Warfare: Food Supply/Access

[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.

[Surferbeetle]

....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....

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.

Watcher in the Middle,

Appreciate the links. No, I would agree that government intervention/price controls are not the answer, Argentina provides a fairly recent Latin American example of why.

This week's Economist offers an interesting analysis and solution

In general, governments ought to liberalise markets, not intervene in them further. Food is riddled with state intervention at every turn, from subsidies to millers for cheap bread to bribes for farmers to leave land fallow. The upshot of such quotas, subsidies and controls is to dump all the imbalances that in another business might be smoothed out through small adjustments onto the one unregulated part of the food chain: the international market.

For decades, this produced low world prices and disincentives to poor farmers. Now, the opposite is happening. As a result of yet another government distortion—this time subsidies to biofuels in the rich world—prices have gone through the roof. Governments have further exaggerated the problem by imposing export quotas and trade restrictions, raising prices again. In the past, the main argument for liberalising farming was that it would raise food prices and boost returns to farmers. Now that prices have massively overshot, the argument stands for the opposite reason: liberalisation would reduce prices, while leaving farmers with a decent living.

There is an occasional exception to the rule that governments should keep out of agriculture. They can provide basic technology: executing capital-intensive irrigation projects too large for poor individual farmers to undertake, or paying for basic science that helps produce higher-yielding seeds. But be careful. Too often—as in Europe, where superstitious distrust of genetic modification is slowing take-up of the technology—governments hinder rather than help such advances. Since the way to feed the world is not to bring more land under cultivation, but to increase yields, science is crucial.

[Watcher In The Middle]

over food shortages is a complete non-starter:

UN Expert Calls Biofuel 'Crime Against Humanity'
By Edith M. Lederer, Associated Press
posted: 27 October 2007 09:40 pm ET

UNITED NATIONS (AP) -- A U.N. expert on Friday called the growing practice of converting food crops into biofuel "a crime against humanity,'' saying it is creating food shortages and price jumps that cause millions of poor people to go hungry.

Jean Ziegler, who has been the United Nations' independent expert on the right to food since the position was established in 2000, called for a five-year moratorium on biofuel production to halt what he called a growing "catastrophe'' for the poor.

Scientific research is progressing very quickly, he said, ''and in five years it will be possible to make biofuel and biodiesel from agricultural waste'' rather than wheat, corn, sugar cane and other food crops.

Link

Now, think of this "stupidity" from a political viewpoint here in the US (like in the Midwest). Explain to me exactly how you are going to get (a) Max Baucus (D-MT); (b) Tom Harkin (D-IA); Evan Byah (D-IN), or virtually any other US Senator from the Midwest (Democrat or Republican) to advocate working with the UN, and in effect just handing their potential opponents an issue over dissing their farming base of supporters.

You aren't going to get a one of them to support you, because imagine telling a farmer that because they support Ethanol, they are part of committing a "crime against humanity" - just because they FARM for a living.

I mean, how stupid can you get???

Ethanol production from corn just isn't an efficient idea. Ethanol from sugar cane is much better (than corn) from a production standpoint. But talking smack to the farming community is a sure-fire way to make sure you get nowhere fast.

/rant off

[Ron Humphrey]

It brings to mind how often I fail to expand my mental horizon's in considering strategic implication's.


Wonder how those non-state actor's did in counting on this type of thing?

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.

[bourbon]

Wonder how those non-state actor's did in counting on this type of thing?

I firmly of the believe that persons connected to bin Laden, and/or AQ, are profiting handsomely in commodity and financial markets. These are smart people, they've read Paul Kennedy's Rise and Fall of the Great Powers, they know high finance, they know oil. They could have readily anticipated the cascading effects of a surge in oil prices. I think it is likely that they did, and that they consider it a pillar in their strategy of defeating the US by leading it blindly to its fiscal demise.

"We -- with God's help -- call on every Muslim who believes in God and wishes to be rewarded to comply with God's order to kill the Americans and plunder their money wherever and whenever they find it."
- Fatwa Urging Jihad Against Americans, published in Al-Quds al-'Arabi on Febuary 23, 1998

[Watcher In The Middle]

Originally posted by Bourbon:

I firmly of the believe that persons connected to bin Laden, and/or AQ, are profiting handsomely in commodity and financial markets. These are smart people, they've read Paul Kennedy's Rise and Fall of the Great Powers, they know high finance, they know oil. They could have readily anticipated the cascading effects of a surge in oil prices. I think it is likely that they did, and that they consider it a pillar in their strategy of defeating the US by leading it blindly to its fiscal demise.

There's just way too much smart money out there for this to happen. Besides, the last time around where there was cascading oil prices worldwide, the whole ag community took it in the shorts. Not happening this time around. Actually, it's going 180 degrees this time around.

Looking back at the last 12 to 18 months, there were a few people who predicted this, but not many (I mean like a handfull). Most missed big time on the whole ag commodities market (too much time spent on Hedge funds, with all the CDO's and SIV's in the subprime markets).

Truthfully, we here at SWJ did a better job of seeing the effects even before the MSM starting running all their "scare" stories.

If this is their version of our "financial demise", well, they may hit Wall Street (although methinks Wall Street pretty much did it to themselves without a whole lot of outside help), but in the MidWest and the other ag production areas of the US, Main Street is doing pretty well, thank you. Not perfect, but pretty well.