Getting Used to Life Without Food, Part 1

Wall Street, BP, Bio-Ethanol and the Death of Millions

Grain Storage Wikimedia Image

William Engdahl
Financial Sense

My late grandfather, a man of sturdy Norwegian-American farm stock, who later became a newspaper editor and political activist during the First World War, used to say, 'A man can get used to pretty much anything with time, except dying...and even that with some practice.' Well, as fate has it, it seems we, the vast majority of the human race, are about to test that adage in regard to the availability of our daily bread itself.

Food is one of those funny things it's hard to live without. We all tend to take it for granted that our local supermarket will continue to offer whatever we wish, in abundance, at affordable prices or nearly so. Yet living without adequate food is the growing prospect facing hundreds of millions, if not billions, of us over the coming years.

How Goldman Sachs Created the Food Crisis

Don't blame American appetites, rising oil prices, or genetically modified crops for rising food prices. Wall Street and The Fed are at fault for the spiraling cost of food.

Frederick Kaufman
Foreign Policy

Bankers recognized a good system when they saw it, and dozens of speculative non-physical hedgers followed Goldman's lead and joined the commodities index game, including Barclays, Deutsche Bank, Pimco, JP Morgan Chase, AIG, Bear Stearns, and Lehman Brothers, to name but a few purveyors of commodity index funds. The scene had been set for food inflation that would eventually catch unawares some of the largest milling, processing, and retailing corporations in the United States, and send shockwaves throughout the world.

The money tells the story. Since the bursting of the tech bubble in 2000, there has been a 50-fold increase in dollars invested in commodity index funds. To put the phenomenon in real terms: In 2003, the commodities futures market still totaled a sleepy $13 billion. But when the global financial crisis sent investors running scared in early 2008, and as dollars, pounds, and euros evaded investor confidence, commodities -- including food -- seemed like the last, best place for hedge, pension, and sovereign wealth funds to park their cash. "You had people who had no clue what commodities were all about suddenly buying commodities," an analyst from the United States Department of Agriculture told me. In the first 55 days of 2008, speculators poured $55 billion into commodity markets, and by July, $318 billion was roiling the markets. Food inflation has remained steady since.

The money flowed, and the bankers were ready with a sparkling new casino of food derivatives. Spearheaded by oil and gas prices (the dominant commodities of the index funds) the new investment products ignited the markets of all the other indexed commodities, which led to a problem familiar to those versed in the history of tulips, dot-coms, and cheap real estate: a food bubble. Hard red spring wheat, which usually trades in the $4 to $6 dollar range per 60-pound bushel, broke all previous records as the futures contract climbed into the teens and kept on going until it topped $25. And so, from 2005 to 2008, the worldwide price of food rose 80 percent -- and has kept rising. "It's unprecedented how much investment capital we've seen in commodity markets," Kendell Keith, president of the National Grain and Feed Association, told me. "There's no question there's been speculation." In a recently published briefing note, Olivier De Schutter, the U.N. Special Rapporteur on the Right to Food, concluded that in 2008 "a significant portion of the price spike was due to the emergence of a speculative bubble."

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The Pharaoh will Fall, Oil will Climb, and Wall Street will Win

Eric Blair
Activist Post

Yesterday, oil broke through the $100 mark for the first time since 2008 due to the populist uprising in Arab nations, indicating it's well on its way to new heights. Many financial insiders have predicted oil will go to $150 per barrel and beyond this year. But if $100/bbl was not odd enough given the stagnant (at best) economic environment, what could possibly make it jump another 50%?

The dollar won't drop that significantly over the next year, will it? If it does, calls to drop the petro-dollar as the reserve currency will likely turn to reality.  And surely the global economy is not expected to grow fast enough to warrant a 50% jump for the lifeblood of civilization. It seems clear that demand for oil will stay relatively flat, so only a catastrophic supply problem would justify these increases.

Enter the new supply problem.  A stunning wave of populist protests has swept through Egypt who control the ultra-important Suez Canal.  The Egyptian revolution is displaying powerful solidarity in their struggle to oust longtime autocrat Pharaoh, Hosni Mubarak, for corruption and economic suppression. And it's beginning to look as though Mubarak will eventually be forced out and new leadership will be throned to appease the masses.

However, the uprising is expanding, and is likely to spread deeper into the psyche of the eternally oppressed around the world.  The outcome of this tsunami of activism is uncertain, but stormy waves means it is surf's up for Wall Street.  The civil unrest gives them the perfect excuse to justify what can only be described as outright fraud and manipulation of the oil markets.


