World braced for new food crisis

[Contra Mundum]

"This is by far and away the most serious weather issue and supply and demand problem that I have seen by a mile"

Video in link.
http://www.ft.com/cms/s/0/9989dc80-d...#axzz217fPjGzx

The world is facing a new food crisis as the worst US drought in more than 50 years pushes agricultural commodity prices to record highs.

Corn and soybean prices surged to record highs on Thursday, surpassing the peaks of the 2007-08 crisis that sparked food riots in more than 30 countries. Wheat prices are not yet at record levels but have rallied more than 50 per cent in five weeks, exceeding prices reached in the wake of Russia’s 2010 export ban.

The drought in the US, which supplies nearly half the world’s exports of corn and much of its soyabeans and wheat, will reverberate well beyond its borders, affecting consumers from Egypt to China.

“I’ve been in the business more than 30 years and this is by far and away the most serious weather issue and supply and demand problem that I have seen by a mile,” said a senior executive at a trading house. “It’s not even comparable to 2007-08.”

David Nelson, global strategist at Rabobank, added: “Today the [US crop] disaster is real, whereas to some degree the big run-up in prices in 2008 was speculatively driven.”

José Graziano da Silva, director general of the UN’s Food and Agriculture Organisation, told the Financial Times: “I am certainly concerned about the recent rises in food commodity prices, given their potential implications especially for the vulnerable and the poor, who spend as much as 75 per cent of their income on food.”

In 2007-08, a spike in prices triggered food riots from Bangladesh to Haiti as the number of hungry people in the world surpassed 1bn. However, economists point out that supplies of rice and to a lesser extent wheat – key staples for many of the world’s poorest people – remain abundant, subduing prices.

Joseph Glauber, chief economist at the US Department of Agriculture, also argued that the current situation was “far better” than 2008. “Prices are higher, and there’s no question about that, but we really had an extreme shortage of wheat in 2007-2008 and I don’t see that at this point.”

Justin Forsyth, chief executive of Save the Children, said the rise in prices was still likely to have an exaggerated effect on the world’s poorest people. “Large numbers of people live very close to the edge,” he said. “Failed rains and high food prices have tipped lots of people over the edge from being able to cope to not being able to cope.”

The USDA slashed its corn production forecasts last week by the most in a quarter of a century, and conditions continue to deteriorate in the worst US drought since 1956.

Meteorologists have warned that at least half of the US corn and soyabean belt will remain dry over the next fortnight, and traders have cut their estimates for the US corn crop by a further 8-15 per cent. “I get on my knees every day and I’m saying an extra prayer right now,” Tom Vilsack, US agriculture secretary, said on Wednesday.”

Prices for corn on Thursday hit a record $8.16¾ a bushel, and traders believe prices could rise above $9 by early August unless the weather in the US dramatically improves.

Mr Graziano da Silva said that the FAO would convene an intergovernmental summit before the end of the year to address the issue of food security if the crop situation deteriorated further.

[The Lawspeaker]

It has fuck all to do with the weather and all the more with pure greed a.k.a cold-blooded murder.

[Contra Mundum]

Agriculture Secretary tells White House drought getting worse, resorts to praying for rain

(Reuters) - The drought in the Midwest is getting worse for hard-hit farmers and the wilting crops will mean higher food prices, the top U.S. agriculture official told President Barack Obama at the White House on Wednesday.

While USDA Secretary Tom Vilsack said he was praying everyday for rain, he told Obama the drought is not as bad as in the last great drought of 1988.

"I get on my knees everyday and I'm saying an extra prayer right now," Vilsack said. "If I had a rain prayer or a rain dance I could do, I would do it."

In his briefing to President Obama, Vilsack said that the drought of historic proportions will shrink this year's harvest of corn and soybeans. The crops are used for food and feed and because of that Vilsack said meat and poultry prices will be higher this year and next.

Vilsack reiterated he did not see a need right now for a government waiver to reduce production of corn-based ethanol, which critics say is helping to further drive up sky rocketing prices.

But he said the drought footprint was widening with an additional 39 counties designated as primary natural disaster areas for a total of 1,297 counties across 29 states.

The government said this week that the area affected by drought was the largest since 1956, but the 1988 drought is the costliest to date, which devastated farmers and sparked widespread forest fires.

Vilsack said the drought was not yet as severe as the 1988 weather disaster in the Midwest which caused billions of dollars of damage.

"Part of the problem we're facing is that weather conditions were so good at the beginning of the season that farmers got in the field early, and as a result this drought comes at a very difficult and painful time in their ability to have their crops have good yield," he said.

