Food as a commodity sends a message

As two-thirds of the United States suffers from the largest drought to hit the country in 50 years, food crop prices rocket and speculation is rising on the financial markets.

Corn and soybeans, essential for feeding large swathes of the planet’s population, stand at record highs. Corn has jumped between 30 to 50 per cent and soybeans are up 60% since last December.

For investors in food as commodities, of course, it’s great news. The Fiscal Times, for example, put matters like this:

“Agricultural commodities have handily beaten most other asset classes so far this year as a place where investors have been able not only to generate positive returns but capture gains of 20 percent or more, depending on their ability to buy into the right contract at the right time, and roll that contract over when it approaches expiry".

Thus, big consumers of grain from Egypt and Morocco to South Korea and Taiwan are facing a renewed bout of food inflation as cash rich gamblers on the commodity exchanges drive food inflation far beyond the limits of supply and demand.

In fact, it seems that economic, social and political effects of the sharp rise in agricultural commodity prices have barely begun. And with the increased cost of food, memories of the world’s recent food crises abound.

In 2007-08 rapidly rising food prices triggered riots around the world. In 2011 wheat prices were a major factor in pushing Egypt’s masses onto the road to revolution.

This time around, in Indonesia, the tofu industry has threatened to strike over rising soyabean prices; in Mexico, the cost of corn tortillas is on the rise; and Iran last week witnessed a rare protest over the cost of chicken.

Now, sharply rising food prices are intensifying the already existing impact of austerity measures imposed by governments since 2008.  Austerity measures are of course part of the effort to pass the responsibility for debts accumulated in bailing out the banks onto already beleaguered populations.

The World Bank is one of many agencies of the global capitalist class that are worried. Africa is their last hope of a source of profitable growth for corporations in the deepening global depression.

“Certainly there is a lot of reason to worry’ says Mthuli Ncube, Chief Economist and Vice President of the African Development Bank (AfDB).

“It is a threat … if they (the food prices) keep rising, again we will have social upheaval that will threaten economic growth in Africa”

Another global food price spike will squeeze net food importers in Africa. It will combine with the euro zone crisis in Europe and the continuing slowdown in China’s growth to negatively impact African exporters of oil and other commodities.

But, naturally, the Bank’s first and only concern is to return to profitable growth – the self-vicious circle of profit-fuelled commodity production process that has culminated in the present crisis.

The ways in which abnormal weather conditions like the US drought interact with global warming and climate change is extremely complex. But even Brad Plummer of the mainstream Washington Post is now warning about the effects of climate change on US farmers.

He has concluded that the Intergovernmental Panel on Climate Change’s (IPCC) 2012 report on extreme events, which brings together existing investigations, concluded that it was probable that droughts would “become more intense in many parts of the world if the planet keeps heating up — a trend that could disrupt the world’s food supply”.

The use of land and food production to generate profit and for speculation is fundamentally incompatible with feeding the world’s population.  Breaking the vicious circle between the corporate profit system, climate change and the threat of starvation for millions on the planet is most urgent.

A global network of People’s Assemblies can remove break the cycle by seizing control of the land, factories, offices and infrastructure and setting out on a path to sustainable production replacing the chase for profits with the interests of the planet and those who live on it.

Gerry Gold

Economics editor

Threat to Amazon grows

The news of a huge rise in the rate of deforestation of the vast Amazon rainforest is one of the most serious indications yet that governments are standing more or less idly by as the conditions for climate change worsen. While they may wring their hands in concern, they are essentially taking on the role of spectators as global warming continues its acceleration.

Take the Brazilian government under President Lula. His attempts to protect the rainforest are so puny that they have come to nought. The Brazilian government has announced that in the last five months of 2007 alone, some 3,235 sq km (1,250 sq miles) of the rainforest were lost. We are talking about what is referred to as the “lungs of the world”, a massive forest that holds and soaks up huge amounts of carbon dioxide. Satellite imaging experts say the rate of deforestation is unprecedented and could even be far higher after further analysis is completed.

Brazilian officials admit that a rise in the price of soya has encouraged companies and farmers to clear the forest at an increasingly rapid rate. This price hike is itself inextricably linked back to Lula’s government and climate change. One of the reasons soya is in short supply around the world is the fact that it is being used increasingly as a source of so-called biofuels. These are being put forward as a “cleaner” alternative to fossil fuels.

Only last year, the Lula government signed a deal with the US government to expand production of soya beans. Because soya beans are also used in 60% of all processed food, a rise in prices is now being felt by shoppers around the world. Biofuels are a key plank of the European Union’s market-driven, carbon trading approach to curbing carbon emissions. The EU reacted angrily to a UK Parliamentary report this week which concluded that biofuel targets were damaging the environment and threatening food supplies.

In the past 40 years, close to 20% of the Amazon has been cut down. Last year, Lula said his government's efforts to control illegal logging and introduce better certification of land ownership had helped reduce forest clearance significantly. The latest figures show this to be nonsense. In practice, the government’s efforts have been minimal. "We have a national plan to fight deforestation that, historically, was a good plan on paper but lacked implementation both due to political will and due to resources," says Marcelo Furtado, campaigns director for Greenpeace in Brazil.

“Although the government could celebrate in recent years a decrease in deforestation, the fact is that structurally this didn't change. The environment ministry still lacks funding. You still have situations where the police don't have a helicopter to fly over a certain area or there is no fuel in the truck to go to verify if an area is being deforested or not. You still have a problem with availability of maps," Furtado said. “The tools to decrease deforestation and monitor implementation of the law are still not good enough." At the United Nations Conference on Climate Change in Bali, Indonesia, last month, Brazil announced the creation of a voluntary fund to protect the Amazon, due to be launched this year. This is all too little, too late.


Paul Feldman
AWTW communications editor