Wheat price surge raises inflation fears (wheat stock 60-year low)

A fall in US inventories of wheat to a 60-year low drove prices of the grain sharply higher on Friday to a fresh record, intensifying fears of rising global food price inflation.

US wheat futures – global benchmarks for the grain – have jumped by their daily trading limit each day this week. Prices for Minneapolis wheat, the US variety most suitable for making flour, rose 10.7 per cent on the week, extending its price surge since the beginning of the year to 50 per cent.

“We are in uncharted territory,” said James Bower of Bower Trading. “The market is desperately trying to tell global producers that we need more acres for wheat production.”

The price gains came after the latest update from the US Department of Agriculture fuelled concerns over low inventory levels. The USDA reduced its estimates for wheat stocks at the end of the 2007/08 marketing year to 272m bushels, compared with its January estimate of 292m bushels.

“The US has sold too much wheat and will have to import, probably from Canada, to satisfy its domestic requirements,” said a hedge fund manager. “This will have a major impact on the rest of the world if consuming countries can’t buy US wheat and Europe becomes the global supplier.”

Global stocks of wheat are expected to fall to a 30-year low as consuming countries have scrambled to ensure they have enough supplies for domestic consumption.

“With global inventories at very tight levels, we expect to see further upward pressure across grains prices,” said Sudakshina Unnikrishnan of Barclays Capital. “The question for the market is how these high prices will influence US farmers’ decisions to allocate land to crops this year.”

Record wheat and soyabean prices mean these crops are expected to win land at the expense of corn cultivation in 2008. The USDA will update the market on farmers’ planting intentions in March.

Analysts say India and China should allow domestic wheat prices to rise to attract land away from cotton. India says it expects to produce 74.81m tonnes of wheat in 2008, down from 75.81m tonnes last year.

India, the world’s second-largest wheat consumer, has imported wheat for the past two years but it says it might not need to import this year if favourable weather boosted production.

But Mark Samson of US Wheat Associates, the wheat marketing group, said India might have to buy 3m tonnes of wheat in the year starting in April, a 68 per cent rise on the previous year.

As a result of the price pressure, the Minneapolis Grain Exchange will remove the daily price limit on the spot-month hard red spring wheat contract for trading on February 25, the first time it has done so.

Hogwash.

Before oil became readily available, making fuel from "food" was the norm. A brand new 1935 Minneapolis Moline 35 hp tractor shipped from the factory with an adjustable marvel carb, ready to run on alcohol, and could be run on gasoline as well if it was available.

The diesel engine was first designed to run on vegetable oils, not kerosene.

Bio fuels are a good alternative fuel and supplement to oil based fuels, and the growth of this industry will be nothing but good for our economy.

The MYTH so many seem to believe- that it could divert agricultural production away from food crops- even leading to mass starvation in the poor countries- is simply NOT TRUE.

Aside from lacking the essential analysis of food supply and demand, this ridiculous claim leaves out the potential of set-aside land and marginal land, it ignores the large amounts of biomass currently wasted in various ways in developed countries like ours (from agricultural and forestry residues to commercial food-processing by-products to the huge amounts of waste cooking oil dumped in sewers and landfills), plus it relies on a mythical view of the developed nations' role in feeding the world.

These are typical objections to biomass energy production:

1. "Any attempt to grow fuel for general use would require a massive increase in crop yields at a time when we are unlikely to be able to grow enough food to feed everyone without affecting other species. To go 'green' in developed countries at the expense of food production may well result in effective genocide in other, less developed countries, even our own poor would not be exempt."

2. "Present food shortages throughout the world call attention to the importance of continuing US exports of corn and other grains for human food to reduce malnutrition and starvation. Expanding ethanol production could entail diverting essential cropland from producing corn needed to sustain human life to producing corn for ethanol factories."

First and formost

There is no food shortage! The world already grows more than enough food to feed everyone. About a billion people now don't have enough food to meet basic daily needs, but that's NOT because there's not enough food. There's more food per capita now than there's ever been before -- enough to make everyone fat. There's enough to provide at least 4.3 pounds of food per person a day: two and a half pounds of grain, beans and nuts, about a pound of fruits and vegetables, and nearly another pound of meat, milk and eggs.

People starve because they're victims of an inequitable economic system, not because they're victims of scarcity and overpopulation.

It's a myth that most of the food in the world is grown in the rich countries. The US, for instance, is the world's biggest-ever food IMPORTER.

That- "US exports of corn and other grains for human food to reduce malnutrition and starvation" is another myth. Most US grain exports go to feed livestock, not humans. Much of it is also used as feedstock for industry. It can also undercut local food production, leading to less local food security, not more.

Facts

1. The US and the other industrialized countries are the world's major food importers, importing 71% of the total value of food items in world trade (Handbook of International Trade and Development Statistics 1994 (New York and Geneva: United Nations Conference on Trade and Development, 1995), table 3.2).

