Friday, November 30, 2012
EP committee votes to curb food commodity trading to tackle price spikes
German banks seem to be losing their appetite for agricultural commodities trading as public opinion turns against the investment vehicles blamed for driving up global food prices. Catastrophic droughts this summer in the United States and Russia have led to an explosion in global cereal prices, fanning the flames of debate on whether it is ethical for investment banks to make billions of dollars in profits from speculation in food commodities while millions of people are condemned to live — and die — in hunger and poverty. “By betting on price developments for agricultural commodities, investment banks are driving up food prices. They are accessories to the world’s famine crisis,” the German-based NGO, Foodwatch, says on its website. “And because the banks are using the money that we invest in life insurance policies and pension funds to gamble in this global commodities casino, it’s a problem that implicates all of us,” the campaign group said. But the tide of public opinion is turning. And in face of growing pressure, Germany’s second-biggest bank Commerzbank, regional banks LBBW and LBB and the savings bank DekaBank have all announced in recent months that they are pulling out of agricultural commodities trading and ceasing to offer such investment vehicles to their customers. Deutsche Bank, Germany’s biggest lender and which for most people embodies the German banking system, announced in March that it was shelving a new set of investment products based on basic agricultural goods. Nevertheless, its DWS investment arm would continue to offer existing products, at least for the time being. “We cannot with a clean conscience advise our clients” on investments in agricultural commodities, said Commerzbank’s chief commodities analyst Eugen Weinberg. “The media and politicians are currently convinced that these are driving up prices. And even if we do not share that opinion, for the sake of image, we don’t want our products to be associated with speculation,” he said. German banks are nevertheless still relatively minor players in the agricultural commodities markets in comparison to big investment banks such as Britain’s Barclays or HSBC, insurers and even agricultural companies themselves. Industrial-scale agricultural producers, for example, use so-called futures contracts to guard themselves against short-term price volatility by fixing prices several months in advance. “It could actually prove counter-productive to bar banks from investing in agricultural commodities,” warned Thorsten Polleit, former chief economist at Barclays Capital and now chief economist at the precious metals trading group Degussa Goldhandel. “Agricultural firms would find it difficult to finance their investments” and that would push up prices even more, Polleit argued. Expert opinion is in fact divided over whether there is a real causal link between agricultural exchanges and rising food prices. “The majority of studies reach the conclusion that investors aren’t behind price movements per se, but that they reinforce the underlying trends be it up or down,” said Manfred Schoepe, an agricultural specialist at the Ifo economic think tank in Munich. In the long term, it is other factors that influence agricultural prices, such as global population growth, large-scale changes in nutritional trends or a decline in the amount of cultivatable land, he argued. German Development Minister Dirk Niebel recently used the controversy of soaring agricultural prices to propose a ban on the sale of the bio-fuel E10, arguing that land used to cultivate it meant there was less land for growing foodstuffs. In reality, however, E10 was disliked by car drivers because they feared it damaged their car’s engine.
Wednesday, November 28, 2012
one doesn't need to look too far...
Proven model predicts higher food prices if speculation is not reined in
The New England Complex Systems Institute, that has developed a quantitative model able to very closely predicted the FAO’s food price index, released a new report predicting sharply higher food prices due in part to excessive speculation.
Their model, originally released in September 2011 matched the FAO’s index from 2004 to 2011. Since then it has continued to closely follow the real world numbers.
Unfortunately, the model now predicts, “another speculative bubble starting by the end of 2012 and causing food prices to rise even higher than recent peaks”
While the researchers acknowledge that the drought in the Midwest U.S. will cause prices to rise, their model shows that excessive speculative activity will have an even larger effect. Though some key financial reforms passed in 2010 may finally begin to be implemented in early 2013, that may be too late to avoid the coming price bubble.
“We find that through the mechanism of speculative activity, the drought may trigger the third massive price spike to occur earlier than otherwise expected, beginning immediately, and sooner than could be prevented by the anticipated new regulations. This spike may raise prices well beyond an increase justified by the reduced supply caused by the droughts… [w]hile the drought only causes a limited price shock, the impact on prices is amplified by the speculative activity,” write the authors.
