Why the Food and Energy shock will outlast the War — and how You can position for it
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What do you do when the guns stop but the food crisis is just beginning? Energy is up 40% since the Strait of Hormuz closed on February 28 but grain prices have barely moved. That disconnect is the trade. Farmers across the US and Asia are planting their spring crops right now without enough fertilizer, and that harvest damage is already locked in regardless of what happens next in the Middle East.
This episode walks through five specific ideas built on that thesis. Each trade is designed to profit regardless of what happens next in the Middle East. The crops have already been planted. The market just hasn't figured it out yet...
All this and more on the latest edition of Milkshakes, Markets, and Madness.
MMM episode….164 (April 12, 2026)
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The speaker argues that while the Iran ceasefire ended immediate hostilities, the real economic damage from supply chain disruptions—especially fertilizer shortages and agricultural impacts—is still ahead, creating trading opportunities in commodities and agricultural stocks over the next 6-9 months.
- Cessation of hostilities is being confused with resolution of supply chain problems that are already baked in
- Fertilizer and diesel constraints will bite in 1-3 months, leading to crop yield shortfalls and food inflation 6-12 months out
- Market pricing reflects immediate energy shocks but underprices delayed agricultural and food system impacts
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Natural gas in the United States is in deep surplus with more supply than domestic demand can absorb, while European natural gas commands a premium due to import dependency and scarcity.
“Um this is natural gas in the United States, and you can see we had a big spike uh last year, but then, you know, it's just it's really low because we've got we've got more natural gas than we know what to do with in the United States. And now everybody's coming to us to buy it. But it costs more to buy it in Europe.”
The ceasefire agreement announcement caused oil to fall 13% in a single day, one of the biggest single-day drops in 4-5 years, but this does not mean the supply chain crisis is resolved because the Strait of Hormuz remains effectively closed with only a few ships transiting.
“when the ceasefire the next day when it was announced it you know, oil fell 13% which was one of the biggest single day drops in like four or five years. Um but even though the peace it wasn't a peace agreement, a ceasefire and even that is, you know, up for debate whether it's an actual ceasefire. Um but for the most part the strait still effectively remains closed.”
Markets are confusing a cessation of hostilities with a resolution to supply chain problems, which are two completely different things and the real impact will come 6-9 months down the road from fertilizer depletion and potential agricultural shortages.
“I think that the big rallies that we've seen over the last couple days uh in risk assets and the big sell-off in energy and even a pullback in some of the agricultural commodities uh is confusing a cessation of hostilities with a resolution to the supply chain problems which are kind of baked in at this point because these two things are completely different things.”
The ceasefire announced on Tuesday allowed equity markets to rally over the next couple of days, snapping a four or five week losing streak, while oil sold off significantly.
“Well, this last week, we got the ceasefire agreement on Tuesday. Markets rallied um big uh over the next couple days. They were kind of flat on Friday. But they snapped, I think it was a four or five week losing streak for the equity markets. Um oil sold off.”
Even if the Strait of Hormuz returns to normal operations immediately, the impact on agricultural supply disruption is not over because the supply chain damage is already baked in from the weeks of closures.
“But we still don't have it back to normal and there's only a few that are transiting the strait. Um and even if it does open up as we said the impact is not over because what the real problem in my mind was not the immediate impact of the price spike in energy. But in my mind the real problem comes six to nine months down the road from now when we get into a potential agricultural shortage and depletion um situation.”
Energy (especially oil) is very difficult to trade because it can move 20 bucks up or down in a day, so the speaker avoids trading it directly and instead focuses on the food system's delayed response to the energy shock.
“the bottom line is, you know, in my opinion, energy is really tough, especially oil. Um you know, it could go up 20 bucks in a day or down 20 bucks in a day. I'm just not even going to try to trade it. But, I do think what is easier to trade, not easy, but easier to trade is the food system's delayed response to an energy shock, especially when you combine it with the fertilizer shock and the chemical shock as well.”
A potential trade is going short US natural gas and long European natural gas, betting on the spread widening because Europe will face higher energy shocks than the US due to its exposure to supply disruptions.
