Results 1 to 2 of 2

Thread Information

Users Browsing this Thread

There are currently 1 users browsing this thread. (0 members and 1 guests)

  1. #1
    Senior Member AirborneSapper7's Avatar
    Join Date
    May 2007
    Location
    South West Florida (Behind friendly lines but still in Occupied Territory)
    Posts
    117,696

    Egypt's unrest may have roots in food prices, U.S. Fed polic

    Egypt's unrest may have roots in food prices, U.S. Fed policy

    By Kevin G. Hall | McClatchy Newspapers

    WASHINGTON — Economists and experts in food security have warned repeatedly in recent years that an unbridled rise in food prices could trigger the very kind of explosion of citizen anger that's now threatening to topple the Egyptian government. Such anger is likely to rise elsewhere, too.

    A large nation with lots of desert, Egypt must import more than half of its food supply. Since 2008, there's been sporadic unrest there as the cost of staples, from bread to fruits to vegetables, has gone up steadily.

    One of those warning about the food prices was Hamdi Abdel-Azim, an economist and former president at the Sadat Academy for Social Sciences in Cairo.

    "If the rise in food costs persists, there will be an explosion of popular anger against the government," he told the IPS Inter Press Service in mid-November.

    A few weeks earlier, political opponents of President Hosni Mubarak had rallied to protest rising prices and to demand price ceilings on products to protect Egypt's poor.



    Soaring food prices aren't the only reason that Egyptians took to the streets to try to topple their long-serving president. But they're a significant factor, and a steady surge in global commodity prices reminiscent of 2008 is sure to bring new battles over food security this year.

    Protests against food prices recently rocked Jordan and Algeria. These same rising prices were partly why Tunisia's strongman, Zine El Abidine Ben Ali, fled his nation in mid-January. India and China are navigating the difficult waters of trying to control rising prices in their populous nations.

    In the trading pits of commodity markets, the buzz is that many poor nations are trying to hoard wheat, corn and other staples. Such stockpiling has added to the bullish sentiment that's driving commodity prices even higher.

    "Countries are hoarding grain supplies right now because they don't want to see what's happening in Egypt happen to them," said Phil Flynn, senior market analyst for commodities trader PFG Best in Chicago.

    The United Nations Food and Agriculture Organization took the unusual step last Wednesday of updating its guide for policymakers in developing nations. It urged nations to avoid "policy actions that might appear useful in the short term but could have harmful longer-term effects or even aggravate the situation."

    Such actions in the past have involved export restrictions by food-producing nations, which aggravated tight global supplies in 2008 and led to a spike in prices. By restricting exports, these nations, which include Argentina and Ukraine, drove down domestic prices, discouraging production and causing even tighter global supplies.

    The Food and Agriculture Organization compiles an index of basic food prices around the globe, and it peaked in December.

    "With this new price shock only two years after the crisis in 2007/08 there is a serious concern now about implications for food markets in vulnerable countries," Richard China, the director of the U.N. organization's policy and program development support division, said last week in announcing the updated guidelines.

    For U.S. farmers, Egypt presents the eighth largest export market, much of it wheat sales, since the country is the world's leading wheat importer. American wheat and corn are sold across North Africa and the Middle East, prompting worries by U.S. farmers that Egypt's problems will spread throughout the region.

    Wheat prices have risen by more than 70 percent over the past 12 months, and corn prices climbed in mid-January to their highest level since July 2008, a period when global food prices soared. They've since dipped slightly, to just under $6.60 a bushel Monday, but they're expected to remain volatile, since corn production is expected to drop 14 percent globally, according to the U.S. Department of Agriculture.

    U.S. corn farmers traditionally have had 80 percent of the Egyptian market, although that dipped to 50 percent last year. There's less concern about current shipments, especially since Egypt is thought to have adequate inventories for now. The focus is more on what sort of government emerges there.

    "I think, longer term, it is really what's going to happen with the transitional government. Is that some sort of continuation," said Chris Corry, the senior director of international operations for the U.S. Grains Council, which represents U.S. farmers.

    The issues in Egypt right now are basic, he said, noting, "The government must function for banks to be open, for payments to get transacted, for commodities to be purchased."

    A number of factors are combining to drive up the global prices of wheat, corn, soy and other commodities. Some of the story is weather-related. Argentina, Australia and Pakistan have suffered from heavy rains, which have damaged crop production. Russia is recovering from a devastating drought last year.

    Another part of the story is demand. Big emerging markets such as China, India and Brazil continue to soak up greater shares of global supplies, and the recovery in the U.S. economy, the world's biggest, is accelerating.

    A third explanation that's gaining acceptance is that the U.S. Federal Reserve inadvertently exacerbated the price picture for grains and other commodities. The Fed has been engaged in what economists call "quantitative easing," buying U.S. Treasury bonds to attack the threat of deflation — the phenomenon of falling prices across an economy.

    Quantitative easing has the effect of raising asset prices, whether they're the prices of stocks or what traders are willing to pay for commodities such as wheat or corn. One of the side effects of this policy is that the dollar weakens against other currencies, and that's helped push up the global prices of commodities.