As NECSI president Bar-Yam said, “We are on the verge of another crisis, the third in five years, and likely to be the worst yet, capable of causing new food riots and turmoil on a par with the Arab Spring, alluding to another study by the NECSI showing that the last two food prices bubbles in 2008 and 2011 correlated with similar increases in violent outbreaks and food riots.
Perhaps most frustrating is that the principal causes of the rising prices are bad public policy:
“Each of these causes is due to particular acts of government intervention or deregulation. Thus, while the food supply and prices may be vulnerable to global population increases and environmental change, the existing price increases are due to specific governmental policies. In order to prevent further crises in the food market, we recommended the halting of government support for ethanol conversion and the reversal of commodities market deregulation, which enables unlimited financial speculation.
Heavy capital investment in existing systems and infrastructures, and rising food prices make it difficult to break out into new solutions and alternatives. Nestle CEO Peter Brabeck-Letmathe in an October 2010 statement to shareholders explained that high food prices increase the pressure to improve efficiency, "But when you start only after prices have gone up, you are too late”. In general, as the food chain extends over distances able to span the globe, waste tends to rise. Local food production for local consumption is the solution but existing commercial practices, consumer habits and expectations are major obstacles to change in the absence of government intervention and legislation, which itself is only likely under crisis conditions.
Holiday Greetings: Food prices on the rise
The U.S. Department of Agriculture Economic Research Service forecasts grocery prices will increase 3 percent to 4 percent next year, with beef and veal leading the way. The information was last updated Oct. 25.Dermot Hayes, an ISU economist specializing in commodity markets and price analysis, thinks the USDA estimate is low. An additional 1 percent to 2 percent is likely, he said.“I think the USDA is just watching farm costs. They’re not looking at other costs” like packaging, trucking and pay and benefit increases, Hayes said.The USDA predicts increases of 4 percent to 5 percent in beef and veal, 2.5 percent to 3.5 percent for pork, 2.5 percent to 3.5 percent in fresh fruit and 3 percent to 4 percent for cereal and bakery products, among other things.Grain supply and demand is the major driver, officials said. The 2012 corn crop nationwide is pegged at 10.7 billion bushels, down 13 percent from last year. Soybean production is forecast at 2.97 billion bushels, down 4 percent from a year ago.Grain stockpiles have greatly diminished over the years as demand ramped up. Corn ending stocks for the 2012-13 marketing year are estimated at 647 million bushels, down from 1.1 billion bushels two years ago. Soybean stocks are projected at 140 million bushels, down from 215 million bushels in 2010-11.As a result, the USDA estimates average corn prices during the current marketing year ending next September will be $6.95 to $8.25 per bushel. The average price in 2010-11 was $5.18. Soybean prices escalated from an average price of $11.30 per bushel during the 2010-11 marketing year to an estimated average of $13.90 to $15.90 this year.Lee Schulz, an ISU Extension livestock economist, said high feed costs will be reflected at the meat counter. Schulz recently spoke at an agriculture outlook seminar at Hawkeye Community College.Farmers nationwide are raising less cattle, hogs and poultry because of a run of red ink, and will for the near future.
Beef on the Rise
While most were busy focusing on turkey last week, cattle prices made a move – jumping from $125 to $128/cwt.Forward cattle contracts for 2013 are averaging $133.50, 8.7 percent above 2012 levels. Both on-feed and off-feed inventories are tight due to two consecutive drought years. 2012 beef cow slaughter is 3.9 percent below a year ago. Total year-to-date beef output is 1.9 percent below 2011, and 2013 production could be down as much as 4 percent. Both steak and ground beef prices have had double-digit percentage increases this year and more of the same is expected in 2013.
Households with least access to market-sourced food are precisely those that must rely on markets to fill their basic food needs. Food markets tend to fail most often and most severely for those who need them the most – the hungry poor.
There is considerable evidence that because poor households spend large shares of their incomes on food and because staples loom large in their food expenditures, lower prices of staple foods significantly increase purchasing power and real incomes. Higher real incomes allow greater purchases of non-staples, leading to substantial short- and long-term nutritional benefits. Conversely, high prices for staple foods lead to reduced consumption of nutritious foods, with long-term negative effects on health, education and productivity.
