying he's already made up his mind, but there's a calculus. What I will say in my crystal ball, is this tension's going to stay at a heightened level for years, probably decades. I think that Russia is probably trying to get back to some of that 1980s sphere of influence that they've lost. I mean, if you think back to '89 and through the 90s and purely in East versus West, the West has been encroaching on Russia more and more. I think that this move of troops, right now it's new, it's the amassing of whatever, a 100,000, 130,000, 150,000, that I'm not seeing that... Even if we don't have conflict, even if we don't have invasion, that that's probably not going to change.
Jon Doggett:
Whether Russia goes into Ukraine or stays on the border, what are some of the immediate implications for food? Not only in Europe, but around the world?
Mark Purdy:
Yeah, this is big, and we touched on it a little bit, just Ukraine being termed as the bread basket, especially for Europe there in a big way. Just take two commodities that are near to us in the United States, in corn and wheat. Wheat definitely, if you take Russia, Ukraine, throw in maybe the stands there, that's a third of the world wheat that's coming out of that area. A conflict for sure is going to disrupt a third of the world wheat, and that has huge implications when it comes to food. Think about, what was the impetus for the Arab Spring? I mean, it was this tight wheat, we can trace that right back to that significant point in recent history, and we can see similar things, so the effects can reverberate across the globe.
Mark Purdy:
Now corn, not as big, but when you're talking 10%, 12%, 15% of anything global, that's huge, so we'll see second and third order effects as we talk about what's happening around the globe. It'll be tight supplies, it'll be high commodity prices maybe for a point in time, which means people are going to have a hard time getting a hold of the food that they need, food inflation and things like that. That's all coming out of, if not direct, a second and third order effect of... I think it's going to be lesser if it just remains this high tension, but it's going to be severe if we experience some type of invasion like we've contemplated here today.
Dusty Weis:
I mean, that's what happens in the immediate sense then there Mark, but longer-term, how does that all play out for growers here in the US, would you say?
Mark Purdy:
Yeah, and I alluded to it a little bit, but I think in the near term there's likely to be some spike in commodity prices, but then how does the rest of the globe react? Do they start looking for alternate sources, alternate types of food to meet the demand? I think the impact could be volatility. And then when we think about one area of outlet for food for some of our commodities versus fuel, versus some of the other uses, it's going to, I think create a lot of volatility. It might be some near-term gains, but probably, in the long term, we'll see some wild swings to high and low commodity prices. And then just layer that in with some of the other things that we already have going on, with inflation, with input costs and things like that. We've kept this conversation to Russia and Ukraine, but we've got a lot of other things going on around the world when it comes to competition and conflict.
Jon Doggett:
That was where I wanted to ask the next question and we have a number of hot spots around the globe. We have China, we still have situation in Syria, we are just getting off of two of the longest lasting wars that this country's ever been involved in, in Afghanistan and in Iraq, and those certainly are by no means settled. We have Narcoterrorism South of the border. What about these hotspots? What about China? What about the Middle East? This just keeps piling on, and piling on, and piling on, it's a little disconcerting.
Mark Purdy:
Yeah. I mean, that's a great point. Because if you take what's the relation between Ukraine and Russia to China? Well, it's big. China looks to Ukraine to offset its dependency on any US commodities for corn and soybeans, especially when we're seeing what we're seeing in South America with the lingering effects of La Niña. Our disputes and competition with China certainly play into this, but that's just as big. When you think about the layering effects of volatility, so China comes to the US because we have what they need. When they can get it elsewhere, sometimes they do so the predictability there is not always there, so that leads to volatility.
Mark Purdy:
Other places around, when you think about, just to talk a little bit more of things that are layered into this, I mentioned La Niña. We thought we would be out of it, right now it's looking like that that's going to stick around probably into 2022, and that's a significant factor when we look at the major production zones. We have the United States and then what we're talking about here, Ukraine and Russia, but number two to the United States, is South America. And the effects of La Niña down there, it's looking like it's going to carry in further into 2022, so I think the volatility is going to increase. Now, when we're out of that, I think we're going to swing back the other way, so it's a big deal.
Jon Doggett:
Mark, after nearly 20 years being in Afghanistan, we're back out. What are you worried about in Afghanistan?
Mark Purdy:
Afghanistan. We talked a lot about conventional risks with Ukraine. As the person that participated in the last two decades of these longest wars, I think what it's devolved into, it's disheartening. The base that Osama bin Laden set over there was in this chaos, so I think that we're running the risk of that, because they've descended into chaos. Descent into Chaos, there's actually a book on Afghanistan about that, pre-invasion 2001, and I think we're back there.
Mark Purdy:
I know that our special operations community and others are actively fighting this behind the scenes. I mean, we just saw the attack on the new ISIS leader, at least new from al-Baghdadi, so that fight is certainly being carried out there. But I mean, when you get into the chaos and we do have the distance created in Afghanistan. Distance physically from Western forces, distance in infrastructure and elsewhere, there's a lot of places to go and hide there, and you can form bases of operation. From a unconventional space, I think Afghanistan's becoming ripe again as it was in the 90s.
Jon Doggett:
What would be the other place that we're not looking at that we ought to be looking at?
Mark Purdy:
I guess as far as a country with resources and economy, Nigeria always causes me concern because there's food insecurity there and yet there's money, but it's also a crossroads for a lot of terrorism and terror.
Jon Doggett:
And again, you have another population, a lot of unemployed, young men, never a good thing to have in a country where you have a lot of graft, a lot of corruption, a lot of poverty. And then you have this oil wealth that is being controlled by very few people.
