Food, inflation & social stbility

[Billy T]

"April 18 (Bloomberg) -- At a time when consumers are focused on food costs that are within about 3 percent of a record, stockpiles of edible oils needed to make everything from noodles to fish sticks are dropping to a three-decade low.

The combined stocks of nine oils will plunge 25 percent to 9.39 million metric tons this year, or about 23 days of demand, the fewest since 1974, the U.S. Department of Agriculture estimates. Palm oil prices will climb as much as 23 percent to 4,000 ringgit ($1,324) a ton by Dec. 31, based on the median in a Bloomberg survey of 11 analysts and traders. ...

As the global population expanded 85 percent in the past four decades, demand for edible oils rose almost ninefold. ... “The world cannot afford any crop problem this year, anywhere,” said Steve Nicholson, a commodity procurement specialist at International Food Products Corp., a distributor and adviser on food ingredients in Fenton, Missouri. “Without a cushion of inventories, any production hiccup in the northern hemisphere this year will be catastrophic and leave today’s prices looking cheap.”

Vegetable oils have been left behind in this year’s surge in food costs, which the United Nations says rose to a record in February. ..."

Much more at: http://noir.bloomberg.com/apps/news?pid=20601087&sid=ag9Wmzd631Rg&pos=7

Billy T comment: IMHO desire for democracy, free speech, etc. has little to do with the unrest in N. Aftrica and the Mid East. Those freedoms were absent 30+ years ago. What has changed is that for much of their populations their jobs, if they have one, will not feed their families. As Egypt is now learning, getting rid of an oppressive dictator does not solve the fundamental problem (food affordability) which is very likely to grow much worse.

Where do you foresee this going, even in the US as budget problems shrink assistance to the poor?

 

[cosmictraveler]

What has changed is that for much of their populations their jobs, if they have one, will not feed their families. As Egypt is now learning, getting rid of an oppressive dictator does not solve the fundamental problem (food affordability) which is very likely to grow much worse.

Strange isn't it that during the Mubarak administration the people voted for him overwhelmingly at every election that was held. It seems rather odd that after 30 years of his administration that no one called him a dictator but only voted for a freely elected official to represent them overwhelmingly knowing he did what they asked for the most part.

Now, because of the radical Muslims we hear that Mubarak was a dictator , why is this happening now? Is it because the radicals are wanting more control to make themselves even more money to help in their fight against democracy? Seems that's what I see happening, which also insures more troubles ahead.

 

[Billy T]

For POV that current high prices for food will pass as due to some bad weather etc. watch short video here:
http://www.moneyshow.com/video/video.asp?wid=6923&t=3&scode=015362
It supports FED's use of "core" instead of "headline" inflation.

I don't think it is that simple mainly as parts of the world which once ate "rice & beans" are now eating meat, a food higher up on the "growing chain" with far fewer calories per acre of farm land. Also food is being diverted to energy production, especially in the USA.

... Now, because of the radical Muslims we hear that Mubarak was a dictator , why is this happening now? Is it because the radicals are wanting more control to make themselves even more money to help in their fight against democracy? Seems that's what I see happening, which also insures more troubles ahead.

The Muslim Brotherhood, etc. may some day be a significant factor in Egypt's political evolution, but thus far they hardly have played any role. Perhaps they are just "keeping quiet / laying low" waiting for a better time to try to gain at least some influence in Egypt's new government?

 

[quadraphonics]

Strange isn't it that during the Mubarak administration the people voted for him overwhelmingly at every election that was held.

That's pretty normal for modern dictators.

It seems rather odd that after 30 years of his administration that no one called him a dictator

Nothing odd about the fact that you're totally oblivious to what lots of people did and did not call him over the years. It only means that you're ignorant and talking out of your ass here.

but only voted for a freely elected official

There were no "free and fair" elections in Egypt under Mubarak. You obviously don't know the first thing about Egyptian politics, democracy, etc.

One obvious give-away: there has probably never been a free and fair national election anywhere that resulted in a candidate winning by the sorts of margins that we observed in Egypt's elections (or Belarus, etc.). That kind of wildly stilted outcome is a telltale indication that an election was not free and fair.

