by Asinus Asinum Fricat
Sun May 11th, 2008 at 08:57:05 AM EST
Panic over commodity shortages continues to emerge as the dominant factor in the global markets, with both end user and speculative buyers of corn, soybean, cotton, rice and a host of other commodities taking note of what's happening with the wheat shortcomings. Commodity markets are now seen as the main factor behind price rises. But rising fuel prices, Chinese demands and a lack of infrastructure to deal with extreme weather in countries such as Bangladesh and Australia have also played their part.
Farmers and food executives have appealed fruitlessly to federal officials for regulatory steps to limit speculative buying that is helping to drive food prices higher. "Casino capitalism has taken a seat at the table of the poor" said EU Socialist Group leader Martin Schulz yesterday, "this is immorality carried to the extreme. This is why we need international controls on financial markets."
Meanwhile, some Americans are stocking up on staples such as rice, flour and oil in anticipation of high prices and shortages spreading from overseas.
Diary rescue by Migeru
Even Wonkette reports: "the New York Times to, uh, the New York Sun, newspapers are reporting the hot new American trend: survivalism.
"Something is wrong," said National Farmers Union President Tom Buis, adding that the CFTC's refusal to rein in speculators will force farmers and consumers to take their case to Congress. Their pleas did not find a sympathetic audience at the Commodity Futures Trading Commission (CFTC), where regulators passed the buck and said high prices are mostly the result of soaring world demand for grains combined with high fuel prices and drought-induced shortages in many countries.
This may warrant congressional intervention. The public is all too aware of the credit crisis on Wall Street. No one needs another lack of oversight and regulation that could lead to a similar crisis in rural America and beyond.
While farmers here and abroad generally are benefiting from the high prices, even they have been burned by a tidal wave of investors and speculators pouring into the futures markets for corn, wheat, rice and other commodities and who are driving up prices in a way that makes it difficult for farmers to run their businesses. While US has made improvements to increase crop production efficiency in recent years, the world hasn't really put sufficient investment into production agriculture for several decades. The net result has been declining stocks at the same time that expanding global wealth has demanded more raw commodities. The net result is a new all-time record high prices for corn, soybeans and wheat. Solid demand for soyoil and soybeans, especially from China, continues to fuel buying interest in the oilseed complex. China is also said to be buying both to fight food inflation and to build inventories ahead of this year's Olympics.
Vietnam moved to quell panic over rice supplies yesterday, banning speculation in the market after a "chaotic" buying binge at the weekend highlighted growing global fears about food security. The Vietnamese government, facing the challenge of double-digit inflation as it makes the transition to a market economy, blamed hoarding and speculation for the weekend buying spree, and reacted by ordering local authorities to regulate markets and ban non-food traders from trading rice. The consumer rush for rice took place even as Vietnam's output for the winter-spring crop was estimated at 9.9mn tonnes, 400,000 tonnes higher than last year.
Although Asia consumes over 80% of the world's rice, the impact has been limited as countries like China, India and Japan are self-sufficient. The frantic pace of price increases in Thailand, the world's largest rice exporter, looks set to cool in the weeks ahead, a Thai rice exporter said, with improved supplies.
"The market is likely to correct up to 20% even if the bans by India and Vietnam remain,"
Korbsook Iamsuri, the secretary general of the Thai Rice Exporters' Association said yesterday.
"Crop arrivals are much better than what it was three weeks ago,"
she said, as Thai prices remained above the historic $1,000 per tonne level reached a week ago.
Elsewhere, in a world of increasing affluence, the hoarding of rice and wheat has begun. The President of the Philippines made an unprecedented call last month to the Vietnamese Prime Minister, requesting that he promise to supply a quantity of rice. The personal appeal by Gloria Arroyo to Nguyen Tan Dung for a guarantee was a highly unusual intervention and highlighted the Philippines' dependence on food imports, rice in particular. Mounting concern about rice has prompted the Indian Government to restrict exports of certain varieties. The measure triggered another surge in global rice prices, which have risen 50 per cent in a year, according to the FAO. The rice shortage is even felt in Britain where the price of basmati, the biggest-selling variety, is rising rapidly despite the fact that there are ample stockpiles. The specter of hoarding is everywhere.
The issue of food prices will be discussed on June 3-5 when world leaders meet in Rome at FAO's invitation to attend a High Level Conference on World Food Security: the Challenges of Climate Change and Bioenergy. Guests whose presence at the summit has already been confirmed include Presidents Sarkozy of France and Lula of Brazil, and UN Secretary-General Ban Ki-moon. It will be interesting to see if they will address the evils of speculation.