Most food producers, traders and consumers face a plethora of trade-impeding constraints, which keep many of them in a hunger–poverty trap. Their access to credit is severely limited. The costs of obtaining market information, searching for buyers or sellers, and enforcing contracts are high. Food trade is risky, personalized and cash-based, with limited longterm investment by private traders in transport or storage. Limited and inadequate storage capacity leads to waste and higher pricing.
BIO FUELS AND THE RIGHT TO FOOD
Too much attention has been paid to addressing the mismatch between supply and demand … while comparatively too little attention has been paid both to the imbalances of power in the food systems and to the failure to support the ability of small-scale farmers to feed themselves, their families, and their communities.”
the global community has yet to address the key drivers of recent food prices, which have spiked three times in the last five years. Those include:
- Biofuels, which are still expanding, driving up import costs for developing countries;
- financial speculation on commodities markets, which are still largely unregulated;
- climate change, which continues unchecked with little action on either mitigation or adaptation for developing country producers;
- inadequate public food reserves, which are still widely dismissed as inefficient by global powers;
- insufficient investment in and protection of domestic food producers in developing countries (see my report on Mexican maize farmers), which are still battered by imports and undermined by market failures and misplaced donor priorities.
- Reducing financial speculation on commodities markets – Reforms have been limited, leaving commodities markets prone to wide price swings. Proposals to increase the use of food reserves to limit volatility have been largely rejected.
- Limiting the further expansion of crops and land dedicated to biofuels –Government
subsidies, incentives, and mandates spur biofuel expansion in
industrialized countries, contributing to the underlying demand-growth
that drives agricultural prices steadily upward.
- Expanding sustainable food production in developing countries – Yield gaps are largest among smaller scale farmers, and investing in the sector can close those gaps, improving livelihoods, resource management, and food production.
- Halting “land grabs” – As food-producing resources become more valuable, resource-constrained countries and speculative investors have bought or leased millions of acres of agricultural land in Africa and in other developing regions, compromising the long-term food-producing capacity of developing countries.
We'll make a killing out of food crisis, Glencore trading boss Chris Mahoney boasts
The United Nations, aid agencies and the British Government have lined up to attack the world's largest commodities trading company, Glencore, after it described the current global food crisis and soaring world prices as a "good" business opportunity.
sees what's hidden,
and the ever-wanting soul
sees only what it wants
Monday, November 26, 2012
Sunday, November 25, 2012
October unemployment by state, housing starts and existing home sales, & the World Bank on global warming
even without the shortened market week and congress not in session due to the holiday, it was a fairly uneventful week in the economics blogosphere, where there were just a few reports to cover & where it seemed many bloggers took a long weekend off...fiscal cliff opining continued, but without any news it was more subdued...the administration & congressional leaders met and then put out their canned press releases about progress being made, but none of the positions outlined afterwards suggested anyone's stance had shifted; Republicans want to keep the Bush tax cuts and $5 million estate tax exemption, postpone the sequestered billions in spending cuts for the Pentagon, and pay for that with cuts to entitlement programs and a tax code overhaul; a large faction of Democrats are leaning towards going over the cliff, ie letting everything expire and bargain with a clean slate in the new year, and the administration is still pushing for its $4 trillion "grand bargain", which includes $1.6 trillion in taxes and $2.4 trillion in spending cuts over 10 years...since it appears some business people are a bit innumerate, we should explain that administration plan to bifurcate the Bush tax cuts, ie, leave rates on amounts below $250,000 at their current levels and allow rates above $250K to revert to their Clinton era level of 39.4% from their present 35%, leaves rates on the first $250,000 low for everyone, just as they are now; there wont be a sudden increase in taxes on those making a bit more than $250,000...for instance, someone earning $254,400 would only be taxed $100 more, just on that extra $4400 of income..
one of the few official economic releases of the week was the Regional and State Employment and Unemployment Summary for October from the BLS; this covers the same data covered in the monthly employment situation released the first friday of each month, breaking the two surveys down by state and region...in October, nonfarm payroll employment increased in 35 states and in DC and decreased in 15 states, with the largest monthly job gains logged by California which gained a seasonally adjusted 45,800 new jobs, and Texas, which increased payrolls be 36,000; Utah saw the largest month over month percentage increase in employment, with a gain of 0.7% jobs over septermber, followed by Louisiana and Montana with job gains of 0.6% each...the largest net job loss for any state was in Michigan, where employment fell 16,500; New Jersey also saw employment fall by 11,700, and Minnesota saw 8,100 less payroll jobs in October; percentage wise, the greatest job losses were in Alaska & Rhode Island, which both saw their payrolls fall by 0.5% for the week...October unemployment rates were also calculated for the states using data from the household survey, which we know to have a significant margin of error; 37 states and D.C, were reported to have recorded unemployment rate decreases, seven states showed unemployment rate increases, and six states had no change...as has been the case all year, Nevada still has the highest unemployment rate at 11.5; Rhode Island was second with a jobless rate of 10.4%, and despite adding 295,300 jobs this year and continuing to lead the monthly surveys, California's unemployment rate remains in double digits at 10.1%...on the other end of the scale, North Dakota had the lowest jobless rate at 3.1%...the largest declines in unemployment were seen by S.Carolina, which saw its jobless rate fall from 9.1% to 8.6%, Alaska, which saw its rate fall from 7.5% to 7.1%, and Wisconsin, where unemployment fell from 7.3% to 6.9%...the adjacent bar graph from bill mcbride has the states arranged from the highest october jobless rate on the left to the lowest on the right, which is indicated by the red; he also includes in a blue extension a representation of the highest unemployment rate reached by each state during this recession; all states are now below their maximum, but New York and New Jersey, the two states which suffered the most disruption from Hurricane Sandy, are but a few tenths away from their highest jobless rates, and with weekly reports indicating more layoffs, they may yet see another jobless rate increase that could put them at their highs for this cycle..
there were a couple reports on housing earlier this past week; the first one we'll look at comes from the Census bureau and provides data on New Residential Construction for October (pdf), although it does have a wide margin of error; as reported, housing starts in October were at a seasonally adjusted annual rate of 894,000, which was 3.6% above the revised September estimate of 863,000; however, the 90% confidence interval on that gain was ±13.1%, which puts the new starts gain outside of the range census calls statistically significant; however, that caveat didnt stop the media from declaring that US new home starts jumped to the fastest pace in 4 years; nonetheless, the year over year gain for October was 41.9%, and since the ±15.9% confidence interval doesnt include zero, we can still be assured that annual growth in starts is statistically significant...of the starts in October, single-family homes were started at an annual rate of 594,000; which was an insignificant 0.2% (±10.3%)* below the revised September figure of 595,000, while the annual unit start rate in buildings with five units or more was 285,000...looking for an impact from hurricane sandy, we note there was a seasonally adjusted decline of 6.5% of starts in the Northeast, but with a confidence interval of ± 42.4% on that regional data, we certainly cant accurately quantify the effect...and even though annualized starts reportedly rose from 198,000 to 232,000 in the West, the margin of error at ± 28.2% makes that figure highly suspect too... this report also includes data on new residential permits and home completions...building permits issued in October were at a seasonally adjusted annual rate of 866,000, which was 2.7% (±0.8%) below the revised September rate of 890,000...still, it's 29.8% (±1.8%) above the October 2011 estimate of 667,000, clearly confirming that permits are increasing...single-family permits issued were at a rate of 562,000, 2.2% above the revised September figure of 550,000, while permits for five units or more were issued at a rate of 280,000...housing completions in October were at a seasonally adjusted annual rate of 772,000,14.5% (±15.6%) above the September estimate and 33.6% (±17.3%) above the rate of October last year...single-family housing completions were at a rate of 542,000; while the annual completion rate for units in buildings with five units or more was 226,000...in addition to graphing data on 44 years of total housing starts, bill mcbride also graphs separately 43 years of census data on single family and multiple unit starts and completions on a rolling 12 month basis, which we'll include side by side below; on the left, you see the graph of starts and completions for housing with more than 5 units; blue line is for starts and the red line is for completions; a few observations are obvious; first, construction of multifamily units over the last couple decades has been far below the historical norm, not even considering that our population has grown; second, multifamily starts have almost tripled since they fell to an annual rate of nearly 80,000 in 2010; and it should also be obvious that the multifamily completion line follows and lags the multifamily start line by roughly a year...on the right, we have the graph of single family starts and completions since 1969; again, the blue line is for starts and the red line is for completions; here you can note a shorter lag time between starts and completions, also contrast the early decade single family construction boom with virtually no bubble in multifamily units, and see that unlike the major recovery in multifamily building, there is not yet much new activity in single family construction, where both starts and completions are less than a third of the peak...perhaps this over-weighting towards multifamily units is why we arent seeing the expected increase in residential construction jobs...
the other housing market report released this week was the October data on sales of previously occupied homes, or Existing-Home Sales from the National Association of Realtors...total existing homes sales (including single family, condos, et al) rose 2.1% in October to a seasonally adjusted annual rate of 4.79 million from a downwardly revised 4.69 million in September...since the last part of this month coincided with the arrival of Sandy on the east coast, declining sales at a 1.7% annual rate in the northeast region offset some of the gains in unit sales elsewhere; sales in the West were up at a 4.4% annual rate, while there was a 2.1% gain in sales in the South and a 1.8% increase in the Midwest (no margin of error given; this is data from polling of realtors, who are infallible) ...nonetheless, total home sales were still 10.9% above those of the same month last year, which obviously needs no seasonal adjustment...the October national median price for all existing housing types was $178,600, which was 11.1% above the median of a year ago; the national average for a 30 year fixed mortgage during October was at record low 3.38%, 17% lower that the 4.07% mortgage rate of october 2011 ...the NAR reports that distressed sales, ie foreclosures and short sales, accounted for 24% of total sales, the same percentage as last month, which was questioned by bill mcbride, who noted that other data suggested a decline in the share of distressed sales...half of the distressed sales were foreclosures, which sold for 20% less than the going price for similar properties, and half were short sales, which were typically discounted 14%...2.14 million previously occupied homes remained available for sale at month end, which represented a 5.4-month supply at the current sales pace, down from the 5.6 month supply in september, 21.9% below a year ago and the lowest housing inventory on the market since February 2006...the median time a house was on the market was 71 days in October, up a tad from 70 days in September, but down 26.0% from the 96 day median iin October of last year...32% of homes sold in October were on the market for less than a month, while 20% were on the market for six months or longer...first-time buyers accounted for just 31% of home purchases in October, whereas a normal percentage of first time buyers would be closer to 40%; first-time buyers accounted for 32% in September and 34% in October 2011; meanwhile, all cash sales accounted for 29% of October sales, unchanged from a year ago, while investors bought 20% of the homes sold, more than the 18% they bought a year ago...despite the 1.7% drop in sales in the Northeast, the median price in that region was $232,600, which was 4.6% above a year ago; sales in the Midwest rose 1.8 and the median price was $145,600, up 10.6 percent from October 2011, while home sales in the South increased 2.1% with median sales price of $152,200, 8.2 percent above a year ago, and sales in the West rose 4.4% in October and sold for a median price of $242,100, 21.2% higher than October 2011...we'll again include below two charts from bill mcbride which illustrate these NAR reports; to the left is a chart showing seasonally adjusted monthly existing home sales since January 1994; the obvious sales spikes in 2009 and 2010 were precipitated by the first time homebuyer tax credits; part of the current sales increase is likely due to Fed's action to lower mortgage interest rates, making homes more affordable; on the right is a bar graph for 8 years of actual monthly existing home sales; without the seasonal adjustment, the boom years of 2005 & 2006 are obvious in darker blues, with this years sales through October in red showing some recovery from the long slump...& the seasonal pattern of strong summer sales & winter doldrums is also apparent...
