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Uh Oh: World Food Prices Spike As Soy Harvest Collapses

Among the things we watch here at Via Meadia are trends in world food prices.  Middle class Americans grumble when prices go up at the supermarket ($5 bucks for a box of cornflakes? Are these people insane?) but for billions of people all over the world rising food prices can mean the difference between happy kids and hungry ones, between having a little money for extras at the end of the week and skipping meals.

The news on that front is suddenly not good: as the FT reports, the soybean harvest in Latin America has been badly hit by La Niña caused droughts. That doesn’t just mean a sharp increase in edamame prices at the local sushi spot and a sharp spike in tofu down at Whole Foods. For much of the world, soybeans are a primary source of protein and because they are used to feed animals, soybean price increases affect many other foods. Soybean is also an important source of cooking oil in baked goods (like bread), and this year’s spike in soy prices is made worse by rising prices for other edible oils.

The US Department of Agriculture believes that soybean production is headed for its biggest global drop ever — or at least since 1965 which is when the US started tracking global soybean production. Prices are now higher than they have been in four years, and could reach record levels later in the year.

This is particularly bad news in China, where food inflation already worries a government facing social unrest and economic instability. Soybeans generally, and Latin American soybeans in particular, play a major role in the Chinese diet.

But it also suggests trouble across the Middle East and southern Europe, where economic unrest has shaken governments from Portugal to Pakistan. A lot of people are going to be hurting, and some of them will be hungry. 2012 could be even more… interesting than we thought.

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  • Kuze

    This spike in food prices is bad. Almost as bad: the spike in pseudo-scientific proclamations of attribution to global warming and subsequent suggestions that the best way of dealing with this situation is a global carbon treaty. Also deplorable and often in the same camp: Anti-rationalist, quasi-religious food Luddites who campaign against genetically modified crops.

  • dr kill

    I hope I live long enough to see food become expensive.

  • Mark Michael

    Re: food prices

    One of the side effects of the Arab Spring for some of the countries involved, e.g., Egypt, is that they are now having trouble importing enough food to feed their people. Tourism is way down since the revolution started, and tourism brought in billions of dollars of foreign currency. Hence, Egypt is rapidly depleting their foreign currency reserves importing food.

    Businesses that had been growing under modest economic liberalization measures of Mubarik no longer risk expanding. Foreign investments have stopped coming in, waiting for the political situation to clear up.

    The various international agencies – the IMF, World Bank, EU agencies, American agencies – could step in and provide funds – but if they do, any repayment would be unlikely. Also, there’s been a backlash against these foreign aid agencies since the revolution started.

    We’ve supplied Egypt with billions of military aid ever since the Egypt signed a peace agreement with Israel in the late 1970s. Those funds have kept the Egyptian military sort of “on the reservation” – and also permitted them to become comfortable with that level of financial support, which is unjustified by the economic circumstances of the country. Ending that military support surely would be heartily approved by the great majority of Americans, but it would add to the financial woes of Egypt. (I think we suspended that aid, but Hillary Clinton was discussing releasing some of it, as I recall.)

    It’s hard to tell from the reporting, but I assume the economic situation in Egypt continues to get worse. Given the anti-Israel, anti-American noises coming from the various factions contending for power, it’s hard to see us being overly generous with more aid. (Also, our own $1 trillion plus budget deficits and slow growth don’t help either!)

    For the ordinary Egyptian, the Arab Spring has not made life any easier, and it’s likely to get much harder before it does get any easier.

  • vanderleun

    Oh my yes. The return of widespread famine to the satellite towns and interior of China could indeed lead to interesting times.

  • Rhodium Heart

    And yet soft, wealthy, over-pampered American greenie-weenies will still think it’s OK to take productive farmland off-line and to rail against genetically-modified crops because they know, full well, that daddy’s money will allow them to outbid peasants in China, SE Asia, Africa or Latin America for their foodstuffs. #WhyTheyReallyHateUs

  • SteveMG

    Looks like we could use another Norman Borlaug.

    But those kind don’t come around too often, no?

  • Jim.

    Stop ethanol and other biofuel subsidies that consume fresh water and arable land, NOW.

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