Warfare: Food Supply/Access

[Watcher In The Middle]

because the grain market seemingly is being driven by the negative news. And as a result, prices are going up.

As to Argentina, that's what has tended to occur in prior years. But Argentina has created a major self inflicted wound resulting in a nationwide agricultural strike, which has lots and lots of implications.

Argentina Bids To End Farm Strike
Apr 1, 2008 9:49 AM, By Richard Brock

In a bid to resolve a 19-day farm strike that has produced severe food shortages and a major political crisis, Argentina’s economy minister on Monday announced measures to compensate small-scale farmers for the effect of a recent controversial tax hike on soy exports.

Martin Lousteau says the government would offer refunds on export taxes equivalent to the loss that these smaller producers have incurred since the tax was raised under a new system introduced on March 11, when it provoked farmers to block roads and withhold supplies.

Vowing to challenge the heavy concentration of soy production in the hands of a few large producers, Lousteau says the measure would cover 80% of all producers – those who produce just 20% of the country's total output.

Additionally, special transport subsidies will be given to small producers in Argentina's more distant, poorer northern provinces.

Link to Article

There's another issue that's almost certainly going to come up, and that's the adoption and use of bio-engineered corn (like Bayer CropScience LibertyLink corn). All the activists say its unsafe, and they raise all the "Frankenfood" threats and issues. Here's a link to a more balanced outlook:

The other side of the story.

The real issue, long term, is that at least one, if not several options are going to have to start to occur in the near future to alleviate the food shortage issues. Bottom line, is that as in petroleum, food demand is and has been increasing greater than supply (for the last several years).

All the activists shout about "No War For Oil", but will they say the same thing about Food?

[marct]

All the activists shout about "No War For Oil", but will they say the same thing about Food?

I suspect that will depend on price rises in the fair trade vegan delicatessens .

[Stan]

Wasn't it just last year American farmers asked Congress to consider the need to reinstate strategic grain reserves, in order to stabilize crop prices?

Did that ever go anywhere?

Much like our need for strategic petroleum reserves, policymakers will soon have to come to terms with/or acknowledge that having grain reserves has become just as urgent.

[Watcher In The Middle]

Originally posted by Stan:

Much like our need for strategic petroleum reserves, policymakers will soon have to come to terms with/or acknowledge that having grain reserves has become just as urgent.

You are probably quite correct, but tend to doubt that it goes anywhere, particularly after our experiences back in the 1960's and 1970's.

We used to have what you are talking about (Strategic Reserves), but it ended up being a giant boondoogle on a scale that was almost beyond imagination. It really was a mess, and if you talk to the guys who were active "back in the day", well they still tell stories about it. Let's just say that it tended to be a real life version of "The road to hell is paved with good intentions".

Seriously, it was bad, and then congress started using the program as "welfare for farmers", and honestly, that just made things worse - even for the farming community.

Remember all the "surplus cheese" owned by the USDA? It wasn't limited to just cheese.

You can only store crops for so long before they go bad (even under the best of conditions), so then you had storage issues, and then there was the program where the feds would provide subsidies for farmer's grain bins, storing federally acquired feed grain, and the audits, and the record keeping, and - what an overall, never ending nightmare.

One of the biggest problems you see today in the AG marketplace is that our storage capacity isn't up to the needs. Demand for building new grain storage has a backlog, and up into December, 2007 it was actually getting longer.

Tend to doubt they (and I mean the farming community in particular) wants to deal with that type of government program any more.

[bourbon]

All the activists shout about "No War For Oil", but will they say the same thing about Food?

I would argue that oil is food. And further argue that the activist “no war for oil” mantra is as misguided, as the center-right notion that oil (and thereby food) has nothing to do with this, and it is a war over religion/civilization/freedom/etc.

The lefty likes of Harper’s articles aside, I think this is a pretty good, systematic look at things:

'The Oil We Eat' Following the Food Chain back to Iraq, by Richard Manning. Harper’s, 31 Jan 2003.

