Here are the highlights of the food shortage news from the past few days:
Former President Bill Clinton weighs in on ethanol and it’s impact on corn shortage:
WASHINGTON — With global food prices rising and more corn being diverted to the production of ethanol fuel, Bill Clinton is warning of food riots in poor nations.
The former president told farmers and Agriculture Department employees on Thursday that while producing biofuels is important for reducing America’s dependence on foreign oil, farmers should also look beyond domestic production and consider the needs of developing countries.
“I think the best thing to say is we have to become energy independent, but we don’t want to do it at the cost of food riots,” Clinton said.
Bangladesh stockpiles food in anticipation of further price increases:
Feb. 25 (Bloomberg) — Bangladesh, South Asia’s biggest rice buyer, is in talks with India to buy grains on a regular basis to bolster food security as governments seek to avoid a repeat of the unrest that broke out when prices last soared.
A long-term agreement will protect Bangladesh from possible defaults by private traders, who sometimes fail to meet their commitments if prices gain, Muhammad Abdur Razzaque, the nation’s food minister, said in an interview yesterday. “Rice prices rose this year in our country; people are suffering as they have limited income,” Razzaque said by phone from Dhaka.
In this very in-depth overview of the food crisis, which is well worth reading, one Wall Street Asset Manager who was interviewed states:
“People have to eat, and we have a backdrop of falling stockpiles,” Sorrentino said by telephone from Cincinnati. “Even if we have a great harvest, we’ll just be getting back to levels people can be comfortable with in terms of stockpiles. The trend is going to be for increasing prices for years to come.”
The article concludes with this:
“This has been a demand-driven bull market,” said Jim Farrell, 56, the chief executive officer of Omaha-based Farmers National Co., which manages more than 2.4 million acres on 5,000 farms in 24 states.
“I do not think we can see a big enough increase in US acreage to rebuild inventories back to a comfortable cushion in one year,” he said.
“It is going to take two years of good weather and good yields. There is absolutely no room for any weather problems anywhere in the world this year.”
Meanwhile Australia is hopeful that farmers will increase production, dropping the cost, since demand is high.
CNBC cuts through the bullshit about there being no inflation with numbers like this:
- Ground beef up 6.8 percent month over month, and 11.1 pct year over year.
- Butter, up 3.2 percent monthly and a stunning 27 percent over the past year.
- Coffee, up 6.5 percent and 16 percent.
- Potatoes, up 3.6 percent and 7.1 percent.
- Lettuce actually fell 5 percent monthly after a spike higher in December, but is up 5 percent over the past year.
- Bread up 1 percent and 3 percent.
- Chicken up 0.8 percent. and 4.3 percent .
- Egg prices have been fairly steady.
- Milk, down slightly month over month, but up 2 percent year over year.
That doesn’t sound like the 1.6 percent inflation rate the government is feeding us, now does it?
China gets a three days of rain to cut the edge on their drought which brings down wheat prices by 0.08%. Experts say it will take 3 months to beat their drought.
Elsewhere, Conditions for Russia’s coming harvest are not as favorable as thought, industry observers said on Saturday, citing evidence of patchy snow cover and potential lack of supplies for spring sowing.
USDA predicts further rises in food costs due to energy and commodity prices:
WASHINGTON, Feb 24 (Reuters) - U.S. consumers should brace for rising food costs this year as higher commodity and energy prices make their way to products lining grocery store shelves, the Agriculture Department said on Thursday.
Food prices are forecast to rise a sharp 3.5 percent this year — nearly double the overall inflation rate. The lion’s share of the increase is expected in the second half of 2011. Just last month, USDA forecast an increase of 2.5 percent in 2011.
Policymakers all over the globe scramble to address the worsening shortages and inflation as mixed weather reports fuel and dash hopes.
The Wall Street Journal blames failed policies and highlights the severity of the situation:
World food prices are pushing higher—the United Nations overall food index shows a 28.3% annual increase, with cereals up 44.1%—sparking concerns that a new food crisis may be emerging, just three years after the last one. Does this mean the world is running out of food?