Vilsack urged Congress to work with the Obama Administration to improve aid to farmers who are struggling with a crop that was now affecting 61 percent of the U.S. land mass.

FORECASTS REMAIN HOT AND DRY

There was, however, little relief in sight from the stingy skies across the region. The western Midwest was expected to remain hot and dry for the next week, though there could be cooler temperatures and light rain in the east, an agricultural meteorologist said Wednesday.

"It's a little wetter for next week in the west and southwest," according to Don Keeney, a meteorologist for MDA EarthSat Weather, who said they were expecting only a half inch or less of rain. "So not much relief and confidence is low in that forecast."

The parched lands and predictions of food inflation will be another source of woe for Obama as he battles for reelection in November with an economy already suffering from anemic growth and weak job creation.

While higher feed costs would likely boost meat and poultry prices later this year and next, those prices could drop in the short term as producers slaughter cattle because of high costs, temporarily raising the meat supply, Vilsack said.

He said the USDA would open up more areas in the Conservation Reserve Program to give ranchers access to emergency grazing land.

Corn prices jumped again on Wednesday due to the deteriorating conditions, rising to nearly $8 a bushel to extend a rally that has seen the grain's price jump 50 percent over the past few months.

Hard-hit livestock producers and other groups want the Environmental Protection Agency to give oil refiners a waiver from the mandate to blend ethanol into gasoline, arguing demand for the corn-based fuel was driving up corn prices.

But Vilsack said ethanol demand was not a problem right now.

"There is no need to go to the EPA at this time based on the quantity of ethanol that is in storage," he told a White House briefing.

The U.S. drought is also expected to be felt worldwide as the world's biggest grain exporter struggles to get the crops off the field and to market.

"The dramatic rise in grain prices in the past few weeks is shaping up to be a serious financial blow for wheat importing countries," a German trader said. "African and Middle Eastern countries are now facing painful rises in import bills."

[Grizzly]

We should have better systems to store the extra water in periods of extra precipitation but I guess that's just wishful thinking.

[The Lawspeaker]

The Volkskrant (left-leaning newspaper) blames it on the weather. Public opinion blames it on speculation. I remember that either Tegenlicht (christian-left leaning/public TV) or Zembla (left-leaning public TV) had an interesting episode about speculation the other day.

I say that it is purely Goldman Sachs and others speculating on rising food prices because of a draught and making it far worse. Grain is the new bubble now that gold, oil and derivatives are less interesting.

[2DREZQ]

The

We should have better systems to store the extra water in periods of extra precipitation but I guess that's just wishful thinking.

There is no system even imaginable with current technology to store that amount of water. It might be do-able if we started pumping most of the major rivers in the U.S. back into the aquifers that we have been pumping down for 35 years to irrigate. (check out the drop in the Ogallala aquifer!) But the investment cost would be hard to come up with, and downstream states would scream bloody murder.

The brutal fact is neither the money nor the will exists to store enough grain worldwide against hard times. The nations that could afford it don't have to because if there is any grain at all they will be able to buy it. The nations that will come up short this time around couldn't afford to stockpile even if the political will existed to do so. There was a time not many years ago when the US Gov't. PAID farmers to keep quite of reserve in their possession. I think we should have such a system again.

Of course, I have food stockpiled enough to see my family through most crises that may occur. (and guns and ammo also, but that's another story...)

[2DREZQ]

The Volkskrant (left-leaning newspaper) blames it on the weather. Public opinion blames it on speculation. I remember that either Tegenlicht (christian-left leaning/public TV) or Zembla (left-leaning public TV) had an interesting episode about speculation the other day.

I say that it is purely Goldman Sachs and others speculating on rising food prices because of a draught and making it far worse. Grain is the new bubble now that gold, oil and derivatives are less interesting.

Are you suggesting we eliminate futures trading in agricultural products?

[The Lawspeaker]

Are you suggesting we eliminate futures trading in agricultural products?

I do.

[2DREZQ]

I do.

How would you handle the harvest, storage, marketing and distribution of food?

Not trying to start a war here. Just curious about your ideas.

[The Lawspeaker]

How would you handle the harvest, storage, marketing and distribution of food?

Not trying to start a war here. Just curious about your ideas.

The good old fashioned farmer to market for the most part. The basic food stuffs should be (where possible) produced locally and I don't buy the idea that harvest, storage, marketing and the distribution are warranted by Goldman Sachs and their friends buying up a lot of shares. They weren't there in the past either and this is a new thing.