1. Biofuel. – The International Grain Council reports that grain (mainly corn) diverted to biofuel jumped 44 percent between 2006 and 2007. This surge in demand affects more than the price of corn. When farmers scramble to plant corn to cash in on the ethanol boom, they plant less of other stuff like soy and even wheat, putting upward pressure on their prices. Massive U.S. plantings of corn have also contributed to sharp spikes in fertilizer and GMO seed prices as well as corn-belt land rents, dramatically raising the cost of farming.The International Food Policy Research Institute reckons that the biofuel boom accounts for between a quarter and a third of the run-up in prices over the last three years.
2. climate change
Southern Australia, a major ag-producing region, has been been in a brutal drought for six years,
The Deniliquin mill, the largest rice mill in the Southern Hemisphere, once processed enough grain to meet the needs of 20 million people around the world. But six long years of drought have taken a toll, reducing Australia’s rice crop by 98 percent and leading to the mothballing of the mill last December.
floods and pest outbreaks have damaged rice production in southeast Asia and India.
3. The complete lack of government grain stores
Traditionally, nations kept stores of imperishable foodstuffs. These could be tapped to lower prices in times of crisis and used as food aid to avert hunger scares. But according to neoliberal economic dogma, government grain stores distort markets — and so government grain stores have been phased out.
This gives production and consumption numbers for the last couple of years for several major crops. Check page 12. The “ending stocks” number is essentially the store being kept by the market: production minus consumption for a given growing year. For 2005-2006, ending stocks were 1.9 billion bushels. For 2007-2008, the USDA projects ending stocks of just 1.2 billion bushels, a 36 percent drop. That’s despite a 12 percent jump in acres planted in corn.
Now look at the line called “CCC,” a reference to the Commodity Credit Corporation, the government agency started in 1933 to “stabilize, support, and protect farm income and prices [and] maintain balanced and adequate supplies of agricultural commodities and aids in their orderly distribution.”in US. The CCC line contains big fat zeros. The survivalists, for all their insanity, have a point: Nations, including the U.S., aren’t storing food for a rainy (or drought-stricken) day.
4. Other neoliberal policies
In the 1940s, Haiti produced 80 percent of its own food and exported coffee, sugar, meat, and chocolate. Today, it produces far less than half of its own food. Its per-capita food production has plunged by a third since 1980. What happened? Corrupt governments, cheered on by the IMF and World Bank, ripped open agriculture markets to low-cost foreign competition and slashed agriculture spending. This led to a flood of cheap imports and a mass exodus from the land. Rather than find good jobs in cities, Haiti’s displaced farmers got a place in the “informal economy” — e.g., selling gum to other shantytown denizens. Now that food comes not mainly from the land but rather from the magic of the market — unmitigated by grain stores — hunger reigns when food prices jump. The market is an unsentimental food distributor.
5. Rocketing energy prices.
Sharply dearer petroleum and natural gas clearly contributes to the food-price hikes. Natural gas is the feedstock for synthetic nitrogen fertilizer — lifeblood of industrial agriculture — which has seen its use and price jump.
6. Speculation
We know that big investment groups like hedge funds have engaged in what the Wall Street Journal has called “unprecedented levels of financial speculation in grain-futures markets.” Fleeing the real estate and derivatives markets, these funds are desperately seeking yield in an era of low interest rates.
“When you get a huge influx of speculative money, as happened in December and January, the price inflates beyond what the fundamentals would dictate and creates a sort of balloon,” a National Association of Wheat Growers official told the Journal.
– from gristmill