Oil 1 Peak Oil 21
Food Prices – Mid East Stability
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Food Prices – Mid East StabilityHigh oil prices spur food price increases and threaten Mid East stability Intl Herald Tribune, 2-24-08 http://www.iht.com/bin/printfriendly.php?id=10339966, High oil prices take a toll on the Gulf's middle class Some governments have tried to soften the impact of high prices by increasing wages or subsidies on foods. Jordan, for instance, has raised the wages of public-sector employees earning less than 300 dinars, or $425, a month by 50 dinars. For those earning more than 300 dinars, the raise was 45 dinars. But that compensates for only part of the price increases, and people who work in the private sector get no such relief. The fact that the inflation is coinciding with new oil wealth has fed perceptions of corruption and economic injustice, some analysts say. "About two-thirds of Jordanians now believe there is widespread corruption in the public and private sector," said Mohammed al-Masri, the public opinion director at the University of Jordan's Center for Strategic Studies. "The middle class is less and less able to afford what they used to, and more and more suspicious." In a few places the price increases have led to violence. In Yemen, prices for bread and other foods nearly doubled in the past four months, setting off a string of demonstrations and riots in which at least a dozen people were killed. In Morocco, 34 people were sentenced to prison Wednesday for participating in riots over food prices, the Moroccan state news service reported. Even tightly controlled Jordan has had nonviolent demonstrations and strikes. Inflation has also been a factor - often overlooked - in some recent clashes that were seen as political or sectarian. A confrontation in Beirut between Lebanese Army soldiers and a group of Shiite protesters that left seven people dead started with demonstrations over power cuts and rising bread prices. In Bahrain and the United Arab Emirates, inflation is in the double digits, and foreign workers, who constitute a vast majority of the work force, have gone on strike in recent months because of the declining purchasing power of the remittances they send to their home countries. The workers are paid in currencies that are pegged to the dollar, and the value of their salaries - translated into Indian rupees and other currencies - has dropped significantly. The Middle East's heavy reliance on food imports has made it especially vulnerable to the global rise in commodity prices over the past year, said George Abed, a former governor of the Palestine Monetary Authority and a director at the International Institute of Finance, an association of financial institutions based in Washington. Food Prices – Protectionism AdvantageFood shortages result in protectionism and instability Philip Braude, CEO of Anglo Capital Ltd., accountant, 7-17-08 http://www.jpost.com/servlet/Satellite?cid=1215330998012&pagename=JPost%2FJPArticle%2FShowFull, Personal Finance Strategies: Commodities: Risks and rewards Rationing is something that is associated with the dark days of the last world war, but it is still a reality in many parts of the developing world. Global food shortages have become such a problem that Egypt has widened its food rationing system and Pakistan has reintroduced a system of ration cards not needed since the 1980's. Russia and China are trying to counter rising prices by putting price controls in place, while Argentina and Vietnam are imposing foreign sales taxes and export bans to protect their own supplies. Last week there were demonstrations in major cities of South Africa, with calls for the government to impose price controls on foods. Why the sudden scramble for food? The problem is that global food supplies cannot cope with the demands of a growing world population, together with the trend of more emerging market consumers adopting Western meat-heavy diets. On top of that are the EU- and US-imposed biofuel targets, which require that foodstuffs such as grains be turned into energy-inefficient fuel. These forces have driven up the prices of various foodstuffs. For example, the rise of corn prices in 2005 from $1.75 to more than $5 a bushel, together with the biofuel subsidies, has attracted farmers to plant more corn. However, for every extra acre of corn planted, an acre of something else has to be sacrificed, thus driving up the prices of other crops, such as wheat and soybeans, as their supply is being restricted. Rising oil prices are straining consumers and economies, but for investors prepared to take on some investment risk, and look hard, there is a bright side. I have been suggesting to investors concerned with inflation due to the rise in food and oil prices, to include investments exposed to the energy, commodity and agriculture sectors in their investment portfolios. Over the past few years, the energy, commodity and agriculture sectors have performed strongly, at a time when other sectors, such as share markets, have responded negatively, often due to the rise of commodity prices. To illustrate, as the oil price rises, it becomes more expensive for businesses to operate, and their profits fall, which will drive down their share price. Free trade is key to prevent extinction. Copley News Service, December 1st, 1999 Online
