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Generational Dynamics Web Log for 25-Aug-07
World wheat prices up 30% since May on panic buying

Web Log - August, 2007

World wheat prices up 30% since May on panic buying

Wheat prices hit an all-time record high, as stocks are low, and poor weather has damaged crops in Canada, after Australia suffered a severe drought, and floods have reduced yields throughout Europe.

The latest 30% spike in wheat prices came in response to news that Canada’s crop could be reduced by roughly 20% this year after bad weather hit the world’s second-largest exporter.

Countries that rely on imported wheat, such as Japan and Taiwan, responded with panic buying, pushing the price up.

Demand for wheat is generally up, especially as China and India, as tastes become more westernized, and people demand more pasta and bread in place of traditional rice.

When I last wrote about growing food prices, in an article last month, I noted that some kind of "tipping point" appears to have been reached, and worldwide food prices are really becoming uncontrollable.

Not all agricultural product prices have spiked as much as wheat, but the general trend is to be up sharply. In general, food inflation worldwide is averaging 6-8% over a year ago.

The following graphs show the increase in prices of wheat, corn and rice, respectively, over the last 1-2 years.

(I've mentioned previously that the Wall St. Journal online has been promoting its "historical prices," that go back all of three months in most cases. Well, they must have had a historian in the commodity department, because these figures go waaaaaaaaaaaay back as far as 2005 or 2006.)

Wheat, corn and rice futures prices, 2005 or 2006 to present. <font face=Arial size=-2>(Source: WSJ)</font>

Wheat, corn and rice futures prices, 2005 or 2006 to present. (Source: WSJ)

As you can see from the above graphs, the price of wheat has doubled in two years, corn prices have increased 40-60% in two years, and rice prices have increased about 10% in one year.

Another major source of demand for agricultural demand is the rapidly expanding use if biofuels, led by four regions: US, Brazil, Europe and China. This has increasingly diverted such crops as corn and sugar cane away from food and towards energy production.

According to a a study published in May by Canada's National Farmer's Union (NFU) (PDF), there is a global food crisis emerging.

The following graph illustrates how worldwide stocks of grains have been falling sharply since the year 2000:

World total grains, days of supply: 1960/01 - 2007/08 <font face=Arial size=-2>(Source: nfu.ca)</font>

World total grains, days of supply: 1960/01 - 2007/08 (Source: nfu.ca)

As you can see, there were 130 days of grain supply stockpiled and available in 1986, 115 days supply in the year 2000, and 47 days supply in 2007.

What's significant is not just the lower level of supply, but the sharp downward trend that shows no sign of abating. What this shows is that increasingly we're eating more food than we produce, and that this trend is continuing and probably increasing.

According to the NFU report,

"Every six years, we’re adding to the world the equivalent of a North American population. We’re trying to feed those extra people, feed a growing livestock herd, and now, feed our cars, all from a static farmland base. No one should be surprised that food production can’t keep up. ...

[T]he converging problems of natural gas and fertilizer constraints, intensifying water shortages, climate change, farmland loss and degradation, population increases, the proliferation of livestock feeding, and an increasing push to divert food supplies into biofuels means that we are in the opening phase of an intensifying food shortage. ...

If we try to do more of the same, if we try to produce, consume, and export more food while using more fertilizer, water, and chemicals, we will only intensify our problems. Instead, we need to rethink our relation to food, farmers, production, processing, and distribution. We need to create a system focused on feeding people and creating health. We need to strengthen the food production systems around the world. Diversity, resilience, and sustainability are key."

You know, this is a VERY serious problem, much more serious than the stylish, designer, fad issue du jour, global warming, and yet everyone's completely oblivious to it.

Related Articles

Food Prices
Food rationing comes to the United States: After years of price rises, mainstream media is finally recognizing there's a problem.... (24-Apr-08)

Food panics and riots spread around the world: The unending sharp price wheat, corn and rice prices are destabilizing nations.... (9-Apr-08)

UN World Food Program to institute food rationing: Surging food prices are causing food riots around the world.... (26-Feb-08)

Wheat price rises blocked by commodities market price increase limits: American wheat stockpiles are lowest since just after World War II.... (9-Feb-08)

Wheat prices surge above $10 per bushel, sparking little concern: World food stocks dwindling rapidly, according to the UN.... (23-Dec-07)

UN expert calls biofuels a "crime against humanity": Separately, Oxfam says that biofuels won't work, and they "trample" poor people.... (7-Nov-07)

United Nations warns of social unrest as food prices continue meteoric climb: With world wheat prices now up 60% since January, countries are panicking... (08-Sep-07)

World wheat prices up 30% since May on panic buying: Wheat prices hit an all-time record high, as stocks are low, and poor weather... (25-Aug-07)

The global warming fad is becoming the enemy of food production.: Food prices are continuing to increase sharply around the world.... (16-Jul-07)

Price of food is skyrocketing in India and China: In fact, crop prices are increasing around the world,... (11-Apr-07)

In Mexico, violent crime from drug cartels increases with tortilla prices: After Acapulco incident, Canada may advise citizens not to travel to Mexico.... (8-Feb-07)

UN World Food Program will cut Darfur humanitarian rations in half: This continuing genocide is a very sad situation, but it can't be stopped.... (29-Apr-06)

In a new bizarre move, North Korea demands an end to U.N. food aid: The famine-stricken country officially told the UN World Food Program... (26-Sep-05)

Food prices continue to increase dramatically around the world: Hunger, poverty and starvation are spreading to increasing masses of people around the world,... (10-Aug-05)
China appears to be approaching a major civil war : Unrest is spreading, and economic disparities make China a textbook case for a massive civil war in the making (16-Jan-2005)
Green Revolution vs Malthus Effect: Despite the "Green Revolution," world population continues to grow faster than food production. This is one of the fundamental reasons why wars occur. (28-Jun-2004)

I get yelled at by web site readers for various things on this web site, but there's no doubt what the number 1 issue is that people get angry at me about: The obvious fact that we're running out of food relative to population, and that soon there won't be enough food in the world to feed everyone.