Bloomberg reported in 2009 that Citigroup, JP Morgan, and other "Traders" were leasing and buying oil tankers, parking them idle in the ocean, while simultaneously driving up oil futures through their brokerages.  In fact, it was actually difficult to get oil when it was cheap because of this hoarding.  Meanwhile, prices jumped from the low $40s to over $70 per barrel is just a few months.  The near doubling of prices in the summer of 2009 caused Senator Bernie Sanders (I-VT) to introduce legislation to crack down on oil speculation.

Sanders claimed that, "Despite the record supply of oil and reduced demand, prices are going up, not down."  And that because the storage of oil in overseas tankers goes unreported to the federal government, the practice has distorted supplies and led to unnecessarily high prices. Reuters reported:

"The last thing people need now is to be ripped off at the gas pump because speculators on Wall Street -- some of the same people who received the largest taxpayer bailout in U.S. history -- are allowed to jack up oil prices through price manipulation and outright fraud," he said (Sanders).

Sanders' legislation directs the Commodity Futures Trading Commission, which oversees futures markets like the New York Mercantile Exchange, "to stop sudden or unreasonable fluctuations or unwarranted changes in prices."

At the time, the Commissioner of the CFTC, Bart Chilton, agreed with Sanders, "I wholeheartedly agree with you that the time to act on these issues is now, and the CFTC should aggressively utilize all available authorities . . . to address these pressing issues."  Although the House overwhelmingly passed a similar bill in 2008, nothing has been done to date -- except of course that the price of oil has gone up 150% since 2009 lows.  Once again, the banks are benefiting from the misery of the masses.

In a recent interview, potential presidential candidate and iconic businessman Donald Trump said if the situation in Arab nations becomes catastrophic enough to break up OPEC's control of oil, he thinks the price would go down due to more open competition. Barring that, he predicts at least $150/bbl like many other analysts.  However, he was wrong to claim that OPEC sets the price of oil, as they just set output levels.  Trump's pals, the Wall Street manipulators, are who actually determines the price -- and he knows that.  Therefore, a break-up of OPEC is only likely to fuel further speculation.

Consequently, banks don't care about finding a quick resolution to the chaos in the Middle East, so long as they can find a way to profit from it. Yet, you can bet that whoever ends up running these unsettled nations will likely be a shill for the establishment like Egypt's protest leader and Globalist puppet, ElBaradei.

The situation in Egypt proves that there are forces at work far greater than governments; greater than genuine fundamentals for oil; and powerful enough to co-opt an unprecedented solidarity movement of a region -- they're called Banksters.

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Alaska Pipeline Closes, Oil Pushes $100 per Barrel

Drop in Production by BP, Others Threatens to Push Oil Toward $100 a Barrel

Guy Chazan
Wall Street Journal

BP PLC and other oil producers were forced to shut down nearly all their output on Alaska's North Slope, after a leak led to the closure of the Trans Alaska Pipeline.

Analysts said the shutdown of the 800-mile pipeline network could trigger a jump in oil prices unless the flow of oil resumes quickly, as the region represents a significant slice of domestic U.S. oil output. Some analysts said the disruption could help drive crude-oil prices toward $100 a barrel from below $90 now.

Alyeska Pipeline Service Co., which operates the pipeline network, said the spill has had no apparent ...

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7 Reasons Food Shortages Will Become a Global Crisis

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Oil Hits 2-Year High After Supplies Drop More Than Forecast

Mark Shenk
Bloomberg

Crude oil rose to the highest level in more than two years after government reports showed that U.S. suppliesdropped and the country’s economy grew more than previously estimated in the third quarter.

Stockpiles fell 5.33 million barrels to 340.7 million last week, the Energy Department said. A 3.4 million-barrel decline was forecast, according to the median of 14 responses in a Bloomberg News survey. The Commerce Department said gross domestic product expanded 2.6 percent in the third quarter, up from a previous estimate of 2.5 percent.

“Today’s crude numbers were very bullish,” said Andre Julian, chief financial officer and senior market strategist at OpVest Wealth Management in Irvine, California. “The GDP numbers point to extended growth in the U.S. Previously, we were seeing economic and demand growth in China and emerging markets, now it’s spreading here.”

Crude oil for February delivery rose 66 cents, or 0.7 percent, to $90.48 a barrel on the New York Mercantile Exchange, the highest settlement since Oct. 3, 2008. Prices have climbed 14 percent this year.

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Tighter food supplies, high prices to persist

Svetlana Kovalyova
Reuters

World food prices are set to remain high in 2011/12 with supplies tightening and demand running strong, the United Nations' food agency economist told Reuters on Wednesday after a new jump in prices.

"The chances of prices to remain high and extremely volatile well into 2011/12 are stronger than ever," FAO's economist Abdolreza Abbassian told Reuters in a telephone interview.


Food prices rose in November on the back of surging sugar and strong gains in cereals and oils.

