The Food Bubble
In the past two years world grain prices have risen substantially, while we have noticed this in our cereal products in the United States those who subsist on unprocessed grains have been affected much more. While the affects of rising food prices are singular, the movement of more and more people into malnutrition, the causes are many.
Those on the margin of starvation probably care little about the “credit crunch” or “mortgage crisis” or the losses of the financial giants in America, but the current prices of grain have as much to do with them as they do the eight year drought in Australia, the 50 percent agricultural export tax in Argentina, and the increasing use of corn in America for ethanol.
The largest agricultural exporting nations, the US, Argentina, and Argentina, have all had domestic issues with their agricultural exports greatly affecting the availability of basic cereals especially wheat and rice. Because of the number of ethanol plans being built in the Midwest states are exporting less grain, and some, such as Nebraska are going to become net importers of corn in the next few years. While the past few years have produced very large, and by some estimates, record corn and soybean yields in the US the supply has not kept up with demand. Australia has also become a net importer of grains it was once able to export in previous years because of the eight year long drought. Argentina has imposed a 50 percent tax on all of its agricultural exports for domestic political reasons. India and Vietnam have banned the export of rice from their countries because of the fear of a looming global grain shortage further exacerbating the problem.
As we continue to hear about the housing crisis, the mortgage crisis, and the credit crunch, has the next “bubble” taken shape? The food bubble? Granted there is a genuine shortage of available grain, but I have also seen segments of CNBC’s FastMoney telling people to “ride the global commodity boom” to shelter themselves from the volatility of the stock market. I suspect there is a large speculative factor at work here as well. This sort of bubble won’t make people lose their homes, but poorest and most vulnerable in the world will be pushed further into malnutrition and starvation.
Those on the margin of starvation probably care little about the “credit crunch” or “mortgage crisis” or the losses of the financial giants in America, but the current prices of grain have as much to do with them as they do the eight year drought in Australia, the 50 percent agricultural export tax in Argentina, and the increasing use of corn in America for ethanol.
The largest agricultural exporting nations, the US, Argentina, and Argentina, have all had domestic issues with their agricultural exports greatly affecting the availability of basic cereals especially wheat and rice. Because of the number of ethanol plans being built in the Midwest states are exporting less grain, and some, such as Nebraska are going to become net importers of corn in the next few years. While the past few years have produced very large, and by some estimates, record corn and soybean yields in the US the supply has not kept up with demand. Australia has also become a net importer of grains it was once able to export in previous years because of the eight year long drought. Argentina has imposed a 50 percent tax on all of its agricultural exports for domestic political reasons. India and Vietnam have banned the export of rice from their countries because of the fear of a looming global grain shortage further exacerbating the problem.
As we continue to hear about the housing crisis, the mortgage crisis, and the credit crunch, has the next “bubble” taken shape? The food bubble? Granted there is a genuine shortage of available grain, but I have also seen segments of CNBC’s FastMoney telling people to “ride the global commodity boom” to shelter themselves from the volatility of the stock market. I suspect there is a large speculative factor at work here as well. This sort of bubble won’t make people lose their homes, but poorest and most vulnerable in the world will be pushed further into malnutrition and starvation.