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Tuesday, April 29, 2008

Hoarding, starvation and disincentive to farm

Over that last few weeks the reality of a world food shortage has hit the main stream media as stories show that Wal-Mart’s club store Sam’s and competitor Costco both limiting the sale of rice. There were also articles about price increases in the our part of the world as well as stories about real hunger and desperation as prices and hoarding put basic staples out of reach for millions. The hundreds of millions of people who make less than $2 a day have gone from subsistence to starving in less than a year as prices on many staples such as rice, wheat, cooking oil have risen steadily.

The knee jerk reaction of many exporting countries has been to limit or tax exports in order to keep domestic supplies high and prices low. These measures have been enacted to curb unrest as regimes fear that poverty and riots have the potential to topple their governments. While these moves may curb domestic problems for the time being, in the end they will only make the world wide problem that much worse by further lowering world grain supplies.

Year 1

Country A has a grain surplus but since external demand is driving up domestic prices government A bans exports and creates an artificial glut at home which lowers prices this growing season, Yeah!!! there is rejoicing in the streets of country A.
There are currently at least 40 nations that can be called country A

Country B which was reliant on imports for a significant portion of its food is now cut off, and even if they can afford the new inflated prices they cannot find enough grain on the global market and end up suffering growing rates of malnutrition and a slow die off of population.
I don’t even know how many country B s there are in the world but certainly as many as there are country A

Year 2

Country A’s farmers are kind of pissed off. Last year despite a bull market in grains they were restricted from exporting their surplus and making a good profit. The resulting domestic glut allowed prices to drop while the inputs of farming, seed, fuel, fertilizer, and pesticides have all increased in price, lowering agricultural margins and even creating loses for some farmers. Seeing he cannot survive low prices and high inputs farmer A must change his business model to stay in business; so what can he do?

Change crops to something not banned in export (probably a non grain crop)?

Maybe for some farmers but few can make the leap, Specialized knowledge, expensive specialized equipment and a lack of capital makes any major change in crop unlikely. Grains are relatively cheap and calorie rich food stuffs that store and travel well, replacement crops would not have these advantages and would not be in the price range of starving populations. If these new crops are grown they will be high priced luxury goods for us Western lard asses, the poor will still starve and country A will still lower domestic grain production.

Make something value added with his crop to increase profits and get past the export ban?
Probably not, Once again capital issues, missing skills and difficulty of exporting a higher priced product to the world’s poor limits this to just a portion of the farmer A’s. Farmer A will still not be terribly profitable and this move will not solve Country B’s problem.

Divert more grain to meat production?
Possible, by weight it takes 7x as much grain is to produce meat, while there may be a market for more meat locally or for export, in the end a switch to meat means only 1/7th as many people can be fed, this may be a boon for decadent western carnivores but will not help the worlds poor.

Grow less or go out of business allowing the domestic market to stabilize at a profitable supply/demand ratio?
This is the most likely scenario as it costs the farmer no capital to grow less and as local surpluses decrease he makes more per acre. This more likely plan will decrease world food supply even further and put Country A one drought, flood or blight closer to joining the B countries.

Country B has long since lost its farming base because of globalization, WTO rules against protectionism, cheap subsidized grains from low cost industrialized farming nations, reliance on expensive foreign seeds because domestic seed companies have been driven out of business by Monsanto and other seed giants, seed saving is made illegal due to patents and farmers can’t afford new seed every year. Many country Bs no longer have enough arable land, skilled farmers, time or capital to quickly boost farming capacity to meet this sudden demand. Global warming will increase the need for irrigation but the infrastructure is not in place, also fuel and fertilizers may put expansion or production improvements well out of their means.

Malnutrition and starvation will spread as desperate people sell their means to feed themselves in the future (tools, land, and livestock) in order to feed themselves today. Civil unrest, fallen governments, and victimization of the vulnerable will spread the pain far past simple hunger. Mass migrations and death marches occur as people cross borders looking for safety only to find armed guards, paramilitaries and under funded disease ridden charity camps. Hungry Countries with a powerful military may turn on neighbours in wars for food and water, or simple extermination.

Food rich countries like the U.S could well use food as a foreign policy tool or weapon to get political or resource concessions from hungry nations.

Year 3,4,5……

The Cycle continues until food aid saves country B or a massive die off brings populations and food supply back into sync, in may areas the locust like behaviour of staving people will destroy grasslands, trees, and wildlife seriously lowering the earths carrying capacity.


While real shortages are probably inevitable in the long term, the rise of national hoarding which is contrary to Globalization ensures they happen this year and will make the crisis that much more deadly.

40 countries now tax or ban grain exports representing a great deal food and many millions of lives. It is quite likely more countries will join this trend as external demand further fans food inflation at home.

Any policies that are a disincentive to grow food are inexcusable and these export bans and taxes certainly qualify. Without an open world market the incentive for the world to increase food production to meet demand is thwarted and prices will not fall.

Any policy that continues to encourage or subsidize the conversion of food to fuel should be considered a crime against humanity.Recommend this Post

1 comment:

JimBobby said...

Whooee! Good boogin', MiLord. Farmin' and crops and dumbass policies that limit or discourage food production are a big part of the current crisis. Other factors are involved, too. Rampant, profit-driven, amoral speculation on the world commodities markets is a factor.

Meat eatin' in the developin' world is another big factor. As the Chinese and Indians develop, their growing middle class is demanding a little meat in their diet. Like you said, meat is 7x less efficient than grain.

Globalization has encouraged monoculture. In Kenya, much of the arable land is dedicated to growing flowers for export to Yerp's flower shops. When the Yerpeans buy enough flowers and the prices are all okay, the Kenyans make enough to import food. When high oil prices start drivin' up the cost of exporting and importing, the flowers-for-food scheme fails. And people starve. And civil disorder ensues.

When there is a confluence of deadly factors that all add up to create a crisis, each one of those factors can claim they are not they dominant reason for the crisis and subsequently refuse to act unilaterally. This is exactly the excuse Ginty spouts to continue Ontario's support for biofuels. Ditto Luna de Silva and Brazil's cane market.

Over the next few weeks and months, it'll be impossible for we in the fat, rich, self-indulgent part of the world to completely ignore the crisis we've helped create. It will simply be too huge to ignore. Millions will die and hundreds of thousands will take up arms in a struggle to fill their pitiful bellies.