Global Food Crisis: Corn Prices

Now we have the numbers. This is probably the start of the predicted rise in corn prices from the midwest flood that will push all foods and comodoties higher globally. Because not only is there less corn now, we will be exporting less.

The Global Food Crisis: Too Much Water

Wisconsin, Iowa, Missouri, And Illinois have all been hit by massive flooding over the last week. Some heroic boyscouts have garnered all the press from this storm but there is another story with wider reaching implications. The flooding has caused damage to farmland across the nation's breadbasket, ruining thousands of acres of fields prior to harvest. These fields are primarily corn and as detailed in a prior posting, corn is the backbone of the U.S. comodoties market. Further, such a huge loss in corn will cause the prices of all foods to rise even more than the international food crisis has caused. The bottom line for you, expect to pay more for all kinds of meat, cerial, grains, milk, and of course, gasoline.

This all brings up the concept of inflation. The general rise in the price of goods as measured by the United States excludes the cost of comodities like food and energy(oil). The standard reason given for this is that even when the economy is stable the costs of oil and food fluctuate wildly and are thusly not directly pinned to the general economy. That reason turnes into a mere excuse to ignore bad news in times like these where inflation is being driven by world crisis level food prise increases and devistating growth in cost of oil. Yet economists will continue to use the old measure and more tellingly the old media will continue to parrot what they are told in their role of controling the public.

The World Food Crisis

The world food crisis entered the perception of the average American this week when Costco and Walmart started rationing rice. I came upon rice at half the market rate today in the grocery store and bought up the thirty pounds you see to the left. I also snapped up a gallon of vegtable oil since land used for rice has been converted to the palm oil cash crop and will rise in parity with rice.

The prices of all foods, and all comodities, are linked in this global economy. The staples Wheat, Rice, and Corn have all drasticly gone up in price over the last year. The rise is due to a number of factors that feed back on one another because of the global economy.

In the United States the farm lobby has pushed congress to invest in corn based ethanol. This created an incentive outside of the market for U.S. farmers to dedicate feilds that had been used for producing rice and wheat for food in the past, to corn, that is being burned for fuel. The President spoke of using switchgrass but the money has gone to corn. So this decreases supply of staple foods that the U.S. would otherwise export to the world. With the falling dollar our exports would be very attractive except the cost of rice is fixed to the dollar so it faces the pressures of inflation. The cost of fuel feeds back into the cost of food because of the energy used in transport and processing.

High Gas prices wouldn't effect the hungry as devistatingly if their own countries produced enough food to feed them. Then they wouldn't have to import the food they need from the U.S. Around the world farmer's decisions about what to plant have been influenced by the U.S. economy over the last few years. The black hole of ever increasing imports to America due to ample credit have encouraged foreign farmers to switch to cash crops. Farming has always been a poverty industry since the beginning of time and how can you begrudge an Egyptian farmer who chooses sugar over wheat when its ten times the price?

This global trend to switch to sugar and oil instead of rice and wheat, or poppys in Afghanistan, has driven world food supply even lower. But it has done so in a highly localized way. Major rice exporting countries have cut shipments to ensure they can feed their own people and the major rice importing countries now face a crisis where the whole supply thretans to go into the black market. When the bottom dropped out of the U.S. economy and the falling value of the dollar started an upward trend toward inflation the whole world suddenly realised they had been catering to U.S. luxury demands instead of feeding themselves.