 

[cosmictraveler]

It only means that you're ignorant and talking out of your ass here.

No, I talk from what I've read about over the years. Perhaps the media was just not informing everyone about what was going on in Egypt after all they were always reporting any funny syuff going on during elections but I never read anything. Perhaps you can enlighten us as to what you know about the elections in Egypt over the past 30 years of voting and what you saw as a "fixed" election or whatever you saw.

There were no "free and fair" elections in Egypt under Mubarak. You obviously don't know the first thing about Egyptian politics, democracy, etc.

I again only read about the elections from Western media sources so I can only express my POV about them from that vantage point.

 

[quadraphonics]

No, I talk from what I've read about over the years.

Well, then, we're left with a couple of factors to explain your obvious ignorance of the topic: you've been reading crap, or you've not been understanding what you've read.

All of this stuff is well-understood, in the usual accessible media. The Emergency Law, the authoritarian system, Mubarak's efforts to groom successors, etc. have all been regular fixtures of Western media for years and years and years. Spend a few minutes on Wikipedia - that's what it's there for.

 

[cosmictraveler]

Well, then, we're left with a couple of factors to explain your obvious ignorance of the topic: you've been reading crap, or you've not been understanding what you've read.

You know there's another reason , what if the media were lying or not reporting what was actually going on there? You can't think about that can you? Why is it that you are such a negative person and won't see something else as the problem but only me instead. Why not expose the media for what it doesn't report or twists the truth about what is going on?

 

[quadraphonics]

You know there's another reason , what if the media were lying or not reporting what was actually going on there?

Manifestly not the case - this stuff has been all over the media for years and years. Anybody who wants to know these things, has no excuse not to by now. It's to the point that it's part of the standard evening-news narrative that any given adult is expected to follow. There's no way you can make sense of a given newspaper article on politics in Egypt without already knowing this stuff - it's really basic and well-established. And all this background was repeated quite heavily in the recent coverage of the military coup there. Anyone who doesn't know these basic aspects either isn't trying, or has a serious learning disability.

You can't think about that can you? Why is it that you are such a negative person and won't see something else as the problem but only me instead. Why not expose the media for what it doesn't report or twists the truth about what is going on?

What a bunch of horseshit. It's not the media's fault that you don't know what you're talking about. I had no trouble gathering the relevant facts from the exact same media. Stop making excuses and try paying attention instead.

 

[cosmictraveler]

What a bunch of horseshit. It's not the media's fault that you don't know what you're talking about.

Well then please post a link that before this year Mubarak was known as a dictator in the worlds press. I'll wait to see your link proving that "everyone" knew about him being a dictator.

 

[Billy T]

See short video: http://www.youtube.com/watch?v=WhVgw875IH8&feature=related which has many black & white photos of condition during Germany's hyper-inflation as well as very simple text even a child can follow. (It is worth watching for the stark photos.)
or see longer, self promoting, video focused on coming food disaster called: "Seven Meals From Anarchy" here: http://www.taipanpublishinggroup.co...415&s=333187&u=40779324&l=226060&g=189&r=Milo

A quote from it: "For many people, their only option will be stealing."

As Billy T mentioned several years ago, there may be riots, blood shed, as the poor of US inter cities have nearly one hand gun per person and many cities are already firing part of their police forces as unable to pay for all the police (and firemen) they had last year. Thus things could get very ugly when prices in intercity food store get to be more than local residents can pay. Then the stores can not buy food to stock their shelves at a price that permits a profit, so they close. Etc.


Note, as briefly discussed in 2nd video, fuel cost are very strongly correlated with food production cost. E.g. 95% of the cost on an Idaho potato eaten in NYC, is the oil used to grow and transport it, (when the oil in fertilizer, pesticides, tractor planting and harvest, plastic sacks, etc. is included).

I don't have hard data, but think the correlation coefficient between price of oil and food is greater than 0.8 now with the US's vast "factory farms" production system and average food item on your table having traveled more than 1200 miles to get their (often by truck).

