Monday, February 28, 2011

Food Price Inflation at Record Highs

Notice, this record-setting food inflation is not being driven by supply-demand.  It is a product of our tottering economic/financial system.  As the article puts it: "agricultural commodities are attracting excess liquidity in international markets." 
That means all the extra money printed out by the Fed is being exported as inflation in commodities.   It is exacerbated due to the fact that most foreign nations are "net food importers", not producing anywhere close to the amount of food they need to feed themselves. 
The fact that America is a "net food exporter" means that we have an extra layer of insulation from the food prices rises.  The way we feel about oil prices is the way foreigners feel about food prices: an out-of-control skyrocketing import item.
There is also talk about placing capital controls on food commodities, to help prevent international investors from driving up prices on captive populations.  Of course, only America could do that, as the producer of most of the world's food, and it would involve a major repudiation of free-market principles.  Free-market principles meaning the elite investors can freely drive up food costs as a profit source, well.... maybe that repudiation would be a good thing.  
Certainly it should be the economic policy of any food-importing nation to achieve food sovereignty and gain control over its own food supply.  One major step in that direction would be to place import restrictions or tariffs on food imports, which of course, the international globalist community is fighting against.  
When you get down to brass tacks like this, it is hard not to look at the international economic system as a big enterprise in exploitation and parasitism:
--The advanced economies, with their mechanized agriculture, drive local food producers out of business... 
--Which then forces them to import most of their food... 
--Leaving them at the mercy of their international speculators...  
--International laws are written to prevent any defense against this process...
Without factories to build things, what exactly are they supposed to do for economic development???  Hell if I know...  
I guess if they are lucky (and they keep their wages low enough), some international company will set up a factory there... Meaning that profits will be "internationalized", i.e. extracted into foreign "ownership" hands.  What a clusterfuck!     
The world is living through another major upswing in food prices.
World food prices surged to a new historic peak in January, for the seventh consecutive month, as the FAO Food Price Index reached 231 points, up 3.4 percent from December 2010.
The accumulated increase in food prices during 2010 amounted to 25% relative to the 2009 level.

Price movements are no longer determined only by the basic driving forces of supply and demand: agricultural commodities are attracting excess liquidity in international markets and other factors, far less transparent and constantly changing, such as expectations and appetite for risk, start to play an important role in determining the direction of the prices.

Furthermore, food markets are more and more intertwined with financial and energy markets, both of which are characterized by greater volatility. Facing these multiple sources of uncertainty, agricultural commodity markets tend to overreact to any changes in the demand or supply projections, as it happened in mid-2010 in the case of wheat.

Although the world produces enough food, global production needs to be gradually increased to keep pace with the growing population. Chronic underinvestment in agriculture throughout the years, in developing countries in particular, made them more vulnerable to risks associated with the new dynamics that rule the world market. Investment in agriculture, which would allow to increase productivity and improve resilience to climatic risks, together with strengthening of rural institutions and better governance of commodity markets, are needed to reduce the incidence of price spikes.

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