world hunger, asia, the free market and hummers
Kann
Posts: 1,146
hello,
Don't know if you've noticed but countries around the world are currently facing a raise in food prices. Such a high raise in fact that in developping countries basic foods (cereals) are becoming to expensive to buy. Several riots have already started in these countries and the governments has been forced to help and feed the people.
I was wondering why we were facing such a raise on food prices and read an article this morning which proposed some explanations :
1 - china and india : countries with more than a billion citizens each whose purchasing power has been on the rise for a few years can and want to eat more and more. And especially more meat : knowing that to produce 1kg of meat you have to use 10kgs of cereals.
2 - Agrofuel : the development of this energetic ressource means more cereals for the cars and less for the humans. I remember reading that filling up the gas tank of a big hummer uses up as much cereal as is needed by a human being for a year (not sure if that's true but you get the idea).
3 - subprime crisis : didn't think of that one, but I don't really understand economics. Considering the real estate market is not sane/secure investments have been transfered elsewhere, including in basic foods, causing inflation on these products.
These points are a start to explain this crisis, but also a start to find some solutions. The world bank is asking for funds to bring food to the countries who need it, wich is great but it's only pushing back the problem. Do you think we need to stop these new fuels? Should we stop eating meat (though I suppose the rise in the prices will force us to reduce the quantities)? Or should we just say 'fuck it', and live on?
I don't know what consequences this can have, riots are obvious, but what else? Higher immigration? Or a radical change in our way of life?
Don't know if you've noticed but countries around the world are currently facing a raise in food prices. Such a high raise in fact that in developping countries basic foods (cereals) are becoming to expensive to buy. Several riots have already started in these countries and the governments has been forced to help and feed the people.
I was wondering why we were facing such a raise on food prices and read an article this morning which proposed some explanations :
1 - china and india : countries with more than a billion citizens each whose purchasing power has been on the rise for a few years can and want to eat more and more. And especially more meat : knowing that to produce 1kg of meat you have to use 10kgs of cereals.
2 - Agrofuel : the development of this energetic ressource means more cereals for the cars and less for the humans. I remember reading that filling up the gas tank of a big hummer uses up as much cereal as is needed by a human being for a year (not sure if that's true but you get the idea).
3 - subprime crisis : didn't think of that one, but I don't really understand economics. Considering the real estate market is not sane/secure investments have been transfered elsewhere, including in basic foods, causing inflation on these products.
These points are a start to explain this crisis, but also a start to find some solutions. The world bank is asking for funds to bring food to the countries who need it, wich is great but it's only pushing back the problem. Do you think we need to stop these new fuels? Should we stop eating meat (though I suppose the rise in the prices will force us to reduce the quantities)? Or should we just say 'fuck it', and live on?
I don't know what consequences this can have, riots are obvious, but what else? Higher immigration? Or a radical change in our way of life?
Post edited by Unknown User on
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Comments
but rock n roll will live forever! - ray davies
I think the increased food prices are a result of increased energy prices, period. there is enough food for everyone on the planet to eat, but it has to be grown and transported, which both require: ENERGY. Biofuels aren't the cause of it. there is not nearly enough biofuel production yet to effect food scarcity. I don't really agree with the WB on that one.
Also Kann, I'm not sure but it may be premature to assume this will be an ongoing problem forever. it's a matter of the price of inputs, not scarcity of food itself. it may fluctuate back to the status quo (I'm not suggesting it's not a serious problem, but I don't think the logical deduction to make from it is that the world is running out of food). I think the major problem is energy that needs to be solved in the long run. the jury is still really out on whether biofuels use more fossil fuels than they save (IMO, I don't think biofuels are the answer, though they could be used to diversity the global energy portfolio, so to speak, which probably wouldn't hurt. plus, if the electricity needed for fuel crop production came from renewables, and the transportation came from biofuels themselves, then there would be a considerably smaller negative impact). I think rather than focusing on eating or not eating certain foods, it would be better to ride a bike.
"In addition, withering drought has decimated harvests in major wheat-producing countries as far apart as Australia and Kazakhstan, crimping supplies, and creating scarcity. Furthermore, a legion of plant breeders, agronomists, and pathologists are concerned about when and where the next disease epidemic will strike, and threaten farm yields in the world’s major granaries. The Bill and Melinda Gates Foundation just announced a $25 million grant to Cornell University to fight stem rust, a deadly wheat disease."
droughts have been an ongoing problem the past few years. climate change?
The part on the subprime crisis makes sense if you consider that banks and funds do not want to invest in real estate anymore and had to find other goods to invest in : mainly food.
It will definitely not be going on forever but obviously we have to find ways to live with limited food and expanded population sizes : the more we are, the more we'll need to eat. I think finding solutions today will help tomorrow. And I also think that the people rioting because they are dying of hunger today don't have time to wait for us to find an energetic alternative. Chances are their will be a 'market correction' soon, either by raising the supply (getting rid of biofuel) or by lowering the demand (letting people die from hunger).
sometimes it takes a while for changes in one market to make it down to another. plus, you've got the droughts compounding it. sometimes something like this is lurking and then something like a drought just pushes it over the edge.
wouldn't that increase food supply and thus decrease the price of the food?
both biologists and social scientists generally agree that this malthusian view is not correct. there is plenty of food to support the population. the problem is the DISTRIBUTION of food. it's getting it to certain places, it's problems like drought, corruption, war, and price of inputs (e.g. energy).