Food is politics. That being the case, I voted twice in 2002. The day after Election Day, in a truly dismal mood, I climbed the mountain behind my house and found a small herd of elk grazing native grasses in the morning sunlight. My respect for these creatures over the years has become great enough that on that morning I did not hesitate but went straight to my job, which was to rack a shell and drop one cow elk, my household's annual protein supply. I voted with my weapon of choice--an act not all that uncommon in this world, largely, I think, as a result of the way we grow food. I can see why it is catching on. Such a vote has a certain satisfying heft and finality about it. My particular bit of violence, though, is more satisfying, I think, than the rest of the globe's ordinary political mayhem. I used a rifle to opt out of an insane system. I killed, but then so did you when you bought that package of burger, even when you bought that package of tofu burger. I killed, then the rest of those elk went on, as did the grasses, the birds, the trees, the coyotes, mountain lions, and bugs, the fundamental productivity of an intact natural system, all of it went on.

[marct]

CBC.ca has a decent story with some links in it here.

[jcustis]

Today's Wash. Post front pager on the Philippines rice issue referenced these folks: http://www.philrice.gov.ph/ and the lead article there provides some interesting context. Rice production, for wxample, is having problem keeping up with the "three babies a minute" birthrate.

[Watcher In The Middle]

FAO expects rice production to rise by 1.8 percent in 2008

Market situation remains difficult in the short-term – lower rice trade

2 April 2008, Rome – World rice production is expected to increase in 2008 by 12 million tonnes or 1.8 percent, assuming normal weather conditions, FAO said today. Production increases would ease the current very tight supply situation in key rice producing countries, according to the first FAO forecast for this year. International rice trade is expected to decrease, mainly due to restrictions in main exporting countries.

Sizable production increases are expected in all the major Asian rice producing countries, especially Bangladesh, China, India, Indonesia, Myanmar, the Philippines and Thailand, where supply and demand are currently rather stretched. Governments in these countries have already announced a series of incentives to raise production.

Link to Information

Well, yes and no. A 1.8% worldwide growth in rice production is certainly better than what has occurred for the last several years, but not good enough. And remember, this is just an advance prediction by FAO - it has to actually come true.

The one thing it (an actual production increase) might do is alleviate some price increases on the futures market, but not for short term deliveries.

The other issue here is that UN crop "predictions" tend to be treated as somewhat suspect, at least to players in the commodities market. The term "wishful thinking" tends to come to mind.

But, we sure can use the increased worldwide production, if it comes true.

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.

[Stan]

The rapid rise in food prices could push 100 million people in poor countries deeper into poverty, World Bank head, Robert Zoellick, has said.

So, we have a new deal coming, but no money to fund it ?

The World Bank and the IMF have held a weekend of meetings that addressed rising food and energy prices as well as the credit crisis upsetting global financial markets. Zoellick's proposal for a "new deal" to tackle the international food crisis was endorsed by the World Bank's steering committee of finance and development ministers at a meeting in Washington.

He also urged wealthy donor countries to quickly fill the World Food Programme's estimated $500m (£250m) funding shortfall.

Some intriguing video links such as this police raid in the Philippines at a warehouse suspected of hoarding rice. Doesn't appear to be much of a rice shortage, the rice is just not getting to anyone.

Then finally this tidbit:There is no rice shortage,

and the country’s rice supply is stable enough to last for 57 days, said Philippine Department of Agriculture Secretary Arthur Yap. If there’s no rice shortage, why is rice price abnormally high?

[Jedburgh]

In reference to the Argentine issue and others, two weeks ago The Economist published this brief piece on the impacts of export restrictions:

In the past two weeks Cambodia, Indonesia, Kazakhstan, Russia, Argentina, Ukraine and Thailand have taken the easy option, restricting food exports in an attempt to shore up domestic supplies.

Such curbs may be politically expedient, but they are economically self-defeating. They demotivate farmers, push them into growing the wrong crops and jeopardise their future access to markets. Moreover, the restrictions on supply send prices even higher on world markets.....

....Because of export quotas, Ukrainian growers, after harvesting more than they could sell at home, were forced to toss $100m-worth of rotten grain into the Black Sea earlier this year—just when world markets were desperate for supply. The measures can also be counter-productive, forcing growers to switch into new crops to avoid the export curbs. That can make local food shortages even worse.....

Another piece is the same issue states that, "...most pundits, agree that the world now has plenty of food: last year saw a record cereal harvest. And the investments spurred by today's high prices promise even more food in future. Even if one allows for rising demand from Asia's middle classes, the real challenge is not the volume of food available; it is the problem of food being in the wrong place and at a price the poorest cannot afford.".

[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?

[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.