A drought in Australia and rising oil prices because of competition from an emerging China are being blamed for the food riots in Haiti and increasing starvation in poor countries across the globe. Well, maybe, but it's hard to square this sudden inflation of the cost of staples with a looming economic collapse and a booming stock market (booming until a few weeks ago, at any rate, and even now doing pretty well all things considered). Prices should be coming down, not continuing to rise.
Paul Krugman lays out the 3 competing theories for why resource prices are expanding.
The first is that it’s mainly speculation — that investors, looking for high returns at a time of low interest rates, have piled into commodity futures, driving up prices. On this view, someday soon the bubble will burst and high resource prices will go the way of Pets.com.
The second view is that soaring resource prices do, in fact, have a basis in fundamentals — especially rapidly growing demand from newly meat-eating, car-driving Chinese — but that given time we’ll drill more wells, plant more acres, and increased supply will push prices right back down again.
The third view is that the era of cheap resources is over for good — that we’re running out of oil, running out of land to expand food production and generally running out of planet to exploit.
Then he asks the question that the "peak oil" Cassandras have been asking about energy prices but enlarges it:
It’s not just oil that has defied the complacency of a few years back. Food prices have also soared, as have the prices of basic metals. And the global surge in commodity prices is reviving a question we haven’t heard much since the 1970s: Will limited supplies of natural resources pose an obstacle to future world economic growth?
One of the things it apparently would mean if it's true is that the corporations who put $$$Billions$$$ into genetically modified food and have been losing their shirts due to global resistance (nobody wants to risk what has come to be known to its detractors as "Frankenfood") suddenly have a financially exploitable situation on their hands: so many people are so hungry that they're willing to overlook the potential dangers of GMF.
Soaring food prices and global grain shortages are bringing new pressures on governments, food companies and consumers to relax their longstanding resistance to genetically engineered crops.
In Japan and South Korea, some manufacturers for the first time have begun buying genetically engineered corn for use in soft drinks, snacks and other foods. Until now, to avoid consumer backlash, the companies have paid extra to buy conventionally grown corn. But with prices having tripled in two years, it has become too expensive to be so finicky.
“We cannot afford it,” said a corn buyer at Kato Kagaku, a Japanese maker of corn starch and corn syrup.
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Genetically modified crops contain genes from other organisms to make the plants resistance to insects, herbicides or disease. Opponents continue to worry that such crops have not been studied enough and that they might pose risks to health and the environment.
“I think it’s pretty clear that price and supply concerns have people thinking a little bit differently today,” said Steve Mercer, a spokesman for U.S. Wheat Associates, a federally supported cooperative that promotes American wheat abroad.
Yeah, funny how that works.
Now, I'm not quite enough of a conspiracy nut to suggest that ADM and other giant agribusinesses used the nervousness of commodities markets and the steep price of oil to engineer a hunger crisis just to recoup all the R&D money they've gone through and had all but given up on getting back, but I have to say the timing and the neatness of the supposed "accidental" convergence of the two are a mite, well, questionable.
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