Oil is now > $110/ barrel and very likely to be near $200/brl at current rate of climb by end of 2011. (Brent crude has closed above $122/ brl.) The specter of closed food store in inter cities is not "wild imagination" but quite possible soon.

There is a well known denial mechanism / belief system: "It has never happen here, so it can't." - Try to consider the facts and trends instead.

 

[Billy T]

"... Corn may become costlier than wheat for the first time since 1984 as demand for livestock feed and ethanol grows, ... Futures will average a record $8 a bushel in the three months ending Sept. 30, more than the $7.70 a bushel estimated for wheat, said Abah Ofon, an agricultural commodity analyst at Standard Chartered Plc in Singapore.

Corn will be 11 percent more expensive than wheat in three months, according to Goldman Sachs Group Inc. Corn in Chicago traded at $7.60, up 2.1 percent,... Surging costs of corn, an ingredient in livestock and poultry feed, may spur global food prices to rebound to a record, ..." From: http://noir.bloomberg.com/apps/news?pid=20601087&sid=aeoo.SkEuRPM&pos=6

Billy T comment: US's corn to alcohol program is (because of all the subsidies) a very expensive self-inflicted disaster unfolding in slow motion. Much like the frog in pot of slowly coming to a boil water. - Too many vested interests to terminate it now so just learn not to eat so much. Wheat's price will follow corn's up - many feed lots are already adding wheat to the feeding trays. Bread, milk, meat, etc. are going to keep increasing much faster in cost than the FED's "core inflation."

Perhaps this post belongs in my old thread: "How DUMB can American voters be?"

 

[Me-Ki-Gal]

We are screwed . The farmers in Montana are rotating to wheat crops from fuel crops because of food inflation . More money to be had in wheat crops . That is good for you all eating bread and cereal . That is not so good with inflation the feds made happen . Maybe the price of wheat will fall if they grow to much? I don't think they can with world populations still growing . I tell you my take is we live in an Artificially dampened growth senerio. Don't use goods, buy necessities only. It is the right thing to do in a shrinking resource world mentality. It could even be a precursor to natural contractions in anticipation to catastrophic population decline that will be hear in 20 years. Our biological clocks controlled by nature know better than use Me thinks . I know one thing Girls are getting hornier

 

[Billy T]

Wheat, not shown, is much like corn (black line)

There is some yellow stuff, appreciating 6 times faster than gold AND unlike gold, you CAN eat it:

"... It’s a little hard to believe, but you know the big hubbub about physical gold hitting new heights, up 20% in the past year? It’s got nothing on physical ears of golden kernels. Yellow corn—the type fed to animals being prepared for slaughter, as well as to ethanol refineries—is up 120% in the past year. ..."

"... The Department of Agriculture estimates that 40% of last year’s US crop was turned into 900,000 barrels a day of ethanol. One reason is that rising crude oil prices have kept the cost of “corn oil” competitive. ..."
{More at my old thread: "How DUMB can American voters be?"}

From: http://www.moneyshow.com/investing/article/1/tptp042811-22906/Skys-the-Limit-for-Scarce-Corn/ Also at that link:

"... Imports by China “could be as high as 2.5 million metric tons, easily double that of last year,” said Unnikrishnan, who correctly predicted in November that increased cotton purchases by China would help drive prices to an all-time high. ...main reason for the rise of corn demand in China has been to feed animals, as the real increase is in protein consumption. A JPMorgan analyst told the wire service: “People are getting wealthier, so they eat more meat. That’s why you need feed, soybeans and corn to feed the livestock with.” ..."

BT comment: China is "eating our lunch," literally. The poor in the US are switching to "franks and beans" if eating any protein at all but don't worry The FED's "core inflation" is less than 2%.

 

[skog]

Another factor not mentioned that is increasing the price of corn in the US is worldwide natural disasters which are yielding grain shortages. When there are bad yields in one country, the slack is picked up elsewhere.

