Monday, May 12, 2008

“resemblance between the surge in food prices and earlier bubbles in technology and housing”

Food supply fear is knee-jerk delusion

The world seems to be suffering from the delusion that there is a chronic shortage of food. Rising consumption of food in the developing world and the growing use of biofuels is said to be bolstering demand and therefore raising prices. Many fund groups are also harnessing such arguments to encourage investors to put money in their shiny new agriculture funds. Problem is there is little basis to such arguments. As Daniel Ben-Ami shows in this week's cover story the rising demand for food inside, for example, China is largely met from rising productivity inside the country. Even America's Department of Agriculture concedes that China is largely self-sufficient in food. It is unlikely therefore that Chinese demand is pushing up prices on the world market.

Posted by jack c @ 06:54 PM (1051 views)
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7 thoughts on ““resemblance between the surge in food prices and earlier bubbles in technology and housing”

  • little professor says:

    It is true that the price is being driven up not by consumption, but by financial markets. Hence India’s brave decision earlier this week to ban futures trading in food prices.

    But there is a clear link between the deliberate devaluation of the dollar (with US interest rates effectively negative, and the money presses being run at full tilt) and the flight of cash into commodities.

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  • …..and a link between banks’ need to rebuild balance sheets and the ramping up of oil & commodity futures.

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  • japanese uncle says:

    World must be prepared to send those unscrupulous punters who make billions out of the misery of the poor, to Guantanamo Bay as financial terroritts.

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  • JU – They’d have to be sent to some salt mine instead – the US President behind Guantanamo Bay says his constituency is ‘the haves and the have-mores’ and his mission is to enable the haves to become the have-mores – mainly through financial terrorism.

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  • jack c – you’ve contributed a lot today!

    sincere compliment

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  • @ 5. malct – thank you for your kind comment – this article is (IMO) in stark contrast to the programme on ITV toight “The end of cheap food”

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  • Nice little scam these hedge funds have. Collectively, they can push up prices and create a bubble in any sector they want – shares, housing, oil, food – to the point where it creates a panic and people pay silly prices for a bag of rice or a house. Then it becomes a self-fulfillling prophecy. Just as the rest of the population dives in, the hedge funds pull out their cash and bank their profits. They have so much money that they can manipulate the markets to the detriment to the rest of us.

    In textbook theory, the hedge funds help make the market more efficient by allocating wealth to where it is most productive (currently the agricultural sector). In practice, ordinary people face high food prices. Is there anything that governments could do to fix this?

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