The quick answer is that the world does seem to be running low on cheap food. There is still an ample potential supply of foodstuffs; it’s just not getting tapped, thereby creating low current supply even as demand shoots up with the rise of large emerging markets. This supply shortage stems from the failure of governments and donors over nearly three decades to fund the basic agricultural research, investments in rural infrastructure, and training for smallholder farmers necessary to push out the productivity frontier.
Until recently, world food crises have been relatively rare events—occurring about three times a century, usually three to four decades apart. The last one to have truly global ramifications, occurred in 1972-74. Over those two years, real rice prices rose 206.3% and real wheat prices rose 118.2%, both setting historic highs.
The food crisis of 2007-08, although scary at the time, was relatively mild by comparison. Prices for wheat, rice and maize—the staple foods that provide well over half the world population’s energy intake directly and a good deal more indirectly via livestock products—rose 96.7% between 2006 and 2008, not approaching the spikes in the mid-1970s when corrected for inflation. Yet here we are just a few years later, talking about food prices again.
Oppressed North Koreans, long struck by famine, suffer as the weakest hurt the most. In my opinion, NK is ripe for bloody revolution based on food shortages at this point:
Experts from five charities visited the country, where, a statement said, they “observed evidence of malnutrition, food shortages and people foraging for wild grasses and herbs.” They also warned global food prices had risen so dramatically the government was finding it difficult to import food to the country.
A leading expert on the state said in an interview harsh winters are becoming more common in the country, and food shortages are becoming a “permanent phenomenon.”
Hundreds of thousands of people died of starvation when a famine devastatedin the 1990s. Some modern observers say up to two million may have died.
However, the REAL story is that North Korea is hoarding the food for it’s military.
In September last year, Grand National Party lawmaker Kim Moo-sung said North Korea has stored 1 million tons of rice for a war. That is enough to feed the country’s 24 million people for three months. Early last year, North Korean authorities temporarily alleviated food shortages during the cold months by tapping into the military’s food stores, but sources in the North say the regime shut them again after the attacks on the Navy corvette Cheonan and Yeonpyeong Island increased tensions with the South.
“Since 1987, North Korea has been setting aside 12 percent of its rice output as emergency supplies in case of war and 10 percent for military consumption,” an intelligence official said.
In a very telling prediction, Israel may begin to cut production of non grain crops and take measures to produce more edible foods on a larger scale. What really struck me was the prediction that over the next few decades they think the US might choose to feed food hungry “neighbors” rather than shipping overseas. Who? Canada? Mexico?
In the coming decades experts predict difficulties in the ability to produce food due to processes such as world population growth and climate change that will expand arid areas and reduce the available land for agriculture.
“This could lead to a situation in which a country like the United States will have to choose whether to provide wheat to hungry neighboring countries or to Israel, and it will probably prefer those close to it,” Rabinovich says.
“So Israel must prepare to produce its own supply of grain crops like wheat …. Israel may have to give up crops like sunflower seeds and cotton in the Jezreel Valley in favor of wheat. It may have to decide to cut down on food exports in order to provide food for the large population of Jews and Palestinians living between the sea and the Jordan River in two decades.”
Scotiabank is out with a good research report on the impact of surging crude prices on the global economy. In particular, the report states that the effects are being dramatically underestimated by market participants. This is despite the last time crude went parabolic back in 2008, which led to a worldwide recession.
The reason the global economy is so susceptible to higher oil prices is because consumers are facing a combination of rapidly rising oil and food prices, creating a double whammy, which automatically decreases available discretionary income.
It is estimated that increased food and oil prices have cost consumers an extra $225 billion (compared to late 2008 levels). Furthermore, US households are severely budget constrained. thanks to high unemployment (U-6 16%), no wage growth, and little to no home equity, which has been the traditional cash cushion of the American consumer.
Without access to home equity, consumers are less able to whether the impact of increasing oil prices, even for a short period of time. This dynamic will have a severe impact on consumer spending, hence depressing economic growth in an economy, which is still reliant on government life support.