“I expect the impact to be a lot higher uh especially on energy prices in Europe than in the US. So, one thing you could do is go short um natural gas in the United States and go long natural gas in Europe. Um this is natural gas in the United States, and you can see we had a big spike uh last year, but then, you know, it's just it's really low because we've got we've got more natural gas than we know what to do with in the United States. And now everybody's coming to us to buy it. But it costs more to buy it in Europe. So, um you know, you can see it had a big spike um when the war broke out, whereas the the US natural gas did not.”
The speaker does not recommend liquidating all equity holdings, but once the ceasefire bounce stabilizes and if it continues for another 1-2 weeks, investors should consider buying hedges when the VIX is back below 20.
“So, this doesn't mean you need to go out and sell everything you own, but now that we've had the bounce, um and if we especially if we bounce for another week or two, uh you know, while cuz it was a 2-week ceasefire, if we bounce higher over, you know, going into the end of this ceasefire and we're kind of up against these resistance levels, and you got the VIX down back down below 20, I think it would be a very wise thing to to to buy some hedges at that point.”
Going long wheat is the highest conviction and easiest trade idea, with potential returns of 20-40% over the next 6-12 months if crop supply shocks materialize, or even higher in a real shortage situation.
“the highest conviction just easiest idea itself is to go long wheat. Um now, how do you do that? Well, there's different ways you can do it. If you're an institutional investor, or if you have access to futures, you have the ability to do some things that the average investor doesn't. But, you know, you can just go long um the wheat contracts. You could buy calls, you could buy call spreads on on wheat. Um I would probably go out to at least the December contract, if not longer, uh because I think that's about when the problems are going to start to to show up.”
Speaker recommends going out to at least the December wheat contract or longer because that is approximately when the fertilizer and supply problems will start to show up in yields.
“I would probably go out to at least the December contract, if not longer, uh because I think that's about when the problems are going to start to to show up.”
Fertilizer producers offer a way to capture the nitrogen bottleneck created by the Strait of Hormuz disruption, with 20-30% or potentially double that return potential if a real crisis occurs, through companies like CF Industries, Nutrien, and Mosaic.
“But in my mind the real problem comes six to nine months down the road from now when we get into a potential agricultural shortage and depletion um situation...um if you're looking at ideas of how to play this is the fertilizer producers. Um it's probably the easiest way to capture the nitrogen bottleneck that's also part of, you know, the Strait of Hormuz...you can also just do it by uh going long some US equities. Um CF uh International, um Nutrien, and Mosaic are probably just some simple ways to do it. And again, I think we could easily see some, you know, 20-30% returns. And if we get into some kind of a real crisis, which is possible, you know, could be could be double that.”
Sugar, coffee, and other soft commodities have not yet shown major price moves relative to year-to-date movements, with sugar and coffee particularly beaten down, offering entry points for a pullback-based entry strategy.
“Here you can see sugar, you know, it's gone up a little bit year-to-date, but then it went up a little bit on the news, but it's kind of pulled back now and it's kind of sitting just above its 100-day moving average. Coffee Coffee's down for the year. Hasn't really shown a thing. So, that you know, that would be a way to buy something that's kind of beat up that could potentially benefit from it.”
Hedge prices were prohibitively expensive when the VIX was above 30 during the Iran crisis, but hedge buying becomes attractive when VIX returns to the teens, creating an opportunity to build protection at reasonable cost.
“You know, we talked a couple weeks ago it was very hard to buy hedges with the VIX above 30, and we mentioned if it gets back down into the teens, that would be a good opportunity to do so. Well, you might have that opportunity to do so.”
Equity markets have bounced back to their 200-day moving averages on the Dow, S&P, and Nasdaq after the ceasefire, but these moving averages now represent resistance rather than support, making it hard to break above them and reach new all-time highs before the midterm elections.
“we've had this big bounce, but you know, everything had broken down. Stochastics had gotten very low. What I think is interesting is they had all broken through both the 50-day, 100-day, and 20-day 200-day moving average. This bounce has now brought them back up to the 200-day moving average on the Dow. Um same thing on the S&P, and same thing on the Nasdaq. So, what was once support is now resistance. I think it's going to be very hard to break through those moving averages and move back above all-time highs prior to the election, uh the midterm elections later this fall.”
