The UN announced today that chronic hunger now affects over a billion people in the world, this is thanks largely to the spike in wheat, corn and soybean prices on the speculative futures market. Brazil has come out solidly against price controls at the ongoing G-20 meeting in Paris. Not surprising as they are now a one of the world’s biggest exporters of grain.
France who now chairs the G-20 is taking the position that controls need to be tightened on speculators and wants to put restrictions on nations who have imposed export bans. Not much of anything is likely to be done of course. It’s not any big deal for your average finance minister if a few million more people starve to death than in a normal year. You see the level of “normal” chronic hunger runs about 850 million people every year and there is money to be made from grain speculation.
If you are a third world dictator and need to buy large amounts of grain to keep your population from revolting you might be more concerned. But when has that ever happened? Ironically Egypt learned from deadly food riots in 2008 and was heavily subsidizing food prices but it wasn’t enough to save Mubarak as rumors of dwindling supplies spread.
Unlike during the 2008 crisis, this time so far the price of rice has remained stable. That’s why in Asia where 3 billion people depend on rice to live, they haven’t seen the upheavals becoming commonplace in the Middle East. This could change with the next global warming driven crop failure. Surprisingly many countries in Africa have been enjoying good harvests and this has kept local prices down and the scope of the crisis is much smaller than you might expect.
So despite the equivalent of the US population being added to the number in danger of malnutrition if not starvation, it could be much worse. Russia who has become a major wheat exporter will not be selling next year even if they have a good crop and the weather is not likely be cooperative everywhere in the world so the chances of building up food stocks is not good.
Contrary to the simplistic explanation of supply and demand that the free market devotees chant whenever one these totally predictable “unforeseen” crisis occur the market will not serve the public. Oh sure, a few million dead will reduce demand but in third world countries this upheaval will decrease production and not increase it.
In first world countries the farmers pretty much produce every kernel that they can already and the futures market has locked most of them into a set price so they have no financial reward from the shortage. Wall Street bankers, hedge funds and multinational corporations will make out like fat bandits however.
Americans will see food prices go up sharply despite the relatively small share that farmers see of the retail food dollar. In fact their share is half what it was 30 years ago and they weren’t doing well then. On the other hand most Americans have more than enough to eat although millions don’t. You don’t need to go the third world to find starving people. Time to rotate your stock of canned goods and take a case to the food bank. www.prairie2.com