2. The US imports about $1.5 billion worth of beef a year (Food and Agriculture Organisation, FAO Trade Yearbook 1995, vol. 49 (Rome: FAO, 1996), 160, table 12).

3. The US imports 54% more in farm commodities than it exports (FAO Trade Yearbook 1995, table 6), much of it from countries where the majority lack a healthy diet. The US is in fact the biggest food importer the world has ever seen.

See:
The Myth of Scarcity
http://www.foodfirst.org/pubs/backgrdrs/1998/w98v5n1.html

12 Myths About Hunger
http://www.foodfirst.org/pubs/backgrdrs/1998/s98v5n3.html

US grain exports

There are many different fuel crops and many different ways of growing them, from the eco-unfriendly, chemical- and energy-intensive industrial farming methods to sustainable methods which conserve or even improve the environment, with equal or higher yields.

In the US, the main fuel crops are corn, for ethanol, and soybeans producing soy oil for biodiesel. These are the crops which it's alleged should not be diverted from "human food to reduce malnutrition and starvation".

We've all heard the usual BS from Politicans and the like which goes something like this:

"We have the ability in the United States to grow the grain to feed the world" - Allen Anderson, Chairman of the MARC 2000 coalition of agribusiness and transportation interests, testimony before the Senate Agriculture, Nutrition and Forestry Committee, April 30, 1998

"Our mission is to feed and nourish a growing world population" - Archer Daniels Midland, multinational grain trading company, November 22, 1999

"Helping farmers grow a wide variety of goods to feed a growing world" -- Cargill, Inc, multinational grain trading company, November 22, 1999

(which is probably whypeople are so quick to believe the "we're al' going to starve if we make bio fuel" fear mongers out there.

Research by Mark Muller and Richard Levins of the Institute for Agriculture and Trade Policy reveals a much different picture:

For every one ton of US corn exported to one of the 25 countries with the world's most serious malnutrition problems (Category 5 countries, with at least 35 percent of the population undernourished), 260 tons were exported to a wealthy Organization for Economic Cooperation and Development (OECD) country.

-20 percent of the total US corn crop is exported; two-thirds of these exports go directly to the 28 industrial OECD countries, where it is mostly used for feeding animals.

-76 percent of the corn used in the US is used for animal feed.
- Less than three-tenths of one percent of total US corn exports went to the poor Category 5 countries in 1996.

-Less than three percent of total US corn exports in 1996 went to the 24 Category 4 countries (where undernourishment affects at least 20 percent of the population).

-More US corn goes to make alcoholic beverages in the US than is exported to feed the hungry in the world's 25 most undernourished countries combined.

-About one-third of the total US soybean crop is exported; 70 percent of US soybean exports went to 28 industrial OECD countries in 1996.

-No soybeans were exported to Category 5 countries in 1996, while 17.8 million metric tons went to OECD countries.

-In 1998, a year of record-low soybean prices, the 25 most undernourished countries received less than 0.027 percent of total US soybean exports.

See "Feeding the World?" (pdf)

http://www.iatp.org/iatp/publications.cfm?accountID=258&refID=36106

"The U.S. Department of Agriculture estimates that more than a billion bushels of corn went unused last year [2000]." -- University of Wisconsin
http://www.news.wisc.edu/view.html?get=6810

Fuel Ethanol and Food Supply, Canadian Renewable Fuels Association -- "Extensive production of ethanol from grain will not detract from Canada’s ability to feed its own citizens and supply large quantities of high-quality grains to export markets.
http://www.greenfuels.org/ethafood.html

Half of US food goes to waste, 25/11/2004 -- As the US celebrates Thanksgiving, a new study reveals that almost half the food in the country goes to waste... The new study, from the University of Arizona (UA) in Tucson, indicates that a shocking forty to fifty per cent of all food ready for harvest never gets eaten... Not only is edible food discarded that could feed people who need it, but the rate of loss, even partially corrected, could save US consumers and manufacturers tens of billions of dollars each year.
http://foodproductiondaily.com/news/ ng.asp?id=56340&n=dh330&c=tzlvsrxywshqwyj

Fuel AND food

With most biofuels you remove the energy and are still left with the food -- or "feed" more often (for livestock). With ethanol the feed value is enhanced: the distillers dried grains by-product is more nutritious than the original unprocessed grain (because of the yeast).
With biodiesel you're left with the oilseed cake after the oil has been pressed out -- again, depending on what seed is used, this is usually a highly nutritious, high-protein livestock feed.

As for poor countries, local production of biofuels from locally grown crops, where appropriate, can cut dependence and cash expenditure on imported fuels, increase community self-reliance, and provide a spur for local job creation and growth. It can also cut dependence on fuel wood, which is often scarce and causes immense health problems through indoor air-pollution. And, as we've seen above, growing biofuels crops can encourage food-crop production rather than reducing it.

Once you cut through all the dis-information about bio fuel production, you are left with the realization that there is nothing but positive benefit and economic growth resulting from bio fuel production.

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