As prices soar, give food some thought

2 As and a B · Post by **2 As and a B** » 12 Sep 2010, 19:05

Food has hit the headlines again in a reminder of the spiralling inflation and social unrest that swept through the developing world in 2008.

This year's price spike is different in a number of ways but the fragility of the world's food system highlighted by the latest bout of volatility is very much the same.

Wheat prices have risen by around 70pc since the beginning of the year, mainly on the back of a heatwave in Russia that prompted Premier Vladimir Putin to slap a ban on exports until after next year's harvest. Good yields for other key exporters, such as the US, mean this is no crisis yet – but further shocks or increased protectionism could see things deteriorate quickly.

Things are different this time for a few other reasons. The price spike this year has been largely confined to wheat, although other foods, such as coffee, cocoa and meat, are pushing higher. Barley and corn prices are under pressure as consumers switch out of wheat where they can. Demand for food is also lower than two years ago and there is less of a squeeze from the biofuels industry thanks to the lower oil price.

It would be wrong to be complacent about the outlook for food prices, however. The increasingly protectionist behaviour of countries such as Russia is a symptom of a more introspective world. Food riots in Mozambique are a stark reminder that when food makes up a significant slice of total household spending, rising prices are not just an irritant but have the potential to topple governments. In the US, food has an 8pc weighting in the inflation basket; the equivalent figure in India is 47pc.

...article continues

syberberg · Post by **syberberg** » 12 Sep 2010, 19:21

Why does it always seem that the only solution is: "Produce more" rather than "waste less"?

Why is Russia's entirely sensible decision to suspend exports in the light of a poor harvest seen as "protectionist" and bad?

In the shorter term, the most interesting opportunities probably lie in fertilisers. During the 2007/08 crisis the cost of commodities such as urea and potash rose around 10-fold. Having seen its share price spike higher two years ago but then fall back to a much more attractive level, it is no surprise that Potash Corp has recently attracted the attention of BHP Billiton.

So, shift the speculation into fertilizers, pushing the price up further above rises due to shortages and therefore increasing the price of food. Why not invest in finding a way of producing terra preta?

nexus · Post by **nexus** » 12 Sep 2010, 19:23

This is another related article. Gotta love the *ankers.

http://www.telegraph.co.uk/finance/mark ... rises.html

The World Development Movement have accused Goldman Sachs of exacerbating the global food crisis through its commodity trading operations.

Lord Beria3 · Post by **Lord Beria3** » 12 Sep 2010, 20:22

People have attacked Russia's export ban as it has caused prices to be driven up on the global mks (on scarcity fears) thus hitting poor people around the world.

One of the reasons, along with speculators, that prices for critical foodstuff rose during the summer of 2008 was the decision by governments to ban the export of food.

This was a key driver in the rise in food prices, leading to false scarcity rumours in the mkts, leading to ever higher prices, which was why we saw food riots around the world.

If governments hadn't panicked and gone all protectionist, than maybe the speculators would had had less excuse to ram up prices.

Of course, regulation of the commodity exchanges needs to occur, but you can't can speculation as its been around since the beginning of time.

JohnB · Post by **JohnB** » 12 Sep 2010, 20:28

Lord Beria3 wrote:If governments hadn't panicked and gone all protectionist, than maybe the speculators would had had less excuse to ram up prices.

Or maybe if they hadn't gone all globalisationist, and put profit before resilience, we wouldn't be in this position.

Lord Beria3 · Post by **Lord Beria3** » 12 Sep 2010, 20:32

Maybe you are right, but I don't think Russia's decision was a wise one.

It was done on narrow minded grounds with no thought to the consequences for the rest of the world.

Putin has a history on this...

http://www.thesun.co.uk/sol/homepage/ne ... 108581.ece

In an astonishing outburst, Mr Putin said: “We all know that African countries used to have a tradition of eating their own adversaries.

“We don’t have such a tradition or process or culture and I believe the comparison between Africa and Russia is not quite just.”

2 As and a B · Post by **2 As and a B** » 12 Sep 2010, 22:18

Another related article by the ubermeister of doom, AEP:

The backlash begins against the world landgrab

The neo-colonial rush for global farmland has gone exponential since the food scare of 2007-2008.

Arowx · Post by **Arowx** » 12 Sep 2010, 22:52

Wasn't there a lot of profiteering as well where people were literally hording tons of grain/rice (think warehouses full) in the process pushing the price up further just to make more of a profit.

syberberg · Post by **syberberg** » 13 Sep 2010, 00:31

Lord Beria3 wrote:Maybe you are right, but I don't think Russia's decision was a wise one.