That was despite the lack of fundamentals which could have justified the rises and also a stronger dollar, which usually sends agricultural commodities prices lower, Abbassian said.

"That shows that there is tremendous market sentiment in favor of high and perhaps still rising prices," he said.

Agricultural commodities demand remained strong, triggering an increased use of reserves and fuelling concerns about tighter supplies next season, especially because the level of new plantings situation in producing countries remained unclear, he said.

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Rice May Triple in 18 Months as Supplies Tighten, Duxton's Peter Forecasts

Chanyaporn Chanjaroen
Bloomberg

Rice, the staple food of more than three billion people, may as much as triple in 18 months as flooding in exporters including Thailand tightens supplies and demand climbs, according to Duxton Asset Management Pte.

“Rice will blow out the stocks,” said Ed Peter, chief executive officer, who co-founded the company last year with Managing Director Desmond Sheehy. Both worked at Deutsche Asset Management and the Deutsche Bank AG unit owns 19.9 percent of Duxton, while Peter, Sheehy and staff own the rest. Duxton, based in Singapore, invests in farmland, Asian stocks and wine.

Peter’s forecast, in an interview on Nov. 29, would put rice at more than the peak during the 2008 food crisis, which triggered social unrest in poorer states. Wheat and corn also surged that year, while record oil prices boosted fertilizer costs. Kiattisak Kanlayasirivat at Novel Commodities SA, which trades rice, said farmers can replant quickly as floods recede.

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Banksters Inflate Speculative Food Bubble

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How the U.S. Government Guaranteed the Coming Global Food Crisis

Steve Sjuggerud
Market Oracle

Porter Stansberry with Braden Copeland write: Over the last several years, I've written constantly on the growing likelihood of a global currency collapse.

The governments of Europe and the United States have accumulated debts so large they can't ever hope to repay them, except with currencies whose value will be inflated away by money-printing.

That's led me to recommend inflation hedges like railroads, gold, silver, and various forms of energy. Owning these "real assets" is the single best way to protect yourself from the inflationary crisis. But make sure you don't forget the most important inflation hedge of all: food.


If you've been reading the financial press for the past few months, you know the prices of vital food commodities are soaring. The price of corn is up 47% since this summer. Soybeans are up 30%. Wheat is up 43%.

I expect this trend of higher food prices to continue for years as the U.S government intentionally debases the dollar while lying to you the whole time about wanting a "strong currency." (Make sure to read our essay hereabout this great lie.) There's also a good supply/demand case to be made for owning agricultural assets. Let's start with the largest crop in the United States, corn...

In 2009, U.S. farmers grew 39% of the world's corn – 307.4 million metric tons. The crop was worth $48 billion. Our corn exports totaled $8.7 billion.

Most harvested corn in the U.S. is used to feed livestock – 43% of 2009 production. Almost as much (41%) was used for food, consumer, and industrial products (toothpaste, adhesives, cosmetics, starches, sweeteners, oils, beverages, industrial alcohol, fuel ethanol, etc.). The remainder was exported. The U.S. sent most of its corn to Japan, Mexico, and South Korea.

The second-largest corn grower, China, produced 165.9 million metric tons, or half the U.S. production. The European Union was a distant third, harvesting 62.7 million metric tons. Brazil checked in fourth, at 51 million metric tons.

In 2009, a severe drought in China killed millions of bushels of corn. Stockpiles dwindled to alarming levels as the government sold corn to keep the price from rocketing higher. Into 2010, the situation hasn't improved. The Chinese have become net importers of corn for the first time in 16 years. Experts predict China will require 6 million to 8 million metric tons of corn this year.

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Banksters Inflate Speculative Food Bubble

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New Food Crisis Looms

Food Aid Pakistan -Athar Hussain/Reuters

Toni Johnson
Council on Foreign Relations

The world experienced a major food crisis in 2008 that led to civil and political unrest from Bangladesh to Haiti and added millions more to those suffering from malnutrition. Though prices have dropped somewhat, some analysts say the crisis never totally ended. With prices rising dramatically in 2010, the world could be on the brink of a new crisis.

While food prices remain below their 2008 highs, "they're a lot higher than they were before 'the food crisis of 2008' took hold," says financial journalist Addison Wiggin (Forbes), noting that wheat, corn, and sugar prices are up more than 50 percent since the beginning of the year. Farm commodity expert Don Coxe argues the first major crop failure in 2011 is all that's needed to "have a full-blown food crisis," one potentially worse than 2008.


In a November report last week, the UN's Food and Agriculture Organization (FAO) sounded the alarm over skyrocketing food prices, predicting the world's food import bill (PDF) could be more than $1 trillion in 2010. The FAO says that food stocks are high enough to avert a new crisis but that predictions that cereal yields in chief producing countries will decrease in the coming year are driving prices up much faster than they rose in 2008.

