Commodity Corner
Views on commodities and energy
from Tales from the Trail:
Think brussels sprouts and cauliflower are agricultural commodities? Think again.
While the financial bailouts tossed to automakers, banks and other groups during the recent economic crisis left a funny taste in the mouth of some Americans, one former U.S. regulator hopes efforts to prevent another panic doesn't go rotten.
The U.S. Commodity Futures Trading Commission is immersed in drafting dozens of rules to assist it in increasing oversight of the once opaque over-the-counter derivatives market, widely blamed for exacerbating the recent financial crisis.
Among the rules it must craft is what the definition of an agricultural commodity is? Of course, corn, cotton, soybeans and livestock, among other items, fall into this realm.
But what about those "other foods" such as brussels sprouts, artichokes, cauliflower, or anything with curry? A former CFTC chairman says they are "abhorrent to American sensibilities" and should be banned.
"Like every U.S. citizen, there are certain agricultural commodities that are abhorrent to me," said Philip McBride Johnson, who is now with the law firm Skadden, Arps, Slate, Meagher & Flom.
In a comment letter to his former agency, he said there is a "natural link" between defining an agricultural commodity and a provision in a law that requires the regulator to protect the public by forbidding the listing of certain products that "are abhorrent to American sensibilities."
Clearly banned under this act are financial products based on wars, terrorism, and assassinations. If Johnson has his way, regulators will be able to protect consumers from a dozen foods that don't mesh with his palate.
from Global News Journal:
Can export bans be challenged at the WTO?
Russia’s ban on grain exports as a heat wave parches crops in the world’s third biggest wheat exporter has raised questions whether such export curbs break World Trade Organization rules. Russia is not a member of the WTO, and it remains to be seen how its new grain policy will affect its 17-year-old bid to join. But other grain exporters, such as Ukraine, which is also considering export curbs, are part of the global trade referee.
WTO rules are quite clear that members cannot interfere with imports and exports in a way that disrupts trade or discriminates against other members. But in practice most WTO rules aim to stop countries blocking imports – shutting out competitor’s goods to give their own domestic producers an unfair advantage.
One of the most fundamental short-comings of the WTO rules is that they prohibit import restrictions on ethical grounds. For example, in 2012 EU will make it illegal to keep chickens in battery cages because of the extreme cruelty involved. Switzerland did so in 1992. However, imports of eggs from countries with much lower standards, such as US, cannot be stopped.
Michael Pollan: “What’s in the beef?”
Where does your burger come from? Journalist and food writer Michael Pollan has traced back the source of much of what we eat, and says that the ultimate answer is oil. Pollan, author of The Omnivore’s Dilemma, argues that it takes massive amounts of petroleum-derived fertilizers and pesticides to run industrial farms and feed lots, with dire consequences for human health and the Earth’s climate.
Check out Pollan’s multimedia presentation below, from the Poptech conference in Camden, Maine last month.
[Editor's note: After some Reuters fact-checking, Pollan withdrew his Poptech assertion that "A vegan in a Hummer has a smaller carbon footprint than a meat-eater in a Prius," and his statement has been edited out of the video. The erroneous meme has nevertheless continued to spread on Twitter]
Pollan writes books for affluent Americans who don’t have real problems and need something to get worked up about.
Giving someone food when they don’t have birth control is like giving heroin to a child.
But will shareholders back hunger fight?
The world needs to spend $83 billion a year to ensure it can produce enough food amid a changing climate for its growing population by 2050, the UN’s Food and Agriculture Organization estimates. Rich countries have pledged more than $22 billion over three years to help small, impoverished farmers grow and sell more by investing in seeds, fertilizer, roads and marketing infrastructure. Philanthropists have thrown their weight behind the goal. Bill Gates challenged research companies last week to make new technologies available to small farmers without charging them royalties. (Click on the link at the bottom to see his full speech to the World Food Prize forum.)
Corporations have said they see themselves as part of the fight too, particularly when it comes to research. But Robert Thompson, a former World Bank official, says he’s pessimistic the private sector will be able to contribute enough. “Their shareholders won’t stand for them solving all the problems of the developing countries, and giving it away,” he told Reuters. “It’s going to take subsidies or at least a public sector contribution to engage their research horsepower,” said Thompson, now an agriculture professor with the University of Illinois, who has pushed for more spending on agricultural development for 40 years. Agribusiness should be motivated to get involved in developing countries because they represent a future growth market for their products, Thompson said. “They should be willing to accept lower return on their own investments as an investment in the longer term, but we have to keep the short time horizon of the U.S. investment community in mind,” he said. “Shareholders are brutal on companies that don’t meet their short-term profit expectations. In that sense, perhaps some of the European companies like Syngenta, BASF or Bayer … may have a little more license, if you will, to take a longer-term perspective than some of the U.S. publicly traded companies.”
Below: Bill Gates addresses World Food Prize forum in Des Moines, Iowa.
from MacroScope:
Will food prices rise?
The Becker-Posner Blog has an interesting debate posted on the question of food shortages and their accompanying price rises. As usual, it is a to-and-fro between economist and Nobel laureate Gary Becker and his University of Chicago colleague Richard Posner, a U.S. appellate judge.
Becker reckons that some commodity prices will rise as the global economy recovers but that food is different.