    "The truth of the matter is that when the Federal Reserve moved on the quantitative easing, it did export inflation to a lot of these emerging markets," Flynn said. "There's no doubt that one of the side effects of the weak dollar and quantitative easing has been rising commodity prices. It helped create this bullish environment for commodities. This is a very delicate balancing act."

    It's a view shared by Ed Yardeni, a veteran financial market analyst, who reached a similar conclusion in a research note to investors Monday. He joked that Fed Chairman Ben Bernanke should be added to a list of revolutionaries, since his quantitative easing policy, unveiled last year in Wyoming, has provoked unrest and change in the developing world.

    "Since he first indicated his support for such a revolutionary monetary change in his August 27, 2010, speech at Jackson Hole, the prices of corn, soybeans and wheat have risen 53 percent, 37 percent and 24.4 percent through Friday's close," Yardeni noted. "The price of crude oil rose 19.8 percent over this period from $75.17 to $90.09 this (Monday) morning. Soaring food and fuel prices are compounding anger attributable to widespread unemployment in the countries currently experiencing riots."

    Although the policy was announced in August, the Fed didn't begin purchasing bonds until November. It's expected to buy $600 billion worth through June, in hopes of driving down the return on long-term bonds and forcing more investor risk-taking in the economy.

    "There are a lot of different sticks in the fire here," said Jerry Gidel, the president of Midland Research Inc., which provides assessments of financial risk. What happens to the price of one food crop affects others, he added, because "it is a human-consumption commodity, and things can get emotional, and they do get emotional. And right now, we're kind of in one of those periods."

    http://www.mcclatchydc.com/2011/01/31/1 ... ts-in.html
    Join our efforts to Secure America's Borders and End Illegal Immigration by Joining ALIPAC's E-Mail Alerts network (CLICK HERE)

  2. #2
    Senior Member AirborneSapper7's Avatar
    Join Date
    May 2007
    Location
    South West Florida (Behind friendly lines but still in Occupied Territory)
    Posts
    117,696
    Kudlow: Bernanke and Ethanol Sink Egypt



    By Lawrence Kudlow
    February 2, 2011 11:17 am

    Decades of autocratic government and a lack of free elections are, of course, the main drivers of the political upheaval in Egypt. But did the sinking dollar and skyrocketing food prices trigger the massive unrest now occurring in Egypt -- or the greater Arab world for that matter?

    In addition to Egypt, the people have taken to the streets to varying degrees in Algeria, Jordan, Libya, Morocco and Yemen. Local food riots have even broken out in rural China and other Asian locales.

    While the mainstream media focus on the political aspects of this turmoil, they are overlooking the impact of rising inflation, driven mainly by record food prices. For example, former Bush advisor Dan Senor notes that Egypt is the world's largest wheat importer. Yet because of skyrocketing prices, Egyptian inflation is now over 10 percent, while some experts estimate that Egyptian food inflation has risen as much as 20 percent.

    So I have to ask this tough question: Is Ben Bernanke's ultra-easy QE2 money pump-priming partially to blame?

    Commodities are priced in dollars, and the Federal Reserve has been overproducing dollars for more than two years. Consequently, emerging markets throughout the world -- and the food sector in particular -- are suffering from rising inflation.

    The CRB food index is up an incredible 36 percent over the past year, including 8 percent year-to-date. Raw materials are up 23 percent in the past year. Inflation breakouts have occurred in China, among various Asian Tigers, and in India, Brazil and other Latin American countries. Even Britain and Germany are registering higher inflation readings.

    In dollar terms, the price of wheat has soared 114 percent over the past year. Corn has surged 88 percent. These are incredible numbers.

    And let's not forget that the world's poor are the hardest hit by food-price inflation. They literally can't afford to buy bread. It brings to mind the French Revolution in the 18th century. When you see this kind of mass protest in the streets, spreading from country to country, you see a pattern that cannot be explained by local conditions alone.

    The dollar is the world's reserve currency. And the rise of dollar food prices is a global phenomenon. It is a monetary phenomenon, as much as anything.

    And that's why one can argue that the worldwide revolt against soaring food prices is an unintended consequence of U.S. Fed policy. That policy is aimed at reigniting inflation here at home. But unwanted dollars circulating worldwide are hitting foreign inflation rates first. We may well catch this inflation virus before long.

    To be fair, not all of the food inflation can be blamed on the Fed. A good part of this problem can also be placed at the doorstep of bipartisan U.S. policies to subsidize ethanol.

    According to The Wall Street Journal, in 2001, only 7 percent of U.S. corn went to ethanol. By 2010, the ethanol share was 39 percent. So instead of growing wheat, our farmers are growing corn in order to cash in on ethanol subsidies. Egyptians who can't afford to buy bread and have taken to the streets in protest might be very interested to know this.

    Not even Al Gore still believes that ethanol provides any environmental benefits.

    As the world watches events in Egypt play out, be mindful that if the U.S. fixed its mistaken monetary and energy policies, the forces of freedom and democratization would have an easier time of it in the rest of the world.

    http://www.gopusa.com/commentary/2011/0 ... ink-egypt/
    Join our efforts to Secure America's Borders and End Illegal Immigration by Joining ALIPAC's E-Mail Alerts network (CLICK HERE)

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •