Commodity Corner

Views on commodities and energy

from Tales from the Trail:

Think brussels sprouts and cauliflower are agricultural commodities? Think again.

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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. USA/

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.

from Global News Journal:

Can export bans be challenged at the WTO?

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Russian grain harvest

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.

Michael Pollan: “What’s in the beef?”

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Photo by Kris Krüg

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.

But will shareholders back hunger fight?

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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.
    
GATES/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.
    
Thompson“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.”

from MacroScope:

Will food prices rise?

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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.

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.
    
foodaid3Former 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.
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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. 
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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

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obama1Many 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.