UN: record food prices put world in "danger territory"

[Jeff]

The coming hunger: Record food prices put world 'in danger', says UN
Perfect storm of climate and oil puts world into 'danger territory'

By Sean O'Grady, Economics Editor
Thursday, 6 January 2011

Food riots, geopolitical tensions, global inflation and increasing hunger among the planet's poorest people are the likely effects of a new surge in world food prices, which have hit an all-time high according to the United Nations.

The UN's index of food prices – an international basket comprising wheat, corn, dairy produce, meat and sugar – stands at its highest since the index started in 1990, surpassing even the peaks seen during the 2008 food crisis, which prompted civil disturbances from Mexico to Indonesia.

"We are entering danger territory," said the UN Food and Agriculture Organisation's chief economist, Abdolreza Abbassian.

Global food prices have risen for the sixth month in succession. Wheat has almost doubled since June, sugar is at a 30-year high, and pork is up by a quarter since the beginning of 2010.

The trends have already affected the UK where the jump in food prices in November was the highest since 1976. Meat and poultry were up 1 per cent and fruit by 7.5 per cent in one month.

...

One concern, especially in Ukraine and Russia, is that the cold winter, following disastrous droughts and summer fires, will have damaged the seeds for next year's crops, leading to an even more acute crisis than seen last year. Government policies, especially the export bans imposed by nervous Indian and Russian governments, have exacerbated such problems in world markets.

Meanwhile, burgeoning consumption in the booming economies of east Asia and the pressure exerted by the demand for crops for biofuels rather than food, especially in the US, is adding to the unprecedented squeeze on world food supplies.

The latest surge in crude oil prices adds to the risk of turmoil. Many experts say oil prices show few signs of abating, and the price of a barrel is set to breach the $100 barrier again soon. Opec officials yesterday said they were happy with such a level. Oil peaked at just under $150 a barrel in 2008; any sign of renewed tension in Iran would see the price exceed that. Higher oil prices add to food price inflation by increasing transportation costs.

...

http://www.independent.co.uk/news/world ... 77220.html

[Nordic]

Good thing our government quit including food prices in our "cost of living" index! I mean, c'mon, nobody's "cost of living" involves FOOD, right?

Right!

[The Consul]

Look at the picture on link in Jeff's post above. I doubt none of us on this page have ever been in that position. Millions are. What we think we know we do not know and we do not know what we think. Our minds move through dank catacombs of ancient lies that echo in the very marrow of our bones. The system is a diabolical miracle. The birds fall in droves on the road. The fish are their own beach now of the dead naked eye. And throngs of us crowd together, reaching up to the sky. Yesterday they came to kill us. Today it's food. We are too hungry to wonder what they might have put in it.

[Stephen Morgan]

Yet subsidies and tariff barriers still ensure massive swathes of African farmland are left waste because they can't compete with western produce backed by state support. This scarcity is engineered, for money and power.

[vanlose kid]

Local food pantries seeing record number of people seeking help
BY JENNIFER A. BOWEN - News-Democrat


Although the government has declared the recession officially over, the number of people needing help to keep food on the table continues to grow.
"There is definitely more demand," said Belleville Salvation Army Capt. Heath Sells. "We are seeing a lot more senior citizens coming in that we haven't seen before. I don't know if that's because they are having to make those tough decisions between food, prescriptions, utilities and housing, but our prayer is that we are able to ease some of that struggle so they don't have to make that decision between whether to eat or get a prescription filled.

"This isn't the chronic homeless, these are the people who are still struggling to pick themselves up out of this economic slump. These are people who are struggling after they lost a job and are trying to get back on their feet," he said.

In July, the shelves of the Salvation Army's food pantry at 20 Glory Place in Belleville were bare. But, due to the holiday season and a number of food drives, the shelves are full once again, Sells said.

"After the holidays, the donations and drives trickle off," he said. "Our pantry is looking good now. However, when we get to February, March, early spring and summer, it's going to be looking pretty lean."

Nationwide, the Salvation Army reported demand for food pantry services was up 94 percent last year compared with the previous year, according to the Salvation Army National Commander Commissioner William Roberts.

