From The Guardian, French use baguette as stick to beat Sarkozy over prices:
The stick of crusty bread that symbolises French eating habits is the latest victim of the leap in international wheat prices which has hit Italian pasta-makers and US cereal firms. Priced at an average 75 to 95 cents (50-65p) in high-street bakeries, the baguette is forecast to rise 5 cents, a 5% to 7% jump. Consumers in France, where nine out of 10 people buy fresh bread daily and many eat baguette three times a day, are starting to protest.
And, from The Telegraph, Angry Italians to go on national pasta strike:
On the 13 September, there will be no spaghetti, fettucine, farfalle or rigatoni in Italy, as the country goes on its first-ever pasta strike. Angry Italians are downing their forks in response to a 30 per cent price rise in the nation's favourite food... The pasta-makers said the reason for the 30 per cent price rise was a shortage of wheat because farmers were switching to produce crops for the biofuel industry. Currently, a half-kilogram (1.1lb) pack of pasta costs around 70 euro cents (50p) in Italy and 70p to £1.10 in the UK. However, a spokesman for the consumer groups said the rises were rampant speculation by the producers. "The statistics show the price of grain has now fallen, but the price of bread, for example, keeps rising, without any link to the wheat price. According to our analysis, bread, fresh pasta and deserts have gone up by 12, 20 and 70 per cent respectively in the last year, while milk has increased by over 300 per cent."
Angry Italians are downing their forks in response to a 30 per cent price rise in the nation's favourite food...
The pasta-makers said the reason for the 30 per cent price rise was a shortage of wheat because farmers were switching to produce crops for the biofuel industry. Currently, a half-kilogram (1.1lb) pack of pasta costs around 70 euro cents (50p) in Italy and 70p to £1.10 in the UK.
However, a spokesman for the consumer groups said the rises were rampant speculation by the producers.
"The statistics show the price of grain has now fallen, but the price of bread, for example, keeps rising, without any link to the wheat price. According to our analysis, bread, fresh pasta and deserts have gone up by 12, 20 and 70 per cent respectively in the last year, while milk has increased by over 300 per cent."
I say artificial, because at least in the States, wheat is sitting on the ground rotting. With the bumper wheat harvest this year, prices should be lower because of the greater supply.
The U.S. railroads had this grain car shortage problem in 2004 too. At the time one railroad, the Union Pacific blamed the grain car shortage on their recent acquisition of the Southern Pacific.
Personally, I suspect the North American railroads are distracted by lucrative Asian-originated intermodal freight and hauling coal, but I don't have a source to confirm my suspicions.
The problem in Colorado is a seasonal transportation bottleneck made worse by financial stress in the agriculture industry from a severe decade-long drought. It's an exaggeration to assert that central planning would have done a better job, since no central planner is going to keep twice as many railroad cars as are usually needed just to handle an occassional peak in traffic.
Here's a podcast from the BNSF that updates the current agricultral products rail traffic situation. http://www.bnsf.com/markets/agricultural/ag_news/podcasts/AG_current_podcast.mp3
About 1/5 of the BNSF's revenue comes from ag products, coal is about 1/5, consumer products about 2/5.
The first link only repeats local quotes and barely states an ancient, standard explanation of market forces, probably with an unstated timing-difference.
The second link is great because it gives a bird´s eyeview of the railroad business and I learned much more than it said. It is amazing how a PR podcast for a huge railroad can have so little accomplishment to PR about. It is practically a railroad commercial with an unconfident voice.
Neither link addresses this issue, nor does it explain why ´central planning´ is so embarrassingly bad. We are talking about moving a product that takes a whole season! to bring in and they still cannot move rail cars to the right place, in these days of IT, satellites and just-in-time everything.
Railroads may not be the cause of the problem here, but they certainly ain´t been part of the solution... and cereal prices ARE being played with around the globe. Our knowledge has surpassed our wisdom. --Charu Saxena.
The point, though, is that neither a market system nor a centrally planned system can do much about a situation where the capacity spans factors of two from year to year. Also, grain trains are used differently in different regions, depending on a bunch of factors (e.g., standardized train lengths), so they can't just all be moved from Kansas to Colorado, for example, at a moment's notice. Capacity planning has to be based on a statistical basis, where you plan to have, say, enought to handle %150 of the long-term average. Some years the cars will sit empty, and other years you won't have enough.
The railroads DO have car tracking for customers, and they support modern practices like pre-ordering of shipments. But agriculture is a tough market, where a great crop can be wiped out in one hailstorm, and the penalty to the shipper for a cancelled order is pretty high. You are aware, I'm sure, that the U.S. railroads are very, very busy places, so you can't just say that you want thousands of extra grain cars to magically appear at point X without notice.
Anyway I was just responding to Jerome's comment about the market system not planning for extra capacity; of course it does, but not for infinite extra capacity.