...Of course, the effects of climate change could end up in line with the malthusian view...
Okay fellas' listen up.
GTDisease, first off...
while your comments about energy prices are at least in the ball park, your offhand dismissal of the "subprime crisis" as overhyped hullabaloo is WAY off base. I'm not going to give a dissertation here about all the doom & gloom attached to massive equitiy write-downs because it could go on for pages, but if you do not even understand the "big deal" about this, you should - respectfuly - not even comment on it.
Now, with regards to clarifying the matter at hand, and the disparity between what GTDisease and Kann have said, let me add the following:
1.
On energy prices:
Kann... GreenTeaDisease is actualy correct on this piece of the equation, an increase in price of ANY agricultural input will necesarily effect agricultural commodity prices.
Where you (Kann) make an error in assessment is your analysis was in the comment about the Euro-Dollar in relation to the USD and oil purchases. You ARE correct, in that US Dollar inflation is one of the big causes of inflated energy prices in AMERICA. However GLOBAL energy prices have also risen recently, and THIS is the piece of the energy..argriculture puzzle you are missing. This increase is also related to ...
2.
The Subprime Crisis
Kann, you got this right in the sense that you understand that existing money is gravitating towards other real assets right now. It is not really coming from real estate though, because that money is gone! What IS happening is that the housing crisis is affecting both bank equity (investable..loanable funds) which means that their balance sheets and income statements are being clobbered. This then effects their stock price. When banks can not lend it also effects ALL companies and thus ALL stocks. That means the broader market suffers. When that happens ALL money gets scared, and LEAVES THE MARKET.
This is what you are seeing currently.
Without absolutely overkilling this subject, there are TWO components to this money migration that are spiking agriculture prices.
a. Existing money. Large investment firms, and big money everywhere has been pulling out of stocks since at least December. But they have to put their money somewhere or risk losing even more by holding on to dollars losing value. Currently the only "safe" real asset to invest in is commodities: metals, energies, and foods. This huge shift in corporate portfolios is driving up ALL commodities, not just agriculture.
b. NEW money. This is where it gets REALLY ugly. Just like the huge rate cuts in the early 2000's caused a real estate bubble, the current rate cuts (and other really creative Federal Reserve inflationary techniques - like TAFs) are starting to cause a COMMODITY BUBBLE! The Federal Reserve has literaly manufactured out of thin air over a HALF TRILLION dollars since October ... we are getting closer to a full trillion at this point. This money goes directly to the banks, who are either lending to other banks or large investment firms. UNFORTUNATELY, they are NOT investing in the stock market as the Fed would have hoped. Instead, THEY ARE INVESTING IN COMMODITIES!
These two facets of money migration are causing a potentialy HUGE problem on many fronts. Food and energy prices are spiking for starters, and this is probably the major HUMAN concern in the near term. However, looking farther out, the result of this inflation driven price spike is going to be a commodity bubble of epic proportions which risks the very same problems we just witnessed with the housing bubble, and before that the internet bubble. Namely, prices are getting "unrealisticaly" high, and at some point will correct at a massive rate, wiping out even more "wealth"!
Anyhow.
I just wanted to make it clear (if anyone actualy could read all this) that THE SUBPRIME CRISIS IS "DIRECTLY" EFFECTING GLOBAL FOOD PRICES. Of course, those other concerns listed in this thread are all valid components as well ... but the massive drive away from the stock market globaly, and the creation of new money being funneled in as well is having a MAJOR impact on global food prices. Do NOT underestimate SPECULATIVE INVESTMENT in commodities. :(
RANT OVER.
Man is least himself when he talks in his own person. Give him a mask, and he will tell you the truth.
-Oscar Wilde
edit : sorry, I understood 'distribution' as in the act of 'transporting' the food to different places
Thanks for the comments! I may be a little off concerning the oil prices but the 30% rise almost overnight seemed disconnected with the energy crisis. As for the investments, I agree and I hope we will not create a bubble over food.
this is EXACTLY what I said, I said it is the DISTRIBUTION of food.
First of all, I said "I don't understand what the big deal is about the sub prime crisis."
basically all you're saying is that banks can't lend to food production. ok that makes sense, but it doesn't make sense why food production would be so disproportionately affected over every other market, given that it is so heavily subsidized and protected, especially in the US where you expect to see most of the subprime market effects to begin with. I just cannot see it being the largest contributing factor to this food problem. to me it seems like natural resources and climate are the major driving factors. the financal issues seem to me to be a symptom rather than a cause. even the cause of housing bubble burst is a resource issue- maybe if every american didn't feel entitled to live in McMansions on 5 acres of land and drive three suvs we wouldn't have these problems to begin with. basically EVERYTHING in the world economy comes down to natural resources. finance is just a means to trade and manage them.