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Generational Dynamics Web Log for 10-Feb-2011
10-Feb-11 News -- From Korea to Egypt, high food prices are driving policies

Web Log - February, 2011

10-Feb-11 News -- From Korea to Egypt, high food prices are driving policies

27% of US homes are 'under water,' up sharply from previous quarter

From Korea to Egypt, high food prices are driving policies

For the last two months, North Korea has been frantically begging for food around the world, according to South Korea's JoongAng Daily. The request has extended to dozens of countries, including China, the U.S., EU, and countries in southeast Asia.

The North Koreans' desperate need for food is apparently responsible for initiating the silly charade that went on the last few days. The North Koreans have a history of wanting to "talk" only when they can use the talks to extort aid, especially food aid. Still, the Norks have been so insistent for the last few weeks, that finally the South agreed to "talk." For the last few days, we've had bubbly stories on the BBC and elsewhere about how things have finally turned around, and a new era of sunshine was opening on the Korean Peninsula.

The talks collapsed in two days, when the Norks stormed out of the meeting, after the South wanted to discuss last year's sinking of the South Korean warship Cheonan, and the shelling of Yeonpyeong Island, killing about 50 South Koreans, according to the Korea Times. The South's demands for an apology reflect a significant hardening of policy since previous talks.

Nor are the North Koreans likely to get much food aid from China, which is deep into its own problems, according to Xinhua. China is suffering the worst drought in 60 years, crippling the country's major agricultural regions, leaving many of them parched.

Striking museum workers in Cairo on Wednesday (AP)

Striking museum workers in Cairo on Wednesday (AP)

China is the world's largest wheat producer, according to the NY Times, and if they're forced to import large amounts of wheat, it could send shock waves through the world's grain markets. "They can buy whatever they need to buy, and they can outbid anyone," according to one expert, which means that they can bid prices up as high as they want.

Wheat prices are also playing a role in the Egyptian revolution, as wildcat strikes are spreading around the country, and are threatening closure of the Suez Canal. Closure of the canal would be a crisis for Europe, according to EurActive, because Europe depends on oil supplies shipped through the canal. It would also be a crisis for Egypt, not only because of the loss of canal revenue, but also because Egypt depends on wheat imports from other countries.

Suez Canal workers have, in fact, gone on strike, according to Bloomberg, but so far the canal is operating normally.

FAO Food Price Index - 1991 - January 2011

FAO Food Price Index - 1991 - January 2011

Food prices are only going to go higher. Food prices were already at historic highs in December, and then they rose an additional 3.4% in January, according to the U.N. Food and Agriculture Organization.

And now, on Wednesday, the US Dept. of Agriculture (USDA) announced that supplies of corn and wheat this year will be well below previous forecasts, according to Reuters, thanks to increased demand for cattle feed and ethanol production.

David Dawe of the FAO explained what has happened in an interview on Bloomberg TV (my transcription):

"Food prices got really low of around 2000. That is about when they hit their trough, and a lot of that was due to investment in technology through agricultural research.
[For example,] governments building roads to move extra production to markets. But certainly a big factor was much higher yields for rice. that was the culmination of a lot of research.
The research funding has fallen off in recent years, especially for some of the cereals and that gradually lead to high prices. We saw prices go from 2000 to about 2007, more or less steadily."

Professor Art Barnaby of Kansas State University provided some additional reasons:

"What's driving the [prices] are the corn numbers. When you look at the supply demand numbers, we are now putting two Iowa corn crops in the gas tanks.
And if you look at the history going back to 2002, the ethanol number is growing every year, and that's what's really driven the whole market. Now the question becomes, if you change government policy, and reduce some of the tax incentives that are built into this ethanol climate, what will that do to the demand for ethanol in this corn complex. And I'm sure that it will back off the demand. I'm not sure we're going to back to where we were in 2002, but on the other hand we've discovered we can produce a lot more corn. It's those corn numbers though, that are dragging acres out of wheat and soybeans, and maintaining those prices.
Even cotton now has some really strong prices. Again corn is out there bidding more acres into production."

And so, since the year 2000, research funding on food production has been cut off, and huge amounts of existing food production have been diverted to ethanol.

