- The Washington Times - Sunday, December 26, 2010


Brace yourself: The neo-Malthusians will soon be in full cry, warning that population is outrunning the world’s food supply. And in this debate, there’s no middle ground - some experts tell us we are drowning in surpluses, while others warn that imminent starvation looms as a result of diminishing cultivable land, water shortages, unsustainable/unhealthful hybrids and the impending loss of cheap petrochemical fertilizers.

Whatever the long-term arguments, it’s clear that rather rising food prices based on short-term shortages have suddenly become political dynamite. And monetary policies - “quantitative easing” as the Fed calls it, printing money for the rest of us - have exacerbated the problem by diverting investors and speculators into bidding up commodities, not least food.

You don’t have to be an economic determinist to see the geopolitical results.

Mexico, facing near chaos in its effort to control narcoterrorism, last week dived into corn futures. It’s no secret other countries - China quietly among them - have bought grain futures to assure an adequate supply. But the fact that Mexico went public with the news was significant, a recognition of the political dangers posed to past governments in Mexico City when shortages for the country’s basic foodstuff pushed up general price levels.

India, whose fragile coalition government under Prime Minister Manmohan Singh is under fire for a series of massive financial scandals, also now faces rising food prices - and an onion shortage! Mumbai’s roaring markets continue to produce near double-digit GDP growth, but the country still has 600,000 villages - many of them barely in the cash economy - still facing food shortages. Eleven out of India’s 19 states face high anemia levels and a slew of childhood health problems.

China, too, has had to turn away from its single-minded focus on creating jobs. One high official, safely on the verge of retirement, has written what the rest of us already knew: Much of the country’s GDP growth comes from make-work projects and other official economic follies at the local level.

Beijing acknowledges an inflationary spiral may be taking hold, led by food prices. And no one remembers inflation’s threat to past regimes as vividly as do Chinese officials. Thus China has been forced to draw down the country’s food reserves.

The dilemma for Chinese planners is that opening up food imports - perhaps by raising the undervalued yuan - would indeed help solve the problem. But having starved the agricultural sector of resources, freeing imports would bring disaster to less fortunate farmers unable to compete on global markets.

Then there is North Korea, where a tiny, pampered elite continues to divert resources to the military. Whatever else Pyongyang’s recent rambunctious military actions were meant to achieve, keeping open the pipeline of South Korean, Japanese and American food aid had to be a primary motive. After famine starved more than a million people in the 1990s, more than six million of North Korea’s 23 million people now exist at near-starvation levels.

Nearer home, any American shopper knows that food prices are rising. It’s true most Americans can eat better than ever. (My rural Virginia Wal-Mart carries everything from kosher salami to Greek phyllo, and I count on their fabled inventory control to know it will be available at an affordable price.) But the fear is that the food prices are a harbinger of another spurt of inflation, one made worse by the huge stimulus outlays pushed by President Obama and enhanced in the recent lame-duck Congress.

Nor is there sweetness and light on the supply side. Wheat prices on the Chicago grain markets advanced 47 percent this year, after a major Russian drought spurred the Kremlin to ban exports. Ukraine is dragging its feet with its own grain export quotas. Bad weather hurt production in Argentina, among the global leaders in corn and soybean production. Australian wheat production will be half the normal output because of rains and floods. Market trackers say it’s too early to know for certain, but are forecasting a “mixed” harvest in the 2011-12 cereal season that is already being factored into future price calculations.

Insane food subsidy politics, of course, only exacerbate the situation. Nothing is as idiotic as the U.S. effort to subsidize ethanol, alcohol from corn. U.S. energy imports are rising as the Obama administration slaps new restrictions on domestic drilling. But one year’s ethanol for the average American car requires 11 acres of farmland, land that could otherwise be used to feed seven people.

Adding injury to insult, some of the modern, hypereconomical vehicles coming off the worlds’ assembly lines reject ethanol as an inadequate fuel. Yet Washington subsidizes ethanol including exports to Europe while maintaining high tariffs against Brazil’s subsidized ethanol imports.

Food problems, like death and taxes, apparently will always be with us - but at times like these, they are contributing mightily to the globe’s ample stock of existing problems.

- Sol Sanders, veteran foreign correspondent and analyst, writes weekly on the convergence of international politics, business and economics. He can be reached at solsanders@cox.net.

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