there was also a bit of news on the global warming front this week...on Tuesday, the World Meteorological Organization (WMO).released their annual report on 2011 greenhouse gases; the amount of carbon dioxide in the atmosphere reached a record 390.9 parts per million (ppm) in 2011; which is about 40% higher than pre-industrial atmospheric levels of CO2.. atmospheric methane also hit a new high of about 1813 parts per billion (ppb) in 2011, which is 259% of the pre-industrial level, although much of the increase in methane came from agriculture, 40% comes from natural sources and an acceleration since 2007 was noted...nitrous oxide from a wide range of natural and anthropogenic sources, including oceans, soil, burning, and fertilizer was about 324.2 parts per billion in 2011, which was 1.0 ppb above 2010 and 120% of the pre-industrial level; nitrous oxide is 298 times more heat trapping than equal emissions of carbon dioxide over a 100 year period and also contributes to the destruction of the ozone layer, which screens harmful ultraviolet rays from the sun...combined, these and other minor greenhouse gases caused a 30% increase in radiative forcing (the climate warming effect) between 1990 and 2011...these greenhouse gas stats from the WMO served to reinforce a new report released on Sunday by the World Bank called Turn Down The Heat (pdf) which predicted that average world temperatures rise more than 4°C (7.2 °F) by the end of the century even if governments stood by their current emissions targets, and that would trigger a “doomsday scenario,” of heatwaves, collapsing ecosystems, rising sea levels and crop failures; most of the warming is expected to occur over land with a range of increases up to 10°C (18°F); increases of 6°C (10.8°F) or more in average summer temperatures are expected in the Mediterranean, North Africa, Middle East and the central United States, while the warmest July temperatures between 2080-2100 in the Mediterranean are expected to approach 35°C – about 9°C (16.2F) warmer than the warmest present day Julys....the report went into some detail about the consequences for various regions of the globe, especially in light of an expected 1 meter in sea levels, and warned “The world must tackle the problem of climate change more aggressively,”...much of the boilerplate was pretty much standard fare for such a report, not much different than the warnings issued by the IEA (International Energy Agency), which forecast an 11°F global temperature rise, the similar report from the IPCC (Intergovernmental Panel on Climate Change) last year, or even the report earlier this month from PricewaterhouseCoopers, the largest of the big four accounting firms, which warned businesses to prepare for catastrophic impacts from climate change...what makes the World Bank report and warnings especially noteworthy is that the World Bank has been widely condemned by environmental groups for investing heavily in new coal fired generation facilities around the world (over $4 billion since 2008) which means they alone will be responsible for more than a billion tons of CO2 emissions over the next four to five decades..in fact, despite all these calls for action on climate climate change and CO2 emissions from all quarters, there are still 1,200 new coal-fired power plants being built or planned around the globe; in fact, coal's global share of primary energy consumption has already increased to 30% and future increased percentages are already assured...
(the above is my weekly commentary that accompanied my sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion, and also includes other links of interest…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)
Thursday, November 22, 2012
Under Mao Zedong, Yang's good fortune was to find a job as a reporter with China's state-run Xinhua news agency. His misfortune had been to see his father die of hunger in 1961, at the height of the famine that killed an estimated 36 million people:
"When my dad died, I thought it was just my family's problem. I blamed myself because I hadn't gone back home to pick wild plants to feed my dad. Later on, the governor of Hubei province said millions of people had died. I was astonished," Yang says.
In the 1990s Yang, by now a senior editor at Xinhua, used his status to secretly research the truth about the famine in 12 different provincial archives:
"I could not say I was looking for data about the famine, I could only say I was looking for data about the history of China's agriculture policy. In the data, I found a lot of information about the famine, and people who starved from it. Some of the libraries allowed me to take photocopies; some only let me write the information down. These," he gestures casually at a teetering pile of brown envelopes on the floor, "are the photocopies".
The result was Tombstone: The Untold Story of Mao's Great Famine, published in the West this year to high acclaim.
Yang, aged 72, is neat, small, swaddled in two jumpers despite the shafts of winter sunlight that stream across his desk. He is rummaging through his shelves on the hunt for a book whose title is important: by a Western author whose name has slipped his mind.
"Something about slavery?" he says. I try the name Hayek and after a bit of transliteration it works. He had stumbled on Friedrich von Hayek's The Road to Serfdom in a library and chuckles with mild scepticism when I tell him it is probably the most influential book in Western economics:
"Before I read Hayek, I had only read works the party wanted me to. Hayek says that to use the state to promote a utopia is very dangerous. In China that's exactly what they did. The utopia promoted by Marx, even though it is beautiful, it is very dangerous."
Even now, 50 years on, Chinese official history insists the famine of 1958-61 was a natural disaster. Yang's work demonstrates the famine's massive scale and its direct, political causes.
Agriculture was brutally collectivised, leaving peasants dependent on centrally distributed grain. Local cadres ordered the forced pooling of family kitchens, confiscating all ladles and punishing those who kept private food supplies.
