Sunday, June 29, 2008

NYTimes: Hording Nations Drive Food Costs Ever Higher

The NYTimes to its credit is one of the few media outlets where the food crisis is even mentioned. They are doing a quality series on the subject dating back to the beginning of the year - if you are interested the articles can all be found here. As with all things (most) media has conveniently forgotten the crisis to move onto new subjects - after all, much like Iraq (which is barely mentioned on nightly news anymore - I mean all it is, is a war) - and New Orleans (hello, still a broken town once you leave the tourist areas), Americans cannot be bothered with the same old news and need new and exciting stimuli. We'll keep it on the front burner - so when the mainstream media find it interesting again you won't be surprised... we've been among the first on this beat [Jan 18: One Lonely Voice Agrees with me on Food Inflation]

Remember our long term thesis here - especially related to food: agflation, food protectionism (countries hording their own supplies to feed their own people), and then social unrest. The latest in the NYTimes series demonstrates the 2nd part of this chain is now playing out. I cannot stress enough how in many parts of the world, the % of income devoted to food is akin to your mortgage (rent) + car payment + energy costs... all combined into 1. Now imagine if those payments doubled/tripled. And then imagine how desperate you become since it's not about fueling your car but about feeding yourself and family. This is the reality for many on the globe. While we worry about "hording of Asian rice" at Costco. It's all relative.

What does a rational human do when said rational human believes higher prices (inflation) are ahead? One hordes.
  • At least 29 countries have sharply curbed food exports in recent months, to ensure that their own people have enough to eat, at affordable prices.
  • When it comes to rice, India, Vietnam, China and 11 other countries have limited or banned exports.
  • Fifteen countries, including Pakistan and Bolivia, have capped or halted wheat exports.
  • More than a dozen have limited corn exports.
  • The restrictions are making it harder for impoverished importing countries to afford the food they need. The export limits are forcing some of the most vulnerable people, those who rely on relief agencies, to go hungry.
  • And by increasing perceptions of shortages, the restrictions have led to hoarding around the world, by farmers, traders and consumers.
  • People are in a panic, so they are buying more and more — at least, those who have money are buying,” said Conching Vasquez, a 56-year-old rice vendor who sat one recent morning among piles of rice at her large stall in Los BaƱos, in the Philippines, the world’s largest rice importer.
  • Now, with Australia’s farm sector crippled by drought and Argentina suffering a series of strikes and other disruptions, the world is increasingly dependent on a handful of countries like Thailand, Brazil, Canada and the United States that are still exporting large quantities of food.
  • Powerful lobbies in affluent countries across the northern hemisphere, from Japan to Western Europe to the United States, have long protected farmers in ways factory workers in Detroit could only dream of.
  • Raises age old questions - Is it best to specialize in whatever food grows best in a country’s soil, and trade it for all other food needs — or even, perhaps, specialize in services or manufacturing, and trade those for food?
  • Or is it best to seek self-sufficiency in every type of food that will, weather permitting, grow within a country’s borders?
  • “If every country in the world decided it wanted to produce its own food for consumption,” Ms. Schwab said, “there would be less food in the world, and more people would be hungry.”
  • From Indonesia to West Africa to the Caribbean and Central America, have frequently cut farm assistance programs and lowered tariffs to balance budgets and avoid charging high prices to urban consumers. But they poor countrieshave found that their farmers cannot compete with imports from rich countries — imports that are heavily subsidized.
  • As a result, steps that could have taken place decades ago, resulting in more food for the world today, were abandoned. These included changes like irrigation schemes and new crop varieties.
  • India and other countries, as well as some nonprofit groups, are quick to point out that economic arguments — that countries specialize in the production of whatever they can make most efficiently — are unconvincing, as long as rich countries heavily subsidize their farmers.
[Apr 14: WSJ - Food Inflation, Riots Spark Worries for World Leaders]
[Mar 31: Reuters - Tensions Rise as World Faces Short Rations]
[Apr 21: The Economist - The New Face of Hunger]

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