Surely now more than ever people should start switching to alternative fuels. Lowering the demand for ethanol would help keep food prices lower and make it easier to export food at a more contained price.

 

[Billy T]

... Surely now more than ever people should start switching to alternative fuels. Lowering the demand for ethanol would help keep food prices lower and make it easier to export food at a more contained price.

That should be: "Lowering the demand for CORN BASED ethanol ..." There a few very well off groups, like privately owned Cargill, who collect hundreds of millions of tax payer dollars from the various subsidies of the farm programs. As I recall 13 crops get government support, but corn gets nearly half of the total.

BTW the US's cotton subsidy has been ruled illegal by the WTO and Brazil, who brought the suit, has been given the unusual right to "cross retaliate." - I.e. Put higher tariffs on unrelated US exports to Brazil like electronics or drugs. For more than a year Brazil has not done so, but is in discussions with the US, mainly trying to get the $0.54 /gallon protective tariff against importation of Brazil's sugar-cane based alcohol removed.

There are many additional subsidies that support the corn to ethanol foolishness. For example the blenders, get about 5 cents per gallon, as I recall, just for mixing the ETOH into gasoline to make "E85."

This corn to alcohol program is one of the dumbest of the US. If there is any net energy gain, it is very small( ~10%) not the 8 times more energy out than in of sugar-cane alcohol - mainly because the fermented corn liquor is distilled in the US with natural gas, whereas the cane stocks are burned in Brazil for the needed heat. They provide so much more heat than is needed that the excess steam generates about 5% of Brazil's electric energy.

Of course using natural gas also releases CO2, but growing sugar cane removes slightly more CO2 than the alcohol fuel burnt in the car later releases. (Some carbon taken from the air remains in the roots of the cut cane and more in the tanks storing the alcohol, etc. This is true of growing corn also, but that storage does not compensate for the burning of natural gas in the distillation process.)

Instead of burning natural gas to distil ETOH from the fermented corn liquor, it could just be used in the cars. For less than $1000, as I recall, one can get a kit and convert your existing car to dual fuel (switch from NG to gasoline) with the flip of a switch while driving down the road. The economy (and reduction of CO2 release as most of energy comes from oxidizing hydrogen, not carbon, with NG) of driving on NG instead of gasoline is causing more NG filling station to be built each year. - The falling prices on NG and rising prices of gasoline are of course accelerating that.) With dual fuel conversion, you can drive across the US, but not with a pure EV car and to the extent you do fill with NG, it will cost you less.

SUMMARY: Natural gas and sugar-cane based ethanol are two alternative fuels with decades of large scale practical use, which EVs & hybrids don't have, that do not drive up the price of food but don't expect to see Agro-businesses like Cargill, et.al. plus Big Oil, to give up their millions of tax payer's money without a lot of money placed in Congress men's pockets. Note that so long as 1/2 of US electrical energy comes from coal, and some more from NG and oil, the EV does little to reduce the release of CO2.

More at my old (more than 5 years now) Thread: "How DUMB can US voters be?"

 

[Billy T]

Part of the growing food problem is the increasing wealth in Asia, especially China. They are eating more meat so needing more grains (as food for animals), mainly corn and soy beans but wheat too. Until 1995 China exported soy beans but since then has been importing more every year (mainly from the US and Brazil). In 2003 China exported 16 million tons of corn, but last year imported 1.5 million tons. China is expected to import 9 million tons in 2011.

China’s wheat producers are already 51% more efficient than those in the United States, according to the U.S. Department of Agriculture, but they are “mining” ground water to do this. The last five years have had bumper crops of wheat, but drought and unusually cold weather threatens the current crop – now projected to be 15 million tons less than last year.
China has wheat in storage of 80+/-20 million tons, so need not immediately become a major imported of wheat, but it is highly likely that during 2012, it will need to import approximately 20 million tons or more if current adverse weather conditions continue.