Then, as Mao ordered rapid industrialisation during the Great Leap Forward, the grain supplies disappeared. Simultaneously local officials, terrified of failure, began to report fictional bumper harvests. Mao, meanwhile, publicly humiliated any party leader who voiced doubts. The result was the greatest famine in modern history.
It is Yang's refusal to duck the parallels with today that make his book unpublishable in mainland China. The famine happened because the party was all-powerful, he argues - just as numerous disasters visited on China by today's leaders - from the HIV-infected blood selling scandal, to the spread of Sars, to the shoddy buildings that collapsed during the Sichuan earthquake - are the result of unfree politics and an unfree press.
Despite its samizdat status, Yang thinks there may be around half a million copies of the Hong Kong edition circulating in China. His own copy, discreetly kept in a cupboard, is a black-market version of the latter: its pages are photocopied, its binding stiff, shiny and amateur.
"We learn a lot about history. However, most of it is fake. It is full of made up stories to meet the needs of ideology. Once you realise you've been cheated, you'll begin to pursue the truth. ” Yang Jisheng
The English language version has made a massive impact, with some calling Yang the Chinese Solzhenitsyn. To me, however, he seems more like the Chinese equivalent of Vasily Grossman: though he believes Marxism is a dangerous fantasy he remains a party member. His haunting prose - like Grossman's - defends the power of memory:
"China has undergone an enormous transformation. But… the abuses under the exclusive profit orientation of a market economy and the untrammelled power of totalitarianism have created an endless supply of injustice, exacerbating discontent among the lower class majority. In this new century I believe that rulers and ordinary citizens alike know in their hearts that the totalitarian system has reached its end." (Tombstone, p22)
What is it like, I ask, to be an historian in a country where historical memory is so completely suppressed?
"Very painful," he says. "We learn a lot about history. However, most of it is fake. It is full of made-up stories to meet the needs of ideology. Once you realise you've been cheated, you'll begin to pursue the truth. That's what I did: I've been cheated, so I want to write the truth - however risky it is."
Though retired from Xinhua, Yang is still active. The small political magazine he runs out of this tiny office seems, from piles of unsold copies stacked up in the corridors, not massively influential. He thinks it will take 10 years to publish Tombstone in the People's Republic, if the political reform process keeps to its current glacial pace.
But like all dissident writers in China, he has learned not to hurry.
He pinches green tea leaves for me into a paper cup, and pours hot water from a flask. There is a barely-touched and ancient computer in one corner of the room, but Yang's conquest has been made in the world of analogue information: photocopies and scribbled notes.
He pats the English edition contentedly, still stunned by the price the publishers Penguin are charging for each one:
"Tombstone has four layers of meaning. The first is for my father who died in the famine, another is to remember the 36 million people who died during the famine. The third layer is a tombstone for the system that killed them."
And the fourth?
"The fourth is - the book has put me at political risk, so it's a tombstone for myself if anything happens to me because of writing it."
Wednesday, November 21, 2012
U.S. food banks raise alarm as drought dents government supplies
(Reuters) - The worst U.S. drought in more than half a century has weakened the safety net for the 50 million Americans who struggle to get enough to eat, and the nation's food banks are raising the alarm as the holiday season gets into full swing. Demand for food assistance - unrelenting as the U.S. economy slowly recovers from the worst recession since the Great Depression - ticks higher during the winter holidays.
This summer's crop-damaging weather in the U.S. farm belt has driven up costs for everything from grain to beef. That means higher prices at the grocery store, but it also means the U.S. government has less need to buy key staples like meat, peanut butter, rice and canned fruits and vegetables to support agricultural prices and remove surpluses.
Most of the products from those government purchases are sent to U.S. food banks, which then distribute them to food pantries, soup kitchens and emergency shelters that are a lifeline for people who struggle with hunger - including low-income families, senior citizens and people with disabilities.
The decline in government donations is exacerbating the pain inflicted by stubbornly high unemployment and a lack of income growth for many low-wage workers.
"People have been coping with economic distress for a really, really, really long time ... After several years of tapping all the resources we have, we're starting to see that we're coming up short," said Carrie Calvert, director of tax and commodity policy at Feeding America, the nation's largest hunger relief organization.
NO KID HUNGRY LINK
FEEDING AMERICA'S CHILDREN
