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Generational Dynamics Web Log for 4-Mar-2011
4-Mar-11 News -- Food prices surge again in February

Web Log - March, 2011

4-Mar-11 News -- Food prices surge again in February

Arab League says that it may impose its own 'no fly zone' in Libya

Food prices surge again in February

World food prices once again rose to fresh historic highs, for the eighth consecutive month. Prices rose 2.2% in one month from January to February, according to the UN Food and Agriculture Organization (FAO).

FAO Food Price Index - 1991 - February 2011

FAO Food Price Index - 1991 - February 2011

Of particular importance were the prices of cereals, which rose 3.7% in one month. The cereal price index includes prices of the main food staples in many countries, such as wheat, rice and maize.

Food prices are expected to continue to climb even if harvests expand, according to Bloomberg. That's because after three years of poor harvests, stockpiles are low, and it will take at least two or three years of good harvests to rebuild stockpiles.

The original Tunisia uprising began as food riots in January, and high food prices have fueled the Arab uprisings in country after country. This is having a feedback effect, since the uprisings themselves are affecting the production of food in those countries, pushing prices still higher. The uprising in Libya is causing the price of oil to surge, and higher oil prices leading to spiralling shipping costs that will drive food inflation even higher, according to Reuters.

A new IMF report says that high food prices are here to stay because of structural issues:

As consumers in developing countries become wealthier, they change their diets away from grains and toward high-protein foods such as meat, dairy products, edible oils, fruits and vegetables, and seafood. These foods are more expensive to produce.
In 2010, the production of corn-based ethanol absorbed some 15% of the global corn crop. Cane sugar, palm kernels and rapeseed are also used for biofuels.
During the last decade, global productivity growth -- as measured by the amount of crop produced per hectare -- has fallen for rice and wheat compared with the 1980s and 1990s and has been broadly stagnant for corn and soybeans. Less productivity growth means higher prices, everything else being equal.
To produce more food, farmers have had to plant and harvest more acreage, and this has forced them on to marginal land that's less productive.

These structural problems have come at a time of weather-related supply shocks, including drought and wildfires in Russia, a hot and wet summer in the U.S., and one of the strongest La Niña weather episodes in the past 50 years, affecting food production in Asia.

Food prices have been increasing almost steadily since 2002, in good times and bad, in good weather or bad. From the point of view of Generational Dynamics, we're continuing to see what I call the "Malthus Effect," a continuing increase in the price of food as the population grows faster than the supply of food, especially during a generational Crisis era.

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The war continues in Libya, as Muammar Gaddafi's forces attempt to recover ground lost to the rebels. Of particular importance are the petroleum and natural gas processing facilities on the coast. The rebels repelled attacks by Gaddafi's forces, while the regime struck back on Thursday with air strikes. LA Times

While the West dithers in trying to decide whether to intervene in the Libyan uprising, the Arab League has made an empty promise by saying that it may impose its own "no fly zone" over Libya, in coordination with the African Union. The Arab League demanded "the preservation of the unity of Libyan lands and civil peace" - similar to the language it used in the run-up to the US-led invasion of Iraq in 2003. Al-Jazeera

China's human rights activists have been disappearing during the last few weeks, ever since someone anonymously posted on the internet that the Chinese ought to emulate Tunisia's 'Jasmine Revolution.' USA Today

Yesterday, we told you that Egyptian officials had once again postponed the reopening of the Cairo Stock exchange, closed since January 27, until March 6. But on Thursday it was announced that the stock exchange would be closed indefinitely. Investors are demanding that it stay closed, so that they can continue to claim that their stock assets are worth more than they really are. This is the same kind of scam that American banks have been using by refusing to mark their toxic assets to market. AFP

(Comments: For reader comments, questions and discussion, see the 4-Mar-11 News -- Food prices surge again in February thread of the Generational Dynamics forum. Comments may be posted anonymously.) (4-Mar-2011) Permanent Link
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Generational Dynamics Web Log for 4-Mar-2011 4-Mar-11 News -- Food prices surge again in February

Food prices surge again in February

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Generational Dynamics Web Log for 4-Mar-2011
4-Mar-11 News -- Food prices surge again in February