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Sol Sanders Archive
Tuesday, December 28, 2009     INTELLIGENCE BRIEFING

Those rising food prices — here, there, worldwide

Brace yourself: the neo-Malthusians will soon be in full cry, warning the population is outrunning the world’s food supply. Like Washington dealing with China, there’s no cool approach: either experts tell us we are drowning in surpluses, or humanitarians warn eminent starvation awaits because of diminishing cultivable land, water shortages, unsustainable/unhealthful hybrids, or “peak oil” eliminating cheap petrochemical fertilizers.

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Whatever long-term arguments, it’s clear that rather suddenly, rising food prices based on short-term shortages, have become political dynamite. And fiscal policies — “quantative easing” as the Fed calls it, printing money for the rest of us — have exacerbated the problem by detouring investors and speculators into bidding up commodities, not least food.

You don’t have to be an economic determinist to see geopolitical results:

Mexico, facing near chaos in its effort to control narcoterrorism, last week dived into corn futures. It’s no secret other countries — China, if sneakily — have bought grain futures to assure an adequate supply. But that Mexico announced it was obviously an effort to add propaganda to its insurance against the possibility of a “tortilla crisis”, which almost totaled earlier administrations when corn shortages for that basic Mexican foodstuff pushed inflationary price levels.

India, whose fragile coalition government under that old planner turned marketaraian, Prime Minister Manmohan Singh, under fire for a series of mega-trillion-rupee financial scandals, now faces rising food prices — and an onion shortage! Mumbai’s roaring markets continue producing near double-digit gross domestic product [GDP] growth. But on Indian development’s dark side is 600,000 villages — many of them hardly monetized — still facing food insufficiency. Eleven out of 19 states have more than 80 percent anemia with children under five suffering stunting and brain damage.

China, too, has had to turn away from its monomania for creating jobs. One high official [if now retiring] has written what the rest of us knew: among other follies, municipalities just dig holes and fill them in to boost their “required” GDP contribution. Beijing acknowledges an inflationary spiral may be taking hold, led by food prices. And no one remembers inflation’s threat to past regimes as vividly as Chinese officials [and the Germans]. China has been forced to draw down food reserves. Beijing planners’ dilemma is opening up food imports — perhaps by unleashing the undervalued yuan — would help solve the problem. But having starved the agricultural sector of resources, freeing imports would bring disaster to remaining impoverished farmers. [Their Japanese neighbor spends 5 trillion yen — $63 billion — annually to stockpile over 2 million tons of domestic rice with a 778 percent blocking import tariff; it’s unlikely a new “rice bread” will help with consumption dropped by half over the last 40 years.]

Then there is North Korea [with its miniscule pampered elite] diverting resources to the military. Whatever else Pyongyang’s rambunctious actions are intended to achieve, renewing a magnanimous South Korean, Japanese and American food dole would be part of any bargain — assuming one is possible — to halt their weapons of mass destruction production. Meanwhile, after famine starved more than a million people in the 90s, more than six million of North Korea’s 23 million now exist at near starvation.

Nearer home, any American housewife [or her househusband] will tell you food prices are rising. It’s true most Americans can — if they would avoid obesity — eat better than ever. [My rural Virginia Walmart has everything from Kosher salami to Greek phyllo and I count on their fabled inventory control to know they can sell it along with questionable Chinese frozen fish.] But with no “banana war” between the EU and Central American exporters, our local prices went from 32 cents to 42 cents over the summer. Is rising food prices a harbinger of incipient inflation from gigantic “stimulus” outlays – continued in the Lame Duck Congress despite the cautions of Nov. 2 elections?

Nor is there sweetness and light on the supply side. Wheat prices on the Chicago grain market advanced 47 percent this year. That’s because Russian drought spurred the Kremlin to banned exports. Ukraine is dragging its feet with grain export quotas. Weather in Argentina whittled down the corn crop [world’s No. 2 exporter] and soybeans [world’s No. 3 exporter]. Australian wheat production will be half normal because of rains and floods. Market trackers say it’s too early to call but predict an allover “mixed” harvest in the 2011-12 cereal season but guestimates already are affecting 2010-2011 prices.

Insane food subsidy politics, of course, continue. Nothing is as idiotic as the U.S. effort to supplement fossil fuel with ethanol, alcohol from corn. Imports rise, of course, because Washington slaps new restrictions on drilling. But one year’s ethanol for the average American car requires 11 acres of farmland, otherwise feeding seven people. Adding injury to insult, some of the new hypereconomical engines reject ethanol as an inadequate fuel. Yet Washington subsidizes ethanol including exports to Europe while maintaining high tariffs against Brazil’s subsidized bagasse [sugar cane byproduct] ethanol imports.

Food problems, like death and taxes, apparently will always be with us — but at times contributing mightily to existing problems.


Sol W. Sanders, (solsanders@cox.net), writes the 'Follow the Money' column for The Washington Times . He is also a contributing editor for WorldTribune.com and EAST-ASIA-INTEL.com. An Asian specialist, Mr. Sanders is a former correspondent for Business Week, U.S. News & World Report and United Press International.

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