Have Bernanke And Ethanol Sunk Egypt? The People Cannot Afford To Buy Bread

IDB Editorials ^ | February 1, 2011 | LAWRENCE KUDLOW

[Kaslin]

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 adviser Dan Senor notes that Egypt is the world's largest wheat importer. Yet because of skyrocketing prices, Egyptian inflation is now over 10%, while some experts estimate that Egyptian food inflation has risen to as much as 20%.

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.

[neverdem]

A bit of a reach there. Not a lot of corn goes to the ME.

But a lot of wheat stopped going there due to corn ethanol subsidies.

"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% of U.S. corn went to ethanol. By 2010, the ethanol share was 39%. So instead of growing wheat, our farmers are growing corn in order to cash in on ethanol subsidies."

Bingo! The article has great arguments against Keynesian economics, the Fed and subsidies. I'll be happy if we don't get another war.

[muawiyah]

There are zones where you can double crop wheat with soybeans. There are other zones where you get far higher productivity by double cropping corn with soybeans.

Not all land in this country is best suited for wheat ~ at the same time much of the land best suited for corn is also devoted to roads, houses, and various public construction projects.

[cookcounty]

I'm not trying to say that things aren't tough in Egypt, but relative to the size of Cairo (16 million), the size of these demonstrations are not impressive. Also note the means of communication: Internet and cell phones, which in Egypt are still upper-middle class appliances. And note all the signs in English. When they say "Mubarek, get out, game over" in english, are they attempting to communicate to Mr. Mubarek? The more I look at this, the stronger Mubarek's position seems to be.

[preacher]

[M.K. Borders]

Sweet Justice!

Yes Ethanol has been part of the equation but consider this;

The cost of anything in this world to a significant degree is based on the fuel to produce it and the fuel to move it.

The very governments who are at risk over high food prices are the same ones who have been jacking up the price of oil for 30 years.

Since the 1st oil embargo in the 70's some folks have pushed for a tit-for-tat, oil-for-wheat system of exports to get back at those who produce oil and nothing else. Fact is that system has always been in place and now we are seeing the payback.

[Daisyjane69]

The article suggested that farmers were enticed by subsidies.

That said, as a gardener who has been thwarted by a crop or two in my time, I’m sure not going to argue with anyone’s Grandpa about choosing reliable crops.

:)

[FreedomPoster]

There are really three main drivers of rising food prices here, the two Kudlow discussed, and one other.

1) Helicopter Ben’s financial policies which have created commodity price inflation.

2) Ethanol subsidies and mandates. Burning food! Such a great idea! What could go wrong!?

And finally, not discussed by Kudlow, and quite important,

3) Huge shortages in the Russian wheat crop in 2010.

Egypt in a normal year imports a *lot* of Russian wheat.

Drought ruins Russia wheat, U.S. says no world crisis
Thu Aug 12, 2010
http://www.reuters.com/article/2010/08/12/us-russia-heat-idUSTRE6751T820100812

Russia Wheat Export Ban Pushes Prices Near 2-Year High
August 6, 2010 at 3:15 PM EDT
http://www.pbs.org/newshour/rundown/2010/08/russia-export-ban-pushes-wheat-prices-near-two-year-high.html

[bert]

ADM had a really nice bump yesterday. Worried about increase in food price? Hedge

[Grampa Dave]

“I believe that the ethanol scam was a deliberate attack on 3rd world populations, in keeping with Agenda 21.”

Isn’t amazing, if we attend a Tea Party rally or say right on, we become racists in the MSM’s eyes.

Yet, the MSM/Serial Killing Greens and our Rats push abortion on the poor in this country and around the world, banned DDT which kills thousands of innocents each day, and now push Mythanol to the point that our wheat crops are down which forces the prices of wheat up and ends up starving poor around the world.

The real racists are our rats, the socialists around the world, the Green Serial Killers of the poor and those who finance their “kill the innocent poor” deadly agendas.

[SunkenCiv]

There were some problems in Russia, and I forget where else (not the US) that led to wheat supplies (and barley, it says here) going shorter than expected in 2010. As always, it had zero, nothing, nada to do with corn for ethanol.

Ag prices are sensitive to petroleum prices, not the other way around.

Nice of the WSJ to shill for OPEC though. No surprise there.

• Western Organization of Resource Councils October 2002 [PDF] "The 2001 wheat crop was the lowest in 30 years. Due to lower wheat prices, U.S. wheat farmers harvested only 48,653,000 acres in 2001, yielding nearly 2 billion bushels."

Conversions I looked up; 1 metric ton = 45.9296 bushels, One Hectare = 2.47 acres:

• World Wheat, Corn, and Rice Production, 2003 (Courtesy FAO)

  Country	Maize area, ha	Maize production, Mt	Yield, Mt/ha
  United States of America	28,789,240	256,904,560	8.92
  (conversion)	71,109,422.8	11,799,523,679
  Country	Wheat area, ha	Wheat production, Mt	Yield, Mt/ha
  United States of America	21,383,410	63,589,820	2.97
  (conversion)	52,817,022.7	2,920,654,996.7
  Country	Rice area, ha	Rice production, Mt	Yield, Mt/ha
  United States of America	1,212,860	9,033,610	7.45
  (conversion)	2,995,764.2	414,910,093.86

[SunkenCiv]

• The Bum Rap on Biofuels
• Campaign to vilify ethanol revealed