Warfare: Food Supply/Access

[TROUFION]

Btw, the very recent US futures market in grains (particularly corn) is showing some interesting trends. Farmers are seeing a very, very strong market for grains up through May/June, but not so much for future deliveries past that. Why the discount? Interesting question there.

What I hear (living in Iowa currently) is that the future (projected) cost of fuel to conduct harvesting and transport of corn and soybean will cut into the profit magin. The famers here are excited about increased value of the staple crops but are not looking forward to paying the fuel cost for combines and trucks.

Livestock farmers are likewise happy with increased value of their animals but are upset by the growing scarcity of feed grain. A lot of the corn and soybean farmers are going after the ethanol and bio-diesel markets that pay slightly higher at this time.

All this is subject to change as is always the case with commodities. However, increased commodity price seems to be the trend for now.

[jcustis]

NPR had another spot about the issue on the air today. The systemic problem of the poor competing against ethanol production was highlighted. Anyone know what Brazil uses to produce it's fuel?

[Jedburgh]

ISN Security Watch, 14 Apr 08: The Global Food Fight

....The facts are stark: The global price of wheat has risen by 130 percent in the past year, and dairy prices have doubled since 2005. A combination of factors is making basic food and fuel too expensive for people in poorer countries - even as projected world cereal production for 2008 is a record 2,164 million tonnes, up almost 3 percent from last year.

But with across-the-board world food price rises averaging at over 80 percent during the last 24 months, this volatility could acquire a dangerous political counterpart, in countries where 60-75 percent of people's income is spent on food.....

....Another stark fact: Over 240kg of corn would feed one person for a year. This same amount is required to produce just the 100 liters of ethanol needed to fill a SUV tank.....

Anyone know what Brazil uses to produce it's fuel?

Sugarcane

[Stan]

French push for EU food response

UN special rapporteur Jean Ziegler accused the EU of agricultural dumping in Africa.The European Union has set a target of providing 10% of its fuel for transport from biofuels by 2020, which its own environment advisers have said should be suspended.

There are fears that the use of farmland to grow crops for biofuels has reduced the scope for food production.

The EU is well aware of the risks of soaring food prices and, only last week, Development Commissioner Louis Michel warned of the crisis leading to a "humanitarian tsunami" in Africa.

France will take over the presidency of the EU in July and, in a statement on Friday, four ministers made it clear that the violent response to price rises in Haiti could easily be replicated in 30 other countries.

Protests because of a big increase in the cost of rice have led to a number of deaths in Haiti as well as the fall of the government.

[M1911A1]

NPR had another spot about the issue on the air today. The systemic problem of the poor competing against ethanol production was highlighted. Anyone know what Brazil uses to produce it's fuel?

Sugar

[Surferbeetle]

Bloomberg has website that provides a snapshot of commodities futures for those of you interested in keeping track. George Soros provided some predictions today on the commodities market...

April 17 (Bloomberg) -- Billionaire George Soros said the boom in commodities is still in a ``growth phase'' after prices for oil, wheat and gold rose to records.

``You have a generalized commodity bubble due to commodities having become an asset class that institutions use to an increasing extent,'' Soros said today at an event sponsored by the Centre for European Policy Studies in Brussels. ``On top of that you have specific factors that create the relative shortage of oil and, now, also food.''

Commodities are in their seventh year of gains, with oil rising to a record $115.54 a barrel today as the dollar plunged to an all-time low against the euro. Rice has more than doubled in a year, while corn has advanced 68 percent and wheat 92 percent. Investments in commodities rose by more than a fifth in the first quarter to $400 billion, Citigroup Inc. said April 7.

[Watcher In The Middle]

Here's three charts of most recent numbers. There's some interesting information here:

The first chart is who consumes the most rice. No major surprises there:

Rice Consumption by Nation

But then we move on to who produces how much:

Rice Production By Nation

Now, we are starting to see some "issues". Some consumers on the 1st list, have no measurable production capability (on the 2nd list). And other nations have some large gaps between their consumption and their production.

So let's take a look at the rice exporting nations:

Rice Exports By Nation

Now, we have some serious issues. By my count, at least five of those exporting nations have put some form of export controls/tariffs on their food exports, rice in particular.