And, as demand for the services provided by the Salvation Army has increased, donations to the non-profit has remained flat or decreased in some cities. Experts expect the demand for food services to continue through 2011, and in Illinois, the food stamp program has experienced a record-breaking increase.

Numbers from the Illinois Department of Human Services show about 857,000 households enrolled in the Supplemental Nutrition Assistance Program in December. That's 12.7 percent more people using food stamps this year compared with December 2009 and a record number of people depending on the help.

To qualify for the food stamp program in Illinois, a family of four must have a monthly income of less than $2,400 to receive the maximum benefit of $154 a week.

The Community Interfaith Food Pantry at 205 West B St. in Belleville serves, on average, between 500 and 550 families every month.

The pantry is the effort of 10 local churches to provide food to needy families throughout the entire community. Last year that pantry gave out around 18,000 bags of food and served 5,885 families.

"The demand out there is tremendous," said food pantry director Jerry Messick. "I have a waiting room that will hold 10 people and most days we have 45 or more people waiting."

Right now the shelves at the food pantry are full, thanks to a successful holiday food drive and donation season, Messick said.

"People have been really generous with us," he said. "Our backup stock is good, we're running short on a few things, but we're doing good. What we have now will last us about three months and so far the donations and the grants I've applied for have come through and we've able to keep right on going."

But donations are always needed to keep up with demand, both Sells and Messick said. Both pantries not only provide canned goods and non-perishable foods, they also keep a supply of paper goods and personal hygiene products, such as toilet paper, diapers, soap, shampoo, toothpaste and feminine hygiene products on hand to fill the gaps that food stamps can't be used to purchase.

The Salvation Army is located at 20 Glory Place in Belleville
The organization can be reached at 235-7378.
At 11 a.m. on Monday, Wednesday and Friday the Salvation Army hosts a dining program, providing a free meal to anyone who arrives. "It's neighbors sitting across the table from neighbors and breaking bread together," Sells said.
The Salvation Army accepts donations of items and accepts cash donations.
The Community Interfaith Food Pantry is located at 205 West B Street in Belleville.
It can be reached at 355-9199.
The pantry is open from 1 p.m. to 3 p.m. Monday, Wednesday and Friday and from 9 a.m. to 11 a.m. Tuesday and Saturday. It is closed on Thursdays.
The pantry accepts donations of items and cash donations.
Most requested items:
Canned meat such as tuna and chicken.
Fresh produce (fruits and vegetables)
Breakfast cereals. The Interfaith Pantry experiences significant demand for sweetened cereals.
Ready to eat meals - macaroni and cheese, canned soup
Dry goods
Rice
Bread
Baked beans/pork and beans
Cooking oil/shortening
Sugar
Diapers


Read more: http://www.bnd.com/2011/01/18/1555955/l ... z1BRvdZ7t6

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[vanlose kid]

Goldman Acknowledges Higher US Food Prices, Says Not A Concern If They Stabilize Soon
Submitted by Tyler Durden on 01/18/2011 21:42 -0500

We were wondering how long the Goldman economic koolaid team would continue living in a pretend "priced to perfection" reality. The answer is just 2 under months. After ignoring the topic of surging food prices, head economist Andrew Tilton finally decides to discuss the issue (following 5 countries with violent riots demanding to learn much more about the issue). Not surprisingly the conclusion is one that will not make any dent on the firm's Goldilocks outlook for a QE-inspired, pretend economy. While Tilton attempts to preserve some credibility by noting that yes, it could get very bad, his conclusion is one of keeping to the party line, i.e., that everything will be ok and that much time has to pass before things get bad, even if they were to get bac. To wit: "the recent surge in food commodity prices poses upside risk to both our core and headline CPI forecasts, particularly the latter. The rise in food costs should push up headline CPI inflation by roughly ½ point even without meaningful pass-through effects into the core index, reducing household real income growth accordingly. While clearly undesirable from the standpoint of households, these results suggests that as long as commodity prices stabilize relatively soon, the burst of food inflation would not have a major impact on the broader economic outlook." And what happens if commodity prices do not stabilize "relatively soon", which they won't as long as Ben Bernanke continues to step in for the increasingly sparser foreign Treasury purchasing interest (also known as the Frost-Sack Top Secret "Dow 36,000 Project").