What I've discovered, listening to people shouting at me on this issue, is that they simply assume that there's enough food for everyone, and that there always will be, and they can't imagine it any other way. It's the same kind of obliviousness that people show toward the increasing instability of the world economy.

I've actually changed my mind about what's going on here. When I've written about this subject in the past, I ascribed the cause of this problem entirely to a statistical fact -- that population grows faster than the food supply grows. But now I see how there's a huge generational factor as well.

After WW II, there was a concerted effort to make sure that everyone would eat, because it was recognized that poverty and starvation were one of the major causes of the war. There was the Green Revolution that brought the latest agricultural technology to countries around the world, especially India. And there have been programs like the U.N. World Food Program that purchases food for needy people.

But the problem is that the population grows faster than the food supply. You can see this from the fact that food prices around the world have been increasing faster than inflation since 2000, and they've really skyrocketed since 2004.

What I believe has happened is that the "Green Revolution" ran out of steam around the mid-1990s, and population growth has been rapidly overtaking food production since then.

But there's another reason as well: The mid-1990s was the time that the dot-com bubble began, and that happened because the people who remember the Great Depression had mostly disappered (retired or died) by that time.

So the "Green Revolution" ran out of steam in the mid-1990s, and the dot-com bubble began in the mid-1990s. Up until now I hadn't related these two events, but lately I've come to believe that they're closely related.

Here are the similarities between the two:

They began at roughly the same time -- in the mid-1990s.

That was the time of the disappearance of survivors of the Great Depression -- who remembered how dangerous the abusive use of credit is, and who ALSO remembered how dangerous starvation is, since it can lead populations to war.

Thus, it was the time that the arrogant, narcissist Boomer generation took charge, driven by the bitter, enraged Generation-X. The Boomers make it their life's work to reject every bit of wisdom their parents tried to hand down, and the GenXers make it their life's work to drive the Boomers to self-destruction. Unfortunately, they both succeed.

People in these generations have the attitude that the only important thing is individual civil rights, and that everything having to do with the global economy, agriculture, and wars will take care of itself, or is someone else's problem. What they don't realize is that it's the people in the generations who survived the Great Depression and WW II who have been taking care of everything for them. With those generations gone, nobody is taking care of the important things.

The new generations are increasingly contemptuous of everything that the older generations were trying to accomplish. They use credit abusively, and they've stopped making the effort to feed the world.

In particularly, they're totally, utterly oblivious to the exponentially increasing inbalances in both the economy and the agricultural marketplaces. They think that everything will take care of itself and, if it doesn't, then someone else is to blame. The only thing that matters to them is politics and arguing.

For example, I feel I can be quite certain that if the survivors of the Great Depression and WW II were still leading the nation and the world, then no one would be talking about reassigning huge amounts of agricultural land away from production of food and to production of biofuels, just to feed a "global warming" fad. They would understand how enormously dangerous that was, when there are people starving.

As a result, the world is facing both a financial crisis and a food crisis, and few people have the vaguest idea what's going on.

Although they're oblivious to these crises, as soon as danger becomes apparent, they panic -- whether it's panic selling of stocks, panic buying of food, or a panicked attack on another nation.

When I wrote in April that "the price of food is skyrocketing in India and China," I quoted the following article from the Wall Street Journal:

"Doomsday predictions of a major food shortage in China and elsewhere have circulated for years but haven't materialized. And some economists believe the recent increase in crop demand probably can be met without severely straining the global economy. They think prices could come back down over time, especially if some countries that have more land that could be put under cultivation -- particularly Brazil -- can greatly increase production. Technological advances, such as better seed varieties, could also help boost production to keep up with demand."

This is the epitome of stupidity. The The Wall Street Journal is supposed to be a newspaper of reporters who know what's going on in the world, but more and more they seem among the most oblivious of all.

It has now been eight years that food prices have been increasing faster than inflation, and the rate of growth itself seems to be growing exponentially and uncontrollably.

This may or may not be of concern to most Americans, where only 14% of a family's budget is spent on food, but it's considerably more important in China and India, where it accounts for 33% and 46%, respectively.

I'll take a guess here: Every time that the worldwide cost of food goes up another 1% more than inflation, another few tens of millions of people in the world are thrown into poverty and undernourishment. Tens of millions isn't very much compared to the world population of 6.6 billion, but it is a lot in absolute terms, and it's far more than enough to start a war. When a man can't feed himself and his family, then he has nothing to lose and everything to gain by going to war.

This is particularly true in the huge megacities of the world, each holding 10-20 million people in vertical apartment buildings or shanties, foraging for food in garbage dumps.

The national and world economy is deteriorating so rapidly, that it now seems likely that a major financial crisis will begin in a matter of weeks, based on research on previous generational crises.

I don't have similar research on food crises, but the huge surge in food prices displayed by the graphs at the beginning of this article cannot continue for long, and there is nothing going on in the world that's going to stop it.

We're expecting a major financial crisis, but even a minor one would be a major disruption to many populations, especially those densely packed into megacities, where there's no opportunity even to grow a little food in the backyard. (25-Aug-07) Permanent Link
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Generational Dynamics Web Log for 25-Aug-07 World wheat prices up 30% since May on panic buying

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Generational Dynamics Web Log for 25-Aug-07
World wheat prices up 30% since May on panic buying