World Food Crisis (score one for the U.S!)

[Winnow]

With 54% of the world's corn supply grown in America's mid-west, the U.S. is one of those countries with an edge.

Food > Oil

OPEC lowers oil output...all the sudden those bushels of corn prices go up for the rest of the world. Plenty for the U.S.!

Interesting article:

http://www.nationalpost.com/news/story.html?id=213343

Forget oil, the new global crisis is food

Alia McMullen, Financial Post Published: Monday, January 07, 2008

A new crisis is emerging, a global food catastrophe that will reach further and be more crippling than anything the world has ever seen. The credit crunch and the reverberations of soaring oil prices around the world will pale in comparison to what is about to transpire, Donald Coxe, global portfolio strategist at BMO Financial Group said at the Empire Club's 14th annual investment outlook in Toronto on Thursday.

"It's not a matter of if, but when," he warned investors. "It's going to hit this year hard."

Mr. Coxe said the sharp rise in raw food prices in the past year will intensify in the next few years amid increased demand for meat and dairy products from the growing middle classes of countries such as China and India as well as heavy demand from the biofuels industry.

"The greatest challenge to the world is not US$100 oil; it's getting enough food so that the new middle class can eat the way our middle class does, and that means we've got to expand food output dramatically," he said.

The impact of tighter food supply is already evident in raw food prices, which have risen 22% in the past year.

Mr. Coxe said in an interview that this surge would begin to show in the prices of consumer foods in the next six months. Consumers already paid 6.5% more for food in the past year.

Wheat prices alone have risen 92% in the past year, and yesterday closed at US$9.45 a bushel on the Chicago Board of Trade.

At the centre of the imminent food catastrophe is corn - the main staple of the ethanol industry. The price of corn has risen about 44% over the past 15 months, closing at US$4.66 a bushel on the CBOT yesterday - its best finish since June 1996.

This not only impacts the price of food products made using grains, but also the price of meat, with feed prices for livestock also increasing.

"You're going to have real problems in countries that are food short, because we're already getting embargoes on food exports from countries, who were trying desperately to sell their stuff before, but now they're embargoing exports," he said, citing Russia and India as examples.

"Those who have food are going to have a big edge."

With 54% of the world's corn supply grown in America's mid-west, the U.S. is one of those countries with an edge.

But Mr. Coxe warned U.S. corn exports were in danger of seizing up in about three years if the country continues to subsidize ethanol production. Biofuels are expected to eat up about a third of America's grain harvest in 2007.

The amount of U.S. grain currently stored for following seasons was the lowest on record, relative to consumption, he said.

"You should be there for it fully-hedged by having access to those stocks that benefit from rising food prices."

He said there are about two dozen stocks in the world that are going to redefine the world's food supplies, and "those stocks will have a precious value as we move forward."

Mr. Coxe said crop yields around the world need to increase to something close to what is achieved in the state of Illinois, which produces over 200 corn bushes an acre compared with an average 30 bushes an acre in the rest of the world.

"That will be done with more fertilizer, with genetically modified seeds, and with advanced machinery and technology," he said.

[Markulas]

It's funny because the food crisis is directly related to the oil crisis. Without a heavy oil infrastructure, including fertilizers that are from fossil fuels, our crops would not have as high of yield. So when oil output goes down the farmer pays more money to produce the same amount of corn. On top of that horribly inefficient ethanolic fuels go up because of "demand" and weak politicians resulting in a further increase of corn prices. The more and more I read about this issue the less hopeful I become.

[Winnow]

Americans are so fat that around the time the rest of the world started dying off from lack of food, Americans would just be starting to look fit having burned off all their excess poundage.

[Tangurena]

We're producing 200 bushels/acre because our farmland has become a way to turn petroleum (mostly natural gas) into food. Yields 50 years ago were closer to 45-55 bushels/acre. The difference has come because of more effective pesticides, herbicides and fertilizers. Almost all of the strains of food crops that came out of "the green revolution" produce lower yields than traditional crops when those pesticides, herbicides and fertilizers are absent. Natural gas is the main ingredient in making anhydrous ammonia, which is the most common fertilizer (and also apparently used for making meth, based on the theft reports). As natural gas rises in price, so does fertilizer.

When the Soviet Union collapsed, Cuba's energy imports dropped by 95% because the subsidies ended. On average, Cubans lost 20 pounds in the first year after that. As an example, all their milk cows turned out to be North American ones that needed to be air conditioned in Cuba's tropical heat - so they died when the AC died. Also, every vacant lot was turned into an urban garden. During WW2, we called such things victory gardens. I don't think we'd be so lucky as to only lose 20# as we've got a grass fetish in the US, and many home owner associations prohibit growing anything other than grass (in FL, there were some "upscale" HOAs that issued pantone cards to their grass nazis to fine people with grass outside the approved color range).

[Animale]

In the midwest it isn't only fossil fuels they are using to grow crops, but also fossil water from the aquifer there. We're going to blow through 10,000+ years of stored water in less than 100, yowch.

Animale

[Boogahz]

but we'll kill off the Gulf of Mexico at the same time with all of the run off!

[Midnyte_Ragebringer]

Corn based ethanol is inferior and shouldn't be pushed anyway.

[Boogahz]

Ethanol demand fuels destruction of sea life.

[Ashur]

[...](in FL, there were some "upscale" HOAs that issued pantone cards to their grass nazis to fine people with grass outside the approved color range).

I can see that.