Postby xtech » January 6th, 2011, 2:17 pm
New Food Crisis Looms
The world experienced a major food crisis in 2008 that led to civil and political unrest from Bangladesh to Haiti and added millions more to those suffering from malnutrition. Though prices have dropped somewhat, some analysts say the crisis never totally ended. With prices rising dramatically in 2010, the world could be on the brink of a new crisis in 2011 with the la nina weather pattern taking hold over the world.
Rising food prices and shortages could cause instability in many countries as the cost of staple foods and vegetables reached their highest levels in two years, with scientists predicting further widespread droughts and floods. Global meat prices are at 20-year highs. Concerns about global wheat supplies are sparking fears that price inflation in the wheat market could lead to a food crisis akin to the one in 2008.
Some countries are already beginning to respond. Russia announced in October it would continue its ban on grain exports for another eight months, a measure put in place in August following the severe drought and wildfires that decimated crops in the country this summer. China, experiencing the worst food inflation since 2008 announced last week it would cap prices on grains, edible oil, and sugar. The US predicted that global wheat harvests would be 30m tonnes lower than last year, a 5.5% fall. Meanwhile, the price of tomatoes in Egypt, garlic in China and bread in Pakistan are at near-record levels. World wheat and maize prices have risen 57%, rice 45% and sugar 55% over the last six months and soybeans are at their highest price for 16 months.
The governments of Kenya, Uganda, Nigeria, Indonesia, Brazil and the Philippines have all warned of possible food shortages this year, citing floods and droughts in 2010, expected extreme weather in 2011, and speculation by traders who are buying up food stocks for release when prices rise.
According to the US Commodity Futures Trading Commission, speculators on the trading floor of the Chicago Exchange bought futures contracts for about 40m tonnes of maize and 6m tonnes of wheat in the summer.
Longtime hedge fund manager Mike Masters, who has worked with WDM, said: "Because there is already much more capital available in the world than hard commodities, speculators can increase the price of consumable commodities, like foodstuffs or energy, much higher than traditional consumers and producers can react.