Wheat has not seen a huge move since hostilities started despite running up year-to-date, remaining at roughly the same level as when the conflict began, suggesting the bulk of the move is still ahead.
“But the reality is so far, it we haven't seen a big impact on wheat. I mean, we Yeah, it ran up, but, you know, it's basically the same level it was when the hostility started. So, while wheat's up this year, it hasn't really gone up a whole lot since the war started.”
Last ships that left the Strait of Hormuz a month ago are arriving in Asia, Europe, and North America, meaning a lot of the war's impact on energy prices and risk assets has already been priced in.
“over the last couple weeks and even over the next couple weeks in the future the the last ships that left the Strait of Hormuz a month ago are arriving in Asia, in Europe, in North America. And a lot of that impact of the war has already been priced in. You know, front-end oil, obviously, um you know, the headline uh you know, risk with you know, risk assets coming off and the immediate stress um has already been priced in.”
The speaker does not explicitly recommend any of these trades; they are presenting trade ideas and noting that recipients should do their own research and not treat these as personal recommendations given unknown personal circumstances.
“I'm not going to tell you what to do. I'm going to tell you some of the things I'm looking at. I'm going to tell you some of the trades I'm thinking about doing, but I want to be clear, these are not trade recommendations. These are trade ideas. I don't know you. I don't know your personal portfolios. I don't know your risk tolerance and your age and all that kind of stuff.”
The ceasefire agreement announced on Tuesday represents a cessation of hostilities, though debate exists about whether it constitutes an actual ceasefire.
“Well, this last week, we got the ceasefire agreement on Tuesday.”
DBA and PDBA are soft commodity ETFs with similar holdings; PDBA has the advantage of not using K-1 tax forms, making it potentially preferable for certain investors.
“DBA uh is one, PDBA. They're basically the same thing. PDBA you don't have it it's a way to it's an ETF that doesn't use a K-1.”
ETF access to wheat has efficiency problems and structural issues compared to futures, but remains viable for retail investors without futures access.
“You can also um there's a wheat ETF. And now, ETFs are not as efficient, um and there's problems with ETFs, but, you know, if if that's what you're limited to, that would work as well.”
Monetary Metals offers a way to earn yield on gold holdings by making gold productive through lending it out, allowing investors to generate returns while waiting for gold to spike.
“those who've been watching for a long time know I'm on the board at Monetary Metals. And you know, while you're waiting for gold to come back, this is, you know, a lot of times if gold isn't moving, you're not you're just sitting there, right? And if it's not going up, then you're you're you're not making money on that capital. That doesn't mean you shouldn't own gold. Everybody should own gold. But if you want to expand your exposure to gold in a way that pays you even when gold is not going up every day, um I think Monetary Metals is a fantastic way to do it. It's a way to earn yield on gold for those who believe that gold is money. It's a way to put gold back to productive use as if it was money.”
ADM has had a pretty good move year-to-date and may be worth waiting for a pullback to enter, as the ag merchant / consumer discretionary trade may not pay off until fall and winter.
“Here you can see ADM. ADM has had a pretty good move year-to-date and it's you know, you might want to wait for a pullback to put that on.”
Silver and gold should decline and touch their 200-day moving averages, which the speaker would buy at approximately 60 bucks for silver and low 4000s for gold.
“silver and gold, you know, I still think that both silver and gold are going to go back down and touch their 200-day moving averages. I would probably be a buyer there. That's about 60 bucks for silver, and it's kind of the low 4,000s for gold.”
The Strait of Hormuz is beginning to open up further based on recent news, but still remains far from normal operations with only a few ships transiting.
“There's a few ships going by um and we got some more news today that it's starting to be opened up even more. But we still don't have it back to normal and there's only a few that are transiting the strait.”
The previous two weeks of prior episode analysis should be watched before this episode to fully understand the multi-step supply chain argument being made, as this episode builds directly on that context.
“I would highly recommend you watch those before watching this one because of this plays right into that and you might have a little hard time with this one if you didn't understand what we already discussed in the last two.”