Originally posted by selil:
Don't forget food needs water. Water is the short pole.
why (in part) the wheat harvest has been substandard the last two years - drought. But the corn harvest (beans, also) has been good the last 2 years, because no drought.

My concern is that we are already seeing nations turn off the export tap to maintain the stability of their domestic food supply.

Imagine what would happen if our 2008 harvest doesn't grow at the same level (or anticipated levels) as for the prior two years, but demands continues to increase. That happens, we got problems right here, right now. You could easily get a 20% rise in base grain prices here in the US, and there's not a pol out there who could withstand the homegrown political pressure they'd be dealing with to cut back/limit food exports. Anything to get those food prices under control.

Look at what Argentina does (WSJ, Pg. C3, 12.26.2007) on grain exports. They limit exports to a percent of a base year (for beef, it's 2005), and only 70% of that year's exports. On grains, they add on a "per Bu." export tax of between 27.5% up to 35%.

Let's not kid ourselves - All the pols are looking for an extra source of cash to fund all their favorite programs - what better way to (a) raise additional cash to fund these programs by (b) taxing food exports, which people have to buy (c) with the end result of maintaining the stability of our domestic food prices.

For example, Argentina raised the export tax on soybeans from 27.5% to 35% in December, 2007, when the daily settlement price on the continuous front-month contracts went from around $8.70 a Bu. (09.01.2007) to $11.80 a Bu. (12.24.2007) for soybeans.

Anybody who thinks our pols aren't paying attention to all the additional rivers of cash that Argentina's government is bringing in with these export tariffs is crazy.

But think about what the consequences would be in the international relations arena if all the sudden the US starts treating food exports the same way as OPEC treats oil.

Thoughts?