Full Andrew Tilton note:

Prices for food commodities have surged in recent months, with our Goldman Sachs Commodity Agriculture & Livestock index up 60% since its recent trough in mid-June 2010.

Higher food costs have yet to reach the retail level. Our analysis suggests an average lag of seven months from commodity price changes to retail food price changes. Typically, retail food prices move about one-tenth as much as commodity prices. Of course, there is significant variation in both the time lag and the degree of pass-through in individual episodes.

If commodity prices held steady at current levels, we would expect to see consumer food inflation accelerate from roughly 1% over the past year to about 5% in mid-2011, contributing about ½ point to the headline Consumer Price Index. Pass-through into core could also be a few tenths of a percentage point, although there is considerable variation around this outcome. These results suggest that the burst of food inflation seen thus far poses modest upside risk to our current inflation forecasts, but not a major threat to the broader economic outlook.

Prices for food commodities have surged in recent months. Cash prices of grains such as corn and wheat have nearly doubled over the past half-year. Our Goldman Sachs Agriculture & Livestock index, a component of the overall GS Commodity Index, is up 60% since its recent trough in mid-June 2010.

Despite the sharp increases in farm prices, higher food costs have yet to reach the retail level. The food component of the Consumer Price Index is up just 0.8% since mid-2010 and 1.5% year-over-year. Commodity prices and consumer prices for food diverge for two main reasons:

1. Other costs dilute the effects of raw commodity price changes. Commodity food costs are only a small portion of the final consumer prices of food. Even raw vegetables at the grocery store incorporate some labor and transportation costs associated with getting the product from the farm to the store shelf. Much of the food that consumers purchase has been processed considerably and packaged, adding further layers of cost. And the food CPI includes food served at restaurants, which incorporates further costs of service. All of these other costs generally move much less than commodity food prices, diluting the effect at the consumer level. As a rough rule of thumb, we find retail food prices move a bit less than one-tenth as much as our GSCI Agriculture & Livestock index.

2. Time lags from farm to store. It takes time for commodity price changes to be reflected at each stage of the food production chain. On average, we find the highest correlation between commodity and retail food price changes at a seven-month lag.

Illustrative Food Price Pass-Through and Lag Times



To estimate the likely impact of the sharp rise in food commodity prices on the Consumer Price Index, we constructed a model linking the food CPI to 1) the GSCI Ag/Livestock index and lags, 2) lagged core CPI inflation (as a proxy for the underlying inflation trend), and 3) capacity pressures, specifically the capacity utilization rate in the food manufacturing sector and the unemployment rate. Using quarterly data from 1985 through 2010, the model suggests that if food commodity prices stayed at current levels, the 60% increase in food commodity prices to date would push food CPI inflation to around 5% (annualized) in Q2 and Q3 2011. On a year-over-year basis, the food CPI would probably peak in the 4%-4½% range.



What does this mean for the more commonly followed headline and core CPI measures? The total effect on the CPI includes both direct and indirect effects. Food has a relative importance weight of 13.7% in the overall CPI, so the sort of acceleration we envision would make a direct contribution of approximately ½ percentage point to headline CPI inflation in mid-to-late 2011.

Food inflation also could have indirect effects on the CPI by pushing up prices of specific items within the core index. This could occur because companies in other sectors provide food to their employees or to customers as part of their business, and are able to pass the incremental food input cost on in their final prices. Or it could conceivably occur if higher food price inflation nudged up inflation expectations, which then affected wages and/or prices more broadly. In any event, we do find some evidence that food prices push up core inflation slightly (specifically, core goods and some core services, but not rents). Food price inflation in the CPI along the lines of the scenario above might push up core inflation a few tenths of a percentage point over the subsequent year; though as with pass-through from commodity to CPI food inflation, results can vary significantly from one episode to the next.