The report notes countries such as Pakistan, devastated by flooding this summer, and many least-developed countries are expected to feel rising food prices the most; it argues more should be done to understand the implications of commodity market speculation on food prices. "A key lesson of 2008 is that volatile global financial markets can result in food commodity price speculation that has dire consequences for the world's poorest," notes CFR's Laurie Garrett. But others say that it was export restrictions, panic buying, and hoarding (JakartaPost) that precipitated the 2008 crisis.

Some countries are already beginning to respond. Russia announced in October it would continue its ban on grain exports for another eight months, a measure put in place in August following the severe drought and wildfires that decimated crops in the country this summer. China, experiencing the worst food inflation since 2008 (SydneyMorningHerald), announced last week it would cap prices on grains, edible oil, and sugar. And the EU is contributing 40 million euros to stabilize Pakistan's food prices.

As global food demand increases, experts say more should be done to bolster agriculture production in least- developed countries and reduce agriculture trade barriers. "Looking beyond the immediate crisis, the United States and other developed countries must renew long-neglected investments in agriculture.

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Wholesale food prices soar as commodity costs rise

Despite the sharp rise in food prices, annual input price inflation - manufacturers' raw material costs - slowed to 8% from 8.7%

Julia Kollewe
Guardian

Soaring wheat and other commodity costs on world markets have pushed up UK wholesale food prices at the fastest rate in two years, official figures showed this morning.

Prices of food produced in the UK were 9.8% higher last month than a year ago, the biggest annual increase since October 2008, the Office for National Statistics reported. Imported food prices climbed 4.5% on the year, the fastest rate since October 2009.

Food prices are likely to be pushed even higher in coming months, with refined sugar surging to a record peak of $783.90 a tonne today.

Consumers are now starting to pay more for bread and meat as a result of sharp increases in the price of wheat and corn following poor harvests, the British Retail Consortium reported this week. Vegetable oil and margarine showed double-digit price hikes, while fruit showed its biggest price increases since April 2009. This helped push up food prices overall at 4.4%, the BRC said, the fastest rate in more than a year.

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Oil hits six-month peaks on falling dollar, Fed move

AFP

World oil prices hit fresh six-month peaks on Thursday as the dollar slumped on the back of the US Federal Reserve's new huge stimulus package aimed at boosting the American economy.

Brent North Sea crude for delivery in December delivery rallied as high as 87.59 dollars, reaching a level last seen on May 4. It later stood at 87.46, up 1.08 dollars from Wednesday's close.

New York's main contract, light sweet crude for December, surged to a similar high point at 86.05 dollars, before pulling back to 85.88, up 1.19 dollars.

The dollar tumbled on Thursday after the Fed announced that it would launch a new asset-buying plan, or quantitative easing (QE), worth 600 billion dollars, to bolster the nation's sluggish economic recovery.

In reaction, the European single currency soared to 1.4264 dollars, reaching the highest level since January 20, as traders fretted that the Fed policy could water down the value of the US unit.

"The Fed announced yesterday evening that it would be buying up more US treasuries. The much weaker US dollar as a result is now giving impetus to commodity prices," said Commerzbank analyst Carsten Fritsch.

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Global food crisis forecast as prices reach record highs

Cost of meat, sugar, rice, wheat and maize soars as World Bank predicts five years of price volatility

John Vidal
Guardian

Rising food prices and shortages could cause instability in many countries as the cost of staple foods and vegetables reached their highest levels in two years, with scientists predicting further widespread droughts and floods.

Although food stocks are generally good despite much of this year's harvests being wiped out in Pakistan and Russia, sugar and rice remain at a record price.

Global wheat and maize prices recently jumped nearly 30% in a few weeks while meat prices are at 20-year highs, according to the key Reuters-Jefferies commodity price indicator. Last week, the US predicted that global wheat harvests would be 30m tonnes lower than last year, a 5.5% fall. Meanwhile, the price of tomatoes in Egypt, garlic in China and bread in Pakistan are at near-record levels.
"The situation has deteriorated since September," said Abdolreza Abbassian of the UN food and agriculture organisation. "In the last few weeks there have been signs we are heading the same way as in 2008.

"We may not get to the prices of 2008 but this time they could stay high much longer."

However, opinions are sharply divided over whether these prices signal a world food crisis like the one in 2008 that helped cause riots in 25 countries, or simply reflect volatility in global commodity markets as countries claw their way through recession.

"A food crisis on the scale of two or three years ago is not imminent, but the underlying causes [of what happened then] are still there," said Chris Leather, Oxfam's food policy adviser.

"Prices are volatile and there is a lot of nervousness in the market. There are big differences between now and 2008. Harvests are generally better, global food stocks are better."

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