And the latest is that 2 of the top 3 (Thailand and India; #1 and #3 respectively) have both just "indicated" (from the government, no less) that they expect that a new "base price" of $1,000 per ton will be the minimum price for rice exports. For comparison, at the end of 2007, price was around $360 a ton. This last week in Thailand, rice hit $760 a ton.

Exporters are literally having to break existing supply contracts left and right because the farmers and millers they buy from are simply refusing to supply the rice already contracted for at lower prices.

Btw, two of the bigger rice importers (Indonesia and Iran) are already squawking about prices and terms. Iran in particular.

That's going to be a fun set of negotiations to watch. Because truth of the matter is that the most open source of supply for rice right now is the US.

[Bill Moore]

We always notice a problem after it gets to a point where it becomes extremely challenging to deal with. Our government and others normally ignore the warning signs that point to trouble whether it is global warming, peak oil, or food shortages (translated as food prices) and call those who point them out as representing poor scientific method, and attempt to kill their credibility on Fox News. Then when the problem explodes beyond the manageable we react. Numerous experts pointed out the false profits who preached using corn for ethanol, but that is only one factor contributing to this problem.

The rapid inflation of oil and food prices has now touched many Americans, but not the ones who make policy or the ones who enjoy the SWJ for the most part. Unfortunately we won't feel it until there are riots in our streets, new grass root political parties form, etc.. Equally important (or perhaps more important in the short term) the food inflation is touching huge swaths of the population in South and Southeast Asia, South America, etc., where the population has enjoyed an increasing standard of living for years, now the rug is getting pulled out from under their feet. This will potentially serve as a catalyst for civil unrest and government initiated price controls (a short term fix that will probably make the problem worse in the long run). This is a great rallying call for some insurgent leaders who will exploit anything that makes the government appear illegitimate.


This is a global problem and will require a global response, which means we'll have to cooperate with organizations that we have marginalized in recent years. I think the second and third order effects on our political, social and economic systems will be greater than most assume.

[Watcher In The Middle]

Originally posted by Bill Moore:

This is a global problem and will require a global response, which means we'll have to cooperate with organizations that we have marginalized in recent years. I think the second and third order effects on our political, social and economic systems will be greater than most assume.

Don't see it happening. Certainly not with any high level of UN involvement. The whole UN "Oil For Food" program fiasco will immediately reappear in all it's full blown glory, and there isn't a US pol out there ready to grab for that one again, particularly with the US probably going to have to be a major source of food supply for any such effort. A total non-starter.

The other part of the problem is that honestly, both China and OPEC have had more of an negative influence on the overall psyche of the Commodities Marketplace than most people realize. It's an attitude like "So rice is a grand a ton. Oil's $120 a Bbl. You want Cheap rice? Then cheap rice = cheap oil. Otherwise ante up & pay the price".

And China comes across as willing to do business with virtually anybody. And it's been coming across to the general public as paying off for them. Now, if you look closely, it's not necessarily true, because China has quite a number of very serious issues. But the Marketplace is becoming increasingly desensitized to these issues in the developing nations. It's becoming a very harsh environment out there.

Just look at Zimbabwe as an example. If these "global organizations" want to really make a difference, get rid of Robert Mugabe and his thugs and get "Africa's Breadbasket" back into the food production business again. Because that's just going to be one of the type of steps required to realistically create long term price and supply stability in the commodities markets.

[Stan]

A key goal of the Bush administration has been to boost supplies of renewable fuels to reduce the country's dependence on foreign energy.

Ethanol makers will consume about one-quarter of the 13.1-billion-bushel U.S. corn crop this year, according to the Agriculture Department, a forecast that is increasingly alarming world governments and food aid workers.

But corn prices are rocketing to record highs, which will raise prices for a variety of products as corn is widely used as feed for livestock. Corn for delivery in May rose 15-1/4 cents to $6.07 a bushel at the Chicago Board of Trade Tuesday.

Asked about the food crisis and how it related to biofuels, U.S. Secretary of State Condoleezza Rice said the two were related but there were a host of other issues involved, such as high transportation costs of food.