In summary, the recent surge in food commodity prices poses upside risk to both our core and headline CPI forecasts, particularly the latter. The rise in food costs should push up headline CPI inflation by roughly ½ point even without meaningful pass-through effects into the core index, reducing household real income growth accordingly. While clearly undesirable from the standpoint of households, these results suggests that as long as commodity prices stabilize relatively soon, the burst of food inflation would not have a major impact on the broader economic outlook.

http://www.zerohedge.com/article/goldma ... ilize-soon

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[vanlose kid]

Forget Food Riots In Africa, Simon Black Says The Canary In The Inflationary Coal Mine Is In Southeast Asia
Submitted by Tyler Durden on 01/18/2011 13:55 -0500

While the bulk of 2011 food protests have focused around countries that are, to put it bluntly, in the periphery of the desert, and thus mostly irrelevant from a food supply perspective (their domestic issues are of no matter to America: after all they have no oil) the recent focus on surging prices has been largely geographically isolated for the time being. That said, in today's piece, "Sovereign Man" Simon Black takes a look at a far more critical country smack in the middle of Asia's breadbasket, Laos, which he believes may rapidly become the canary in the Southeast Asian coalmine, whose troubles could promptly spread to China and the rest of the continent, and from there, to the rest of the world. We would add that unless the central bank approach of pedal to the liquidity metal is reversed promptly in the next few months, which it certainly will not, he will most certainly be proven correct. And just as the deterioration of events in Africa, where the rapidity of protests took even us by surprise, despite first predicting food riots just one day ahead of their actual eruption, should anger spill over in Asia, the time until everything hits a boiling point will make even the recent revolution in Tunisia appear to have transpired at a snail's pace.

The Canary In The Inflationary Coal Mine Is In Southeast Asia, from Sovereign Man

Laos is a small, landlocked economy in Southeast Asia that's often overlooked in favor of its neighbors: Thailand, China, and even Cambodia. But there are a few important factors that set Laos apart and lead me to believe that, when it comes to inflation, the country is the canary in the coal mine.

First, Laos is one of the most sparsely populated countries in Asia; with just 6.3 million people, its numbers pale in comparison to regional neighbors such as Burma (50 million), Thailand (67 million) and Bangladesh (162 million).

The other thing that's important about Laos is that the country is home to some of the most fertile soil in the world: more than 20% of its land mass is ripe for agricultural use. This is an astounding number, and it's no wonder that agriculture makes up the preponderance of the Laotian economy.

Put another way, Laos, with its vast resources and small population, might loosely be considered an agricultural version of Kuwait. But Laos is nowhere near as wealthy, since oil is much pricier than rice, soy, and fish.

Given its resources, it certainly seems ironic that the prices of staple foods in Laos, including rice, have soared in recent months, and that the Laotian government is now under intense pressure to "do something" about it.

You expect this sort of thing to happen in Algeria, where the population is 35 million, where only 2% of the land is cultivated, and where agriculture makes up but a tiny percentage of the economy... but in Laos? This is akin to finding Kuwaitis unable to afford filling up their cars due to high gas prices. It's unthinkable.

Thing is, it's not that there are food shortages in Laos; this isn't an issue where supply has failed to keep up with demand (thus resulting in rising prices). The price hikes are simply another indicator of monetary inflation causing severe price inflation, particularly in the developing world.

How does this happen? The trillions of new currency units being compulsively manufactured by central bankers are finding their way to developing countries. This surge heats up local markets, causing prices to rise.

This effect is compounded when developing markets fight to keep their currencies artificially depressed against the dollar. When the price of milk goes up by a dollar in the developed world, people grumble about it, but they can afford it. In Laos, where the minimum wage is about $65/month, an extra few dollars for groceries is unfathomable.

The government in Laos will most likely raise the minimum wage. The figure that's being discussed is about a 40% increase from today's level, which itself is nearly double the minimum wage in 2009.

Rising wages like this are a common ingredient in hyperinflation, spawning a vicious cycle of higher prices, which then beget higher wages, which then beget higher prices, and so on. Wage hikes are always playing catch-up with rising prices, and the end result is a reduced standard of living. No amount of monetary wizardry can prevent this.

I saw a similar case when I was in Sri Lanka a few months ago: the government there keeps the rupee fixed to the US dollar at an artificially low rate in order to support exporters... yet the weak rupee has hit the locals hard, causing soaring prices of 30% or more for staple foods such as rice and coconuts.

When I was in Zimbabwe recently, the locals told me similar stories about their days of hyperinflation: everyone was constantly getting a "raise" to keep up with inflation, but prices were adjusting so rapidly, their living conditions would constantly deteriorate.