Mark Purdy:
Right. The Middle East, I think is still of concern. I do believe that the Arab Spring shook some of these leaders into, at least that they're managing it more closely. There's maybe lessers of two evils leading in some of the areas, but I don't think we can take our eye off of what's going on. Specifically in Yemen, we've got Iran in the equation. I don't know as we're missing it, but we didn't talk about it. North Korea, I mean they're back to testing missiles, that's a big one for food security. It's a use case in food security and how that's used, I think it could be a powder keg. When you think about the ability to project power, so China's kept them from imploding, with food, so that's why food is so important.
Mark Purdy:
What we've done there and what we've allowed, we've also contributed to that so that we don't have to fight a conventional war there. But when it comes to global proliferation, that's something that should keep anyone up at night. Or maybe some of us will just stay up at night, others should just stay away from it so you get some sleep. Because they have nuclear reactors, they're building reactors for Syria. Of course the Israelis took care of some business there. They're partnered up with Iranians and elsewhere so I think Kim Jong-un knows it's a red line when it comes to nuclear and trading that stuff out, but he gets desperate at times too.
Jon Doggett:
The big difference of where we are right now versus where we were in the 80s and in the 90s, is we're energy independent. Huge gain for this country. And I think it's one of the things, a lot of folks, our organization included, worked on, is to develop more energy sources. And we've had the development of the natural gas with fracking and all of those things, and I think it really helps a lot, but how secure are we with our food supply right now? We can produce a lot of food in this country, but in light of what happened after COVID, how fragile are we with this food security in this country?
Mark Purdy:
Yeah. And that's great, and I'm going to expand it out a little bit beyond just how food secure are we. I think it comes down to our distribution, but if you think about, there's several world leaders out there that have said you're only three meals away from chaos, regardless of how developed your society is or how fortunate you are, and we saw some of that in COVID. I mean, just the runs on the stores when we even thought we might have a shortage. Security, when it comes to the stability of society, I think we're a little more fragile than we thought, and that has to do with some distribution. When we look at, I call it food power, so when we're talking about what we in the United States have, we have food power, which means we can feed a good portion of the rest of the world. It means that others look to us for stability. It means that we can feed our population in a way that we are able to build our economic power, and we use food for diplomatic power.
Mark Purdy:
Of course, back to your example, our military power, if you think about it, it doesn't happen without having this food security. Our center of gravity in the United States is not only the ability to produce food for our population, but our national security, if you think about center of gravity, is our ability to overproduce and supply the rest of the world. Where are we on that? I think we're at a point of intersection, because as we look at some of the drivers out there, just this volatility in the market and demand around the world, but then also the move for a focus on the environment, which we need to do and we need to embrace it, but we need to incentivize environmentally sustainable practices that maintain and increase the ability to produce.
Mark Purdy:
That's where I'm hopeful and concerned at the same time, because returning to practices of two centuries ago, to help the environment, is not where we need to go to maintain our food power. We need to take care of this planet, we need to take care of our soils, waters and the air, but we need to do it focused on the newest and best technology, which we have, and incentivize that so that we maintain our position of food power in the world. A little longer answer to your question than maybe you were looking for, but I'm pretty passionate about that because food security is national security, and it's really America's food power, which are corn growers, growers of all type, deliver. We need to do this right. We need to focus on our environment and we need to take care of it, but we got to do it right.
Jon Doggett:
Mark, how dependent are we on foreign-sourced inputs? Because all I've heard from growers in the last three, four months is fertilizer prices, fertilizer prices, fertilizer prices. Then I heard this last week about glyphosate, you can't get a tractor or a combine because they don't have chips. How does that weigh in on this?
Mark Purdy:
This is a big deal as well, we are very dependent on foreign entities for our inputs. There are some of them that, maybe not singularly exclusive, but nearly singularly exclusive to China when we're thinking about that. Others, India's a big player, so it's good at least we have some diversification across those two competitors, but that's in some of the fertilizers and other inputs.
Mark Purdy:
But then we look at, like you said, our chips and the technology and just that there's these single sources of inputs that we're relying on, and COVID's really exposed that, and that needs to be part of this greater dialogue in the private sector, to be able to diversify our supply chains. But I think it's also in the policy sector, we've got to figure this out because you don't have military power, you don't have economic power, diplomatic power, informational power, without food and the food power, and our food power is our ability to overproduce. The things that you highlighted here, or some of the things that I talked about, is absolutely important.
Jon Doggett:
All right. Mark Purdy, executive vice president and chief operating officer at Aimpoint Research, thanks for joining us again on this podcast. We appreciate all that you've done in your long, long career that has benefited our country, and it certainly has benefited our industry. So again, thank you. I'm Jon Doggett, I'm the CEO of the National Corn Growers Association and we hope you'll join us again soon for the next episode of Wherever Jon May Roam, the National Corn Growers Association podcast.
Dusty Weis:
That is going to wrap up this edition of Wherever Jon May Roam, the National Corn Growers Association podcast. New episodes arrive monthly, so make sure you subscribe in your favorite app, and join us again soon. Visit ncga.com to learn more or sign up for the Association's email newsletter. Wherever Jon May Roam is brought to you by the National Corn Growers Association, with editing and production oversight by Larry Kilgore III, and it's produced by Podcamp Media, branded podcast production for businesses, podcampmedia.com. For the National Corn Growers Association, thanks for listening. I'm Dusty Weis.