Russia, once a major wheat exporter, has prohibited export of wheat and is probably now an importer. Because of the high price of corn in the US (~$8/ bushel) cattle feed lots are now mixing wheat into the feed trays. More than 20% of US corn is now diverted to alcohol production and that fraction is growing. Some of the above facts in copywrited article by Adam Wolfe published by: Roubini Global Economics info@roubini.com

BT comment: in a few years, at most, millions of poor will starve and 100s of millions will be undernourished. The social unrest of the “Arab Spring” is much more about the cost of food, compared to salaries than democracy. If democracy were the main cause, then the Arab Spring would have happen about 30 years ago as that is how long the dictators were in power. If there is a run on the dollar by or before Halloween 2014, as I predicted long ago and seem to be well on schedule, then many of those “malnourished” and some of the starving will be Americans. Oil is much more than half of the cost of food production and distribution in the US now and, priced in dollars or not, oil and food will be several times more expensive due to growing Asian buying power and the falling value of the dollar.

SUMMARY: The US can grow much more food than it needs, but unless there is a drastic change in the US’s economic structure (at least a partial switch to a centrally directed rather than capitalistic economy) US grains will continue to be exported to those who can pay higher prices for it and many poor American will go hungry, some possibly starving.

Food production in the US is a highly industrialized and subsidized industry. The typical food item on your table traveled 1500 miles, much of that by truck, to get there. This is why increases in oil cost are directly reflected in higher food costs.

As shown above, most farm subsidies (your tax money) is not helping the "family farmers" but the oil based agro-business industry like Cargill corporation (Cargill is family owned, not a company you can invest in) and producers (from oil) of pesticides and fertilizers. In the US, food is oil transformed by sunlight. - Why when price of oil doubles so will price of food, even it the global demand were not growing but it is, so expect food to cost more than three times as much as now when price of oil doubles.

 

[Billy T]

"... Corn planting in the U.S., the world’s largest grower, is advancing at half of last year’s pace because of excess rain, government data show. The Canadian Wheat Board said fields are so muddy that only 3 percent of grain has been sown, compared with 40 percent normally. At the same time, drought left the Kansas wheat crop in the worst shape since 1996, and dry spells are threatening crops in France, Western Australia and China.

While the growing season is still early for Northern Hemisphere exporters, corn futures as much as doubled in the past year as U.S. stockpiles headed for a 15-year low, and wheat is up 64 percent from a year earlier. The United Nations says global food costs advanced in April for the ninth time in 10 months, and higher commodity expenses led food makers including General Mills Inc. and McDonald’s Corp. to boost prices to consumers.

“We needed everything to go perfectly, but there’s really a lot of potential for problems, based on these weather issues,” said Sterling Liddell, a vice president for food and agribusiness research at Rabo AgriFinance in St. Louis, who expects corn to reach a record $8 a bushel if conditions worsen.
“It could be a very explosive situation, because we’re already so tight.” ..."

From: http://noir.bloomberg.com/apps/news?pid=20601109&sid=ay4mGlpWEf4w&pos=12

 

[Mrs.Lucysnow]

See short video: There is a well known denial mecha... share in each other's solution for survival.

 

[Billy T]

I don't think its denial. There are many who simply do not know this is occurring, I mean its not as if its really being covered by the mainstream media. Then there are those who do know but don't know what to do about it. Look at all the information there is about the coming crises whether political, economic or environmental and then look at all the various suggestions they have so people can 'prepare' or 'save' themselves and most of those suggestions come with a price tag, meaning people are already profiting from the fear. Until people come together in their local communities to address these issues and prepare for them on a grass-roots level then there really isn't a way for the bulk of the people to protect themselves and their communities even if they understand what the future will bring. Because when you predict theft and violence in response to the lack of food and money then no one is safe even in their own neighborhoods never mind if they have the right stock or not or if they are growing or hoarding food and fuel or not. So you see really the answer is in our next door neighbor we never talk to and the town hall meetings we never attend and the community food gardens we don't grow and share together. People will only be safe if they are living in a community where they share in each other's solution for survival.

Your points are well taken (and stated). I agree. Certainly there is more ignorance than denial, and others feel, probably correctly, that there is nothing they can do to prevent lots of people going hungry or starving, when a bad crop year comes.