If anybody ever had difficulty understanding the significance and importance of generational factors in the flow of history, then surely this example will resolve those difficulties.

It is truly mind-boggling that, since the year 2000, food production has been taken for granted by world officials, It's like Mad Magazine's Alfred E Neuman saying, "What, me worry?"

The survivors of World War II (GI and Silent generations) saw how destructive famines can be, and they set up the Green Revolution and the FAO to make sure that everyone would be fed. But no sooner did the Silents retire in the 1990s, then officials abandoned food research and diverted the remaining food production. It's truly amazing.

I like to compare high food prices to high blood pressure in an individual -- a kind of silent killer, until it's no longer silent.

A great famine in 1788 led to the French Revolution. The Tunisia and Egypt revolutions began as food riots. When a man can't feed himself and his family, he will not sit quietly.

From Korea to Egypt, and around the rest of the world, the greatest threat to world stability today is the continual surge in food prices. Unless food prices fall this year, which nobody is predicting as far as I know, the world could be a different place by the end of the year.

Additional links

27% of US homes are "under water," with home values less than the amount due on their mortgages, as of the fourth quarter. This is a substantial increase over the previous quarter, when the figure was 23.2%. The reason for the substantial increase in the number of homes underwater is because home values fell 2.6% during the fourth quarter. Home values declined all year, but declines have accelerated during the last half of 2010, once the government's home buyer tax credit ended in mid-year. The number of homes sold at a loss also accelerated during the last half of the year. These trends are expected to continue in 2011. Zillow.com

India's army is undertaking its first strategic transformation in more than two decades. The goal is to provide enough capacity to fight a war on "two and one half fronts" -- meaning simultaneous wars with Pakistan and China, at the same time as managing an internal counter-insurgency effort. The Diplomat

Wikileaks revelations make awkward reading for Iran because they reveal how hostile the neighboring countries are to Iran, and how determined they are to prevent Iran from acquiring a nuclear weapon. The Diplomat

Iran's Awakening era demonstrations are far from over. As we reported recently, Ayatollah Seyyed Ali Khamenei, has been bragging that the Tunisia Revolution and Egypt uprising are the result of Iran's 1979 Great Islamic Revolution. Opposition leader Mehdi Karroubi is taking advantage of that declaration to plan a demonstration in Tehran next week, in solidarity with the protest movements in Egypt and Tunisia. NY Times

David Cameron's recent speech attacking multiculturalism reflects growing xenophobic policies and behaviors in Eurpoe. In east London, local campaigners are arguing that an Islamic group should be barred from getting an extension of the land-use permit for their mosque because, the campaigners allege, the group doesn't let women worship, and because its teachings have inspired terrorists, and it preaches isolation from the wider community. Wall Street Journal (Access)

According to Debka, US naval, marine and air forces are arriving in the Suez Canal's Great Bitter Lake, to protect the Suez Canal in case of a military coup in Egypt. Debka

The Belgorod region of Russia is banning Valentine's day festivities and promtions, because it promotes promiscuity rather than love. According to a government spokesman, "It’s designed to swell the emotions, and you know what kind of teenage liaisons happen then." Bloomberg

Russian President Dmitry Medvedev has scolded Japan for unrealistic claims to the South Kuril islands, which are claimed by both Russia and Japan. At the same time, Medvedev ordered the deployment of sufficient weaponry to secure the islands. Xinhua

In Russia's Kabardino-Balkaria province, in the North Caucasus, militant activity has increased four to five times over the past year. Jamestown

For techies: Your guide to the seven types of malicious hackers InfoWorld

Study suggests that people who drink diet soda have higher risk of stroke. AP

(Comments: For reader comments, questions and discussion, see the 10-Feb-11 News -- From Korea to Egypt, high food prices are driving policies thread of the Generational Dynamics forum. Comments may be posted anonymously.) (10-Feb-2011) Permanent Link
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Generational Dynamics Web Log for 10-Feb-2011 10-Feb-11 News -- From Korea to Egypt, high food prices are driving policies

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Generational Dynamics Web Log for 10-Feb-2011
10-Feb-11 News -- From Korea to Egypt, high food prices are driving policies