"Rapid growth in future world GDP is likely to greatly raise the prices of oil and other fossil fuels, unless concerns about global warming induce major steps to reduce the demand for these fuels. Rapid growth in world output is also likely to sharply raise the demand for cereals, meat, and other foods in developing countries. However, I have tried to show why food is different from fossil fuels and minerals, like copper, in that the supply of food is not limited by natural bounds on overall quantity. Rather, the efforts and ingenuity of farmers and researchers are able to greatly increase world food supply to meet even very large increases in the world demand for food."
Posner is not so sure, questionning the impact of technology on food production::
"Technological innovations may hold down increases in the price of food that are due to the increased demand for a rich diet as multiplied by increase in population. But those innovations may create substantial externalities even if they do not push up prices (indeed, the less the increase in prices, the greater the output of agricultural commodities and hence the greater the externalities). As more and more countries adopt the most efficient methods of agricultural production, and thus for example converge on the optimally genetically modified variants of crops, genetic diversity will decline, which will increase the potential damage from blights.... Agriculture is a heavy user of water, moreover, and global warming appears to be reducing the supply of water usable for irrigation by reducing the size of glaciers. The run off from the seasonal melting of glaciers provides a more usable supply of water than rainfall, because the water from a melting glacier is channeled, while rain that falls outside a river or other body of water is difficult to store for use in irrigation.
I am one of those timid souls who worry about the downside of technological advance and economic growth. I find the prospect of continued increases in population and income, and of the technological innovations necessary to cope with those trends, unsettling."
You can read the full arguments on their blog here. But which side are you on?
A food czar could bring sexy back to agriculture
It seems if you got a problem in Washington today, you need a Czar to take care of it. And now some powerful U.S. senators believe the agriculture sector should get one to sharpen efforts to feed the world’s poor. Former Agriculture Secretary Dan Glickman told lawmakers on Tuesday that too often agriculture takes a back seat to other “sexier” issues in policymaking, but it must be a priority if the country hopes to address global hunger and malnutrition. “It is not a secondary factor,” Glickman said before the Senate Foreign Relations Committee. Senator Dick Lugar, the Republican leader of the committee, supported appointing a White House food coordinator to take on raising agriculture and food aid’s prominence. This “food czar” would be tasked with coordinating efforts between the U.S. Agency for International Development, the U.S. Department of Agriculture and other agencies involved in food aid and agriculture production. The need for a food czar doesn’t seem as far stretched when considering recent events that have nudged agriculture over into the realm of a national security issue. Soaring food prices last year sparked food riots and led to political instability in some parts of the world. The threat of violence and coups continues as the recession makes it increasingly difficult for even more people to buy food. A food czar could possibly mitigate future riots by improving the United States’ role in making other nations self-sufficient in agricultural production, an area some say the country has failed in. In fact, U.S. efforts to address the long-term challenge of persistant malnutrition earn an ‘F,’ according to political science professor and author Robert Paarlberg. He said U.S. agriculture assistance to Africa has plummeted 85 percent since the 1980s. “So as things have been getting steadily worse in Africa, the United States goverment has curiously been doing steadily less,” Paarlberg said. A food czar, Lugar said, would have the difficult job of addressing this conundrum.
Photo Credit: Reuters/Luc Gnago (Farmers in Cote d’Ivoire work on a rice field); Reuters/Alberto Lowe (Riot police clash with Panamanians over food prices in Panama City); Reuters/Margaret Aguirre (A child in Ethiopia is severely malnourished due to widespread starvation brought on by drought and soaring food prices)
Obamamania missing in farm country
Many U.S. farmers don’t have confidence in President-elect Barack Obama, with many fearing the new administration will not be receptive to the needs of American farmers and ranchers.
A Reuters straw poll of more than 800 farmers at the American Farm Bureau Federation’s annual meeting in San Antonio found 72 percent of the respondents did not believe Obama would have the best interest of the farmer in mind.
Instead of helping U.S. sectors that produce goods for the country, such as farmers, several mentioned Obama would focus on programs that work to even out income and help those that are seeking something from the government.
U.S. farmers, who tend to be social and fiscal conservatives, have traditionally supported Republicans. One Illinois farmer said he was “not necessarily a Republican beating a drum here but… I just don’t have the confidence in him that I probably should have.”
The Farm Bureau, the nation’s largest farm group, representing growers and ranchers, has adopted a more optimistic tone. Bob Stallman, president of the group, said Obama made several positive comments toward agriculture during the campaign and has expressed a need to have a healthy farm economy.
– Christopher Doering
Photo: President-elect Barack Obama tastes some peaches during a campaign stop at a farmers market in Greensboro, North Carolina, on August 20, 2008. REUTERS/Jim Young
The american farmer has been left out, I’m talking about the mom and pop small farmers. The large ag farmers reap many thousands of dollars of subsidies while the small farm family’s loose money because they cannot afford fuel, fertilizer,seed or insurance!
The cost of keeping up equipment, replacing older equipment, have driven the small producers into bankruptsy as these cost have quad drippled in the last 10 years.
The small independent farms simply can’t afford to buy new equipment. The needs that come from govt laws, to be able to comply need to be overhauled!
The small family farms are loosing the younger generation, to leave the farming business for jobs in the bigger cities as they can’t make a living on the family farm! As we loose these young farmers the farms are sold to developers for more homes for people that want to get away from the cities, yet be able to commute to jobs that are found in the industrial cities.
We are losing the land and the people that feed the world!