I am not sure what can be done by "community action." A hundred or more years ago in the US when there were many exploited in factories and often hungry and a few with wealth, it was common for cities to have "armories."* Stone buildings with sort of castle like appearance in which the wealthy could take refuge in times of strife to collectively protect their families.

Perhaps, but I am not advocating it, they need to be reactivated with stores of food inside. Storing dry foods (rice, beans, flour, etc.) and canned goods in your basement is likely to get you killed if things get really bad.

The only long term solution is more birth control. I have long advocated that free or very low cost food be made available which contains a long duration birth control agent. Mainly only those who can not adequately feed the children they already have would eat this low cost food. There is also the solution China has applied for many decades - only one child without out added cost (fees & taxes). The simple fact is that population cannot continue to increase as it currently is forever. If the birth rate does not come down, the death rate must go up but exactly the opposite is now happening as people live longer. The world is blindly (for most, but some can foresee) heading for huge disaster.
--------
* Baltimore has one, still called "the armory" but I think it is a restaurant now. Years ago, it was the Germany Club's dance hall etc.

 

[Billy T]

'... The Wall Street Journal on Tuesday reported that 500,000 acres of freshly planted corn and other crops are now under water. The article went on to say:

Cotton for July delivery was recently trading 4.1% higher on the day, at $1.1540 a pound on Intercontinental Exchange.

CBOT July corn futures were recently up 1.1% on the Chicago Board of Trade at $7.15 a bushel, and July soybeans were up 1% at $13.49 a bushel.

You may think what I'm about to say is crazy, but in the past century, this is exactly how worldwide famines have started. We have reason to believe this could create a crisis bigger than any financial crisis -- a food crisis of epic proportions. ..."

From: Daily Email to me of: Smart Investing Daily <taipan@taipanpublishinggroup.com>
Their "doom & glum" scare video is here: http://www.taipanpublishinggroup.co...470&s=349369&u=40779324&l=255890&g=174&r=Milo
------
------
"... "Bring us sugar!" was the chant by thousands of Algerian rioters just a few weeks ago. Sugar is a cheap, popular source of calories in many developing countries and the price of sugar is now at 30-year highs. When I mention rioting, Egypt immediately comes to mind. But that country isn't the first. Actually, more than 60 food riots have occurred in more than 30 countries in the past several years! And in the past few weeks, there have been government protests in Tunisia, Algeria, Morocco and Yemen -- all in part because of rising food prices.

But when severe riots and protests bring down a country as relevant as Egypt, that's different. When the situation in Egypt threatens Mideast stability and consumes our daily news, we know we have a problem on our hands. The recent riots were not only about dethroning Hosni Mubarak, the 30-year president. The real catalyst was the poor standard of living and the leader's reluctance to improve Egyptians' daily lives. At the core of that discontent is, of course, food inflation.

And the same kind of anger is brewing in many other Middle Eastern countries. Who knows how far social unrest will spread in the Middle East? But the unsettled political climate in Egypt and in many other countries is worrisome and is likely to continue this year.
No End in Sight. Prices will rise even further in 2011. There is no relief in sight for food inflation.

The bottom line is the demand for food is rising faster than food can be produced...."

From: http://www.taipanpublishinggroup.co...194&s=350100&u=40779324&l=256186&g=184&r=Milo

Billy T comment: Many Americans think there will never be food riots here in the USA as the US's fertile mid west can grow much more food than needed to feed Americans. That naive POV neglects that in the US capitalistic system, food is sold to whomever can pay the highest prices and that is China now. Barges of corn and other grains will still be going down the Mississippi River for transhipment to China via the Panama Canal, passing by the poor and hungry of St Louis, Memphis, New Orleans, etc. until the US seizes control of food production - abandons the policy of selling to the highest bidder. (This of course increases the already unsustainable balance of payments problems.)

Basically that is the future choice - Food riots or end of the current American economic system. Printing press dollars cannot fund a greatly expanded food assistance programs (1 in 8 is already on a food assistance program). That "solution" will not only fail but will destroy the entire economy.