Needless to say, banks do just fine in this situation. All the freshly printed money circulates through the banking system, generating greater volume and higher profits. It's no coincidence that Laos' largest commercial bank (BCEL) is expecting its net income to surge 27% this year, and I'll be curious to see what happens to the Laotian stock market (which just had its inaugural session last week).

Bottom line: if this sort of thing can happen in Laos, where there's about 2.5 acres of lush, fertile, arable land for every man, woman, and child in the country, it can happen anywhere... and I'll be watching this situation very closely to see if any civil unrest develops as a result.

Regardless, inflation is here. And the more you see politicians and central bankers denying it, the more you should be preparing for what may come. More to follow.

http://www.zerohedge.com/article/forget ... heast-asia

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[vanlose kid]

African Food Riots Spread To Persian Gulf As Oman Is Next; Adverse Implications For Oil Prices?
Submitted by Tyler Durden on 01/18/2011 11:20 -0500

While deadly protests in Africa have been largely ignored, because, well, they are in Africa, and they don't even have iPads there and Kindle WhisperNet coverage is spotty if any, the world may be forced to start paying just a little more attention as food riots get ever closer to the center of the oil extraction infrastructure in the Persian Gulf. From BBC Monitoring, which discusses the latest outbreak of protests sweeping Oman "Most participants in the protest were reluctant to be quoted as they were government employees. However, some said they protested against low salaries and soaring prices." Luckily, for now the protest is still peaceful. The thing about hunger is that it doesn't go away if you ignore it. And as Oman borders the UAE, all it takes is for the riots to jump one more border and then it gets interesting. And to all those observent enough to note that soaring prices continue to occur in countries with "growing unemployment" i.e., economic slack, and wonder how this is possible, after all the Fed said record slack can never lead to inflation, don't worry - you are certainly not alone.

From BBC:

A large number of young Omanis took to the streets in a peaceful protest march in the Al Khuwair district where most of the
government offices are located.

The youth, protesting against the general conditions such as soaring price rise and growing unemployment, were allowed to walk in a procession although there was heavy police presence.

According to witnesses, the youth dispersed peacefully after an hour-long protest near the Ministry of Housing and Interior Ministry building.

Though the ministry area was deserted when the protest was held at government department as the staff work only up to 2.30pm. the main Sultan Qaboos Highway saw a huge traffic jam of office goers from the private sector heading home. The curious drivers slowed down the traffic, triggering congestion.

"I could see a huge crowd in the ministry area and the traffic was crawling," an expatriate, who wished not to be named, told Gulf News.

Most participants in the protest were reluctant to be quoted as they were government employees. However, some said they protested against low salaries and soaring prices.

The police kept track of the protesters even as some joggers continued with their routine. The police did not interfere and the protest ended as peacefully as it had started.

The Royal Oman Police (ROP) had no comment to make when Gulf News contacted for details about the protest.

This is not the first time such peaceful protest was held in Oman. Recently some young graduates led a delegation to the Education
Ministry, demanding teaching jobs.

Meanwhile, social media was abuzz with the news about the protest.

While it is still too early, we believe that sooner or later, the riots will reach the Iraq/Iran/Saudi/UAE oil quadrangle. And then the catch 22 of rising food prices leading to reduced oil production, leading to even higher food prices will really get out of hand. Thank you Ben.


http://www.zerohedge.com/article/africa ... oil-prices

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[vanlose kid]

Sudan Next To Succumb To Bernanke's Inflationary Experiment, As Country Threatens Revolution Over Surging Food Prices
Submitted by Tyler Durden on 01/18/2011 07:47 -0500

About a month ago, some took offense at our characterization of the Chair-hewlettpackard-man as a "bearded mutant-cum-supreme genocidal overlord" after we predicted to the dot that his monetary policy would eventually lead to a global, well, genocide, presumably first in the developing world. Following riots, self-immolations and outright revolutions in Algeria, Tunisia, Morocco, Jordan, Yemen and Egypt, in the span of a few shorts weeks, we believe we have been once again validated. Putting the period in any debate of what Bernanke's runaway money printing means to the life-expectancy of increasing number of people, is the latest news coming out of Sudan where "security forces on Tuesday arrested opposition leader Hassan al-Turabi and eight other party officials after they called for a "popular revolution" if Khartoum did not reverse price rises." And since economic slack in Sudan is roughly in line with that of the abovementioned other 5 countries, it is safe to say that the bulk of this move is speculation frenzy related, which in turn is purely a function of pervasive and free global liquidity. And this is still just the beginning. As Bernanke will not stop before the Dow hits roughly 36,000 expect these kinds of headlines to be an hourly occurrence.

