Saturday, September 25, 2010

UN Talks About Food Prices

You can read the article here.

A guy from the World Food Program said "Food might be there on the markets, but people don't have the resources to buy it because it is too expensive."

I am not worried about MY access to food. However I am worried about world stability. The reason I am not worried is that I am, at least relative to the entire world, rich. Like most Americans and western Europeans I spend a relatively small percentage of my income on food. If food prices go up 15 or 20 percent I would notice and grumble but could easily pay. If food prices went up 100 percent or even more we would change the way we eat and have to adjust our budget but we would be able to afford some sort of food to eat.

However food prices radically going up screws with a lot of people. Poor folks (and I'm talking 3rd world poor not those whining Americans with a comfortable residence, 2 cars, flat screen TV's and an Ipod's) can't do this. They spend a very high percentage of their income on food. They don't have room to shift things around if food prices go up 30 percent, let alone double. This means they need to earn more money which is not a solution because if they were capable of that they would already be doing it. What it really means is that some people might starve and lots of people will start protesting and burning stuff down. These folks are ripe for getting whipped up by political agitators of all kinds as they are in a bad spot as well as generally being poorly educated and often illiterate. This is the kind of stuff that, if left unchecked can topple or radically reshape countries.  In particular Mexico (not that it is the most vulnerable but by proximity it would have the biggest second and third order effects on the US) is quite vulnerable to changes in corn prices.

Something to pay attention to if not to freak out about.

2 comments:

Brad K. said...

Ryan,

Be careful about thinking food prices won't destabilize or starve here in the US.

Let food prices climb faster than food support payments to the poor - and you make nearly every community in the US ripe for opportunistic rabble rousers - including the one in the White House that claimed "We will let no crisis go unexploited."

Heating oil, for one issue, is a threat to food affordability in the Northeast. A significant number of people lose the ability to buy enough food right now, during the months they have to buy heating oil. And with Peak Oil keeping all energy prices volatile but steadily ramping upward, that won't be changing.

The other risk to Peak Oil, and food insecurity in general, is that international, intercontinental, and even transcontinental shipments of food might become unavailable on short notice, due to suppliers chasing more lucrative markets, costs of transport making the shipment non-cost effective, or become the target of desperate - or protesting - people. Recall the incident during the Great Depression, where a farmer in Wyoming shot and buried 3,000 sheep at a time that people were going hungry. The price available to him made the cost to get the sheep to sale more than the sheep would sell for. His choice was to go broke, or cut his losses; the impact was felt by him and elsewhere that people didn't get the food.

That can happen again, with produce, with livestock - with clothes. Supposedly the number of people in the US living paycheck to paycheck has gone up dramatically - from 20% to 40%, if I recall - in the last five years. That puts a lot more people in precarious financial positions to react to changes.

Note that the corn harvest wasn't the predicted bumper crop this year. Last year the USDA played games with number, and lied, to export more corn and soybeans than harvests and reserves justified. That puts the nation at higher risk of running short enough to assure higher retail food prices.

Good luck.

Chief Instructor said...

Food is one of those interesting economic categories. A government can tell us that inflation is lower than it really is, income is higher than it really is, or whatever, and most people don't have the ability - or inclination - to verify the information.

But food is different. The government can fudge the numbers, but if people can't get food in their bellies, they don't give a damn what the .gov says.

If you can't get food, you'll get violent.

Look what Russia just did - their wheat crop got hammered by wild fires, so they stopped all exports. They'll keep their people fed.

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