Do you remember this video. A man who lifed side by side with the elite reveals plans of the elite . For example rising food prices.
The US Department of Agriculture’s (USDA) annual “Outlook Forum” in Washington D.C. usually draws a polite trickle of insiders and commodities traders, but on February 24 the forum’s venue was overrun with 2,000 attendees.
At the event, USDA chief economist Joseph Glauber warned of record farm prices for corn, wheat, and soyabeans for 2011, and resulting US food inflation of at least 4% this year and next as prices work their way through the supply chain.
The world situation is more extreme: the USDA says global food prices rose 25% last year, and set a record in January as world grain inventories suffered an estimated 13% decline. The U.N. Food and Agricultural Organization (FAO) in January reported its food-price index was up 32% in the second half of 2010, surpassing the previous record of June 2008. The index, which tracks the prices of a basket of cereals, oilseeds, dairy, meat and sugar, has risen for six consecutive months.
In 2008, food shortages triggered riots across the world, from Haiti to Somalia. It’s no coincidence then that the tottering regimes of Tunisia, Egypt, Libya, and counting, which could have fallen anytime in the last 30 years have come under acute pressure now. As Mary Antoinette would have noted in 1789, when bread becomes a luxury, rulers should watch out.
Rising food demand has many causes, from raised climate instability to demographic growth, to urbanization (loss of subsistence production), to higher emerging market (particularly Indian and Chinese) living standards, to speculation and hoarding, and so on. Some of the problems are systemic, that is, feedback loops apply. For example, the Arab revolt has driven the price of oil to well above $100, and transportation is a significant component of the retail cost of food.
A clear driver
What is evident is global production is not keeping up, or not yet, so in any plausible future prices cannot be coming down soon. High food prices are therefore what scenario planners would call a ‘predetermined element’ – something we should expect for a decade at least, until supply conditions fundamentally adjust.
In terms of thinking intelligently about the future and how to manage it, food is a very clear driver. This is because it is, of all commodities, obviously the most “inelastic” to demand conditions. People can significantly cut their consumption of iPods or scooters, or even health care and education, but not food staples.
The question for leaders and planners is, where does the food-price-crisis go from here; what kind of global operating conditions does it imply for businesses? Is the Arab revolt the extent of it, or are we to be rocked by deeper global social upheaval? Or real famine?
Without exception, genuine famines have political as well as agricultural causes. A crop failure is redeemable through cross-border flows of money or food, but where political conditions disrupt these flows; or worse, where food is provided or withdrawn as a mechanism of engendering political obedience, starvation looms. Western policy solutions therefore need two prongs, raised supply and ensured equitable distribution, and neither is at this point guaranteed in poor parts of the world.
In a more optimistic view, business leaders should expect some new faces around their senior international negotiating and lobbying tables. On the ground, it is evident that political systems respond to social shocks such as food-price-hikes not unlike how buildings respond to earthquakes. Witness the tragic events in Christchurch, New Zealand: solid building stand up, weak ones fall. That’s why some Arab regimes are tottering and collapsing.
We are looking at a high-food-price period, perhaps even a food-price-crisis decade, which will cause every political system to shudder, and the weak ones to fall as the decade plays itself out.