It was done on narrow minded grounds with no thought to the consequences for the rest of the world.

Putin has a history on this...

http://www.thesun.co.uk/sol/homepage/ne ... 108581.ece

In an astonishing outburst, Mr Putin said: “We all know that African countries used to have a tradition of eating their own adversaries.

“We don’t have such a tradition or process or culture and I believe the comparison between Africa and Russia is not quite just.”

And The Sun is known for being a highly accurate newspaper. Part of the Murdoch empire, highly right-wing stance.

I wouldn't even wipe my arse with it.

Anyway, which is more responsible: A government who reduces exports for the benefit of it's own people, or a government who lets its people suffer to ensure cheap food for the West?

I fully expect to see more of this type of hysterical propaganda the more ELM starts to bite.

Now for a little bit of perspective:

Russia's grain harvest in 2010 may total just 60 million metric tons, or 38% less than last year, Prime Minister Vladimir Putin said at a government presidium meeting.

"According to the latest Agriculture Ministry forecasts, the harvest will be much more modest than we assumed at the beginning of the year. It could total 65 or even 60 million tons," Putin said, adding that Russia's domestic grain requirements for 2010 amounted to 78 million tons.

(Original article)

Domestic grain requirements = 78million tons

Expected harvest = 65million tons at best.

So tell me how it's possible to export any grain, regardless of country in question, when there isn't enough to fulfil domestic requirements of said country and how that can possibly be described as "protectionist" rather than "pragmatic"?

Post by **kenneal - lagger** » 13 Sep 2010, 01:34

syberberg wrote:So tell me how it's possible to export any grain, regardless of country in question, when there isn't enough to fulfil domestic requirements of said country and how that can possibly be described as "protectionist" rather than "pragmatic"?

Private Russian merchants sell grain onto the world market at the high world price (making themselves an healthy profit) and the Russian government has to buy it back and subsidise it for sale on the local market to forestall the riots and stay in power.

So not banning exports costs the Russian government, and eventually the Russian people, a large fortune. Wastes a lot of time. Uses large amounts of oil. Puts the Russian government at risk.

So it's protectionist of the Russian government and people, and their pockets, and also pragmatic as well as it saves an awful lot of bother. The only losers are the grain merchants and hopefully the greedy 'kin *ankers.

syberberg · Post by **syberberg** » 13 Sep 2010, 04:31

kenneal wrote: The only losers are the grain merchants and hopefully the greedy 'kin *ankers.

So that's why it's portrayed as a "bad thing" then. Can't be putting people before profits, that's rude that is.

2 As and a B · Post by **2 As and a B** » 13 Sep 2010, 07:34

syberberg wrote:So tell me how it's possible to export any grain, regardless of country in question, when there isn't enough to fulfil domestic requirements of said country and how that can possibly be described as "protectionist" rather than "pragmatic"?

To export part of the harvest and import a greater amount, and be called "protectionist" for not doing so, one needs a whole lot of parasitic middlemen to be taking their cut - Capitalism.

Ludwig · Post by **Ludwig** » 13 Sep 2010, 11:42

Lord Beria3 wrote:Maybe you are right, but I don't think Russia's decision was a wise one.

It was done on narrow minded grounds with no thought to the consequences for the rest of the world.

Oh yeah, right, and you think if Britain would do any different if it was in the same situation?

You advocate hard-headed self-interest, except when someone else's hard-headed self-interest affects you. Typical Tory-voter hypocrisy.

Lord Beria3 · Post by **Lord Beria3** » 13 Sep 2010, 12:38

Well I agree with the UN here.

http://www.lasvegassun.com/news/2010/se ... wheat-ban/

No global food crisis appears to be looming despite a Russian wheat shortfall that has helped lift prices to their highest level in two years, but volatile food commodities markets need better regulation, a U.N. agency said Tuesday.

As for Russia's export ban on wheat, Ghanem said, "as a general rule, export bans are to be avoided as they create market instability."

Post by **kenneal - lagger** » 13 Sep 2010, 14:42

Ludwig wrote:Oh yeah, right, and you think if Britain would do any different if it was in the same situation?

You advocate hard-headed self-interest, except when someone else's hard-headed self-interest affects you. Typical Tory-voter hypocrisy.

That comment sounds like typical Left Wing hypocrisy to me. Personal selfishness is bad but national selfishness is natural and good or, at least, acceptable! They're both a hypocritical as each other.