More from Reuters:

Turabi's arrest comes at a politically sensitive time for the government of President Omar Hassan al Bashir, who stands to lose control over the oil-producing south which last week voted in an independence referendum.

It also comes as Tunisia grapples with fallout from the ouster of its long-time president Zine al-Abidine Ben Ali, who fled the country on Friday after three weeks of violent unrest sparked by social grievances.

Sudan's opposition threatened on Sunday to take to the streets if the government did not remove its finance minister and dismantle parliament over the decision to raise prices on a range of goods.

"This is criminal - how can they arrest a man who is 78 years old and put him in prison? We are scared for him," Turabi's tearful wife Wisal al-Mahdi told Reuters.

Ben Ali's overthrow in Tunisia has reverberated across the Arab world, raising concerns about stability in other countries in the region which share the same mix of social, economic and political problems.

And on the topic of price increases specifically:

Sudan's price increases have sparked student protests in the country's northern agricultural heartland and Khartoum.

The country is grappling with a current account deficit and a currency devaluation that is driving up inflation.

This month Khartoum cut subsidies on petroleum products and key commodity sugar, prompting protests over the past week, quelled only by baton-wielding police firing teargas.

Perhaps it is time someone at 60 Minutes had a follow up interview with Blackhawk Ben, asking him if a united developing world revolution is something he is 100% confident he can also contain...

http://www.zerohedge.com/article/sudan- ... over-surgi

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[JackRiddler]

.

Nordic, please check this one out:
viewtopic.php?f=8&t=21495&p=378328#p377851

A column in Business Insider syncs for the most part with my own thinking, and also provides a clear explanation of why the United States is in deflation even though some prices are rising.

.

The majority in the US and around the world are being robbed on both ends: by a deflation leaving them without income and taking away what wealth they have and concentrating wealth in ever-fewer hands; and by price rises in essential needs due to a combination of actual as well as fixed shortages and pure paper speculation (but not currently due to inflation, properly defined).

The price-rise measures in the US, to the extent that they are even accurate, are nevertheless used in a fraudulent way. A serious look at prices cannot be had by any of the available indicators by itself. If the mass media outlets were interested in anything other than rah-rah propaganda for the system, each time they reported on this issue they would never just tell you core CPI since last month (and then project that, idiotically) but they would emphasize each of the following:

- Core annual CPI, i.e., without food and fuel – and without any bullshit adjustments like the hedonic deflator, just the straight nominal dollar changes.

- Annual food-fuel CPI – while it’s bullshit simply to leave it out unmentioned, it makes sense to separate this category because these prices really do fluctuate dramatically for acute as well as chronic causes, and they do sometimes go down. An honest approach would never mention core CPI without equal emphasis to food-fuel CPI.

- Changes in both nominal measures over 2, 5 and 10 years as compared to changes in the median wage or household earnings dating back to the same periods.

Only that combination would begin to tell you how the cost of living has developed.

.

I do not believe "inflationary experiment" is an accurate description of QE2. For reasons that were foreseeable a year ago, the Fed is resorting to buying up half the T-bill market because no one else will -- perhaps no one else can, there may not be enough capital looking for investment vehicles to cover the current needs of governments regardless of what is thought about their ability ultimately to pay back.

.

[Nordic]

Yeah, that's a very interesting one, JR. I somehow missed that in the other thread.

Seems you nail it here:

The majority in the US and around the world are being robbed on both ends

Absolutely.

Didn't we go through this in 2008, with the food price spike? Was that just a trial balloon? Was that just so much fun for everybody that the PTB's are doing it again?

I remember I was still buying Biodiesel at that time, you could still buy it out of a pump in Los Angeles, at a gas station, just like regular fuel. The price shot up then to almost 6 bucks a gallon. Then they passed a law so that you couldn't sell it at gas stations at all, but by then the price had pretty much destroyed the market anyway.

Evil motherfuckers run the earth.