As long as nations are trading peacefully, and their economies are built on exports to other countries, they have a major disincentive to wage war. That's why bringing China, a budding superpower, into the WTO is so important. As exports to the United States and the rest of the world feed Chinese prosperity, and that prosperity increases demand for the goods we produce, the threat of hostility diminishes. A2 Food Prices - ProductionPoor production and conflicts drive food insecurity, not oil Xinhua News, 7-15-08 http://news.xinhuanet.com/english/2008-07/15/content_8549235.htm, FEWS NET: About 1.2 mln Kenyans facing food shortages The incidence of conflict normally increases during drought periods but subsides soon after the drought period ends. However, over the past two years, conflicts have continued and the impacts have endured for longer. According to FEWS NET, overall domestic maize supply is likely to be below average from the third quarter onwards, due to constrained 2008 long-rains production in Kenya's "grain basket", coupled with mediocre rains in other growing areas. The steep rise in the prices of cereals and other food and non-food commodities is adversely impacting household food security, particularly for market-dependent households in deficit and urban areas. The development came as Agriculture Minister William Ruto gazetted new rules governing the importation of wheat flour, which are set to apply in relation to the quantity as specified under the Mutual Tariff Concessions for the Common Market for Eastern and Southern Africa (COMESA).\ Decreased production and rainy season create food shortages in Kenya Xinhua News, 7-15-08 http://news.xinhuanet.com/english/2008-07/15/content_8549235.htm, FEWS NET: About 1.2 mln Kenyans facing food shortages The organization said in its June 2008 food security update that the 1.16 million Kenyans estimated to require emergency assistance include 225,000 displaced people in pastoral and agro-pastoral areas. "As Kenya's returning internally displaced persons (IDPs) begin to rebuild their livelihoods following post-election displacement, their food security is unlikely to improve significantly in the short to medium term," the report said. "Marginal agricultural farmers in the southeastern and coastal lowlands require sustained long rains to moderate the impacts of apoor short-rains season." The network issued alerts to prompt decision-maker action to prevent or mitigate potential or actual food insecurity. The report said below average agricultural production is expected in July and August 2008 due to an about 25 percent reduction of the cultivated area. A2 Food Prices – Alt CausesOil prices aren’t a major factor in food price increases Vancouver-Sun, 7-18-08 http://www.canada.com/vancouversun/news/business/story.html?id=971cd1f9-a51b-4c1d-87d1-72d0cf98db57,Speculators not culprits behind food inflation, think tank says There is little evidence to support suspicions that speculators are the culprits behind rising world food prices, a new report argues. Rather, the fundamental causes are increasing demand in developing countries for protein-based diets, stagnating agricultural productivity, demand from bio-fuels producers and government controls that limit output and trading, the Conference Board of Canada report concludes. For example, it noted that some governments have reacted to food shortages by putting limits on exports to build up their inventories, or in other words by hoarding food, citing as examples India, Russia and Argentina. Instead, it urges governments and the global agricultural industry to look at ways to restructure markets to address those causes. "In recent years, vast sums of money have been pouring into new forms of financial speculation based on food-commodity prices," observed the think-tank's president, Anne Golden. The report noted that agricultural commodity prices have soared on average 80 per cent in only three years. However, the spread of securitization of food commodities can be seen as an effect, rather than a cause, of the rise in world food prices, she said, adding that it's only when prices for underlying commodities are volatile does it become worthwhile for speculators and investors to seek profit in betting on price changes. "For nearly a 100 years, food-commodity markets have been organized around 'forward' contracts between producers and buyers," it said. "Over time, a 'futures' market has developed, where contracts can be bought and sold by financial intermediaries, or 'non-commercial' players." Most of the non-commercial players, including speculators, trade in the long-term market that reflects expectations of future commodity prices rather than today's prices on the "spot"market, it noted. But securitization has its benefits, it added. It establishes a benchmark price as a point of reference for quotations in the marketplace and it allows producers to hedge against risks, which stabilizes farm income, it said. Decreasing oil prices won’t solve food price spikes – multiple causes Michael Kanellos, CNET News editor, 4-15-08 http://news.cnet.com/8301-11128_3-9918741-54.html, The biofuel factor in rising food prices, CNET News What's causing the global rise in food prices? Everything. Growing demand for food in emerging nations, wheat crop failures, currency fluctuation, speculation in the commodities market, hastily conceived government policies, and the growing demand for biofuels have all--among other factors--converged to drive up the price of food, experts say. "Those who say it's all the fault of biofuels are wrong and those that say that none of the fault belongs to biofuels are wrong," said Walter Falcon, a professor emeritus of international agricultural policy at Stanford University and co-director of Stanford's Center for Environmental Sciences and Policy. "There is no doubt biofuels have added to the problem, but biofuels are not causing the demand for meat and soybeans for feed in China...There are a half a dozen things going on and it's hard to sort out who gets the blame." Increased demand is driving high food prices – low oil prices can’t solve Michael Kanellos, CNET News editor, 4-15-08 http://news.cnet.com/8301-11128_3-9918741-54.html, The biofuel factor in rising food prices, CNET News, Steady pressure on food prices has been building for several years because of consumption in emerging nations, said Roz Naylor, a senior fellow at Stanford studying the correlation of food prices and biofuels. That accelerated after outbreaks of wheat rust in India and Pakistan and droughts in Ukraine and Australia. "I would say that the trigger factor last year was the drought that caused the wheat to go down," she said. Exchange rates have also contributed. Because the shrinking dollar makes U.S. food cheap, other nations can and do buy more food grown here. Biofuel programs, particularly in the U.S., have also prompted speculators to drive up prices. Biofuels, she added, "are a contributing factor, but they aren't the only one." Then there are policy triggers, Falcon said. India has imposed bans on the export of non-fragrant rice. That will likely cause rice prices to spike this year. 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