Share this Mister Wong Digg Del.icio.us Slashdot Furl Yahoo Technorati Newsvine Googlize this Blinklist Facebook Wikio Hear this text Print E-mail Tags food security food security russia vladimir putin information clearing house

Testing times in the immediate future

In that which some experts describe as the worst agricultural conditions in 500 years, Russia and certain surrounding states – the region responsible for 25% of international wheat and other exports – are experiencing a food production disaster that is bound to impact severely on food prices in the immediate future. The world may be heading for a repeat of the 2008 food riots that took place on virtually every continent, when no fewer that 13 countries experienced related unrest, protests, violence and civilian deaths.

In our latest Leadership Intelligence Bulletin, we reported how food security is rapidly becoming a global concern, not only for developing countries but also for developed and so-called first-world countries. The developments in certain key global production areas are likely to trigger a crisis, giving renewed urgency to these concerns.

It is further likely to focus attention on other areas of contention surrounding the issue of food security, including matters such as the climate change debate, the role of speculators in commodity – particularly food – markets, and the wisdom of using food crops for the production of biofuels.

Russian Prime Minister Vladimir Putin has already announced that Russia would ban all grain exports, as production of grain in Russia, Kazakhstan and Ukraine is expected to decline by 40%.

Food prices are sure to rise, although it is unsure by how much. It would further depend on what occurs in other production zones.

It is reported that the prices of wheat, corn and soybeans are presently higher than they were in the corresponding period in 2007, when the record-breaking price run of 2007/2008 began and saw related violent protests breaking out in many parts of the world.

At the time, speculative activity by financial institutions in commodity market derivatives was widely blamed for creating a food bubble, which saw millions pushed into starvation.

Despite much rhetoric and threats to the contrary, very little has happened since then from the side of global regulatory authorities to bring speculative derivative markets under control. It is likely that some of those players are already back on the commodities pitch.

It may be a good time for those investors who became involved in the biofuels industry which is dependent on land suitable for agricultural production – and particularly in the ethanol market, which is heavily dependent on grain production for raw materials – to reconsider their positions.

Against the background of grain production in Eastern Europe, the website Information Clearing House published an article that stated, among others: “A wind turbine on an acre of northern Iowa farmland could generate 300 000 dollars worth of greenhouse-gas-free electricity a year. Instead, the US government pays out billions of dollars to subsidise grain ethanol fuel that has little if any impact on global warming”; and, “With such pressure on the world’s food supply, it is simply wrong-headed to use 25% of US grain for ethanol as a fuel for cars.”

It is in the cards that the heat will be turned up during the months to come on speculative activity in the food commodities markets and the food-for-fuel industry.

Write comment

Your Contact Details:

Name:

Email: do not notifynotify

Comment:

Title:

Message:

Security

Please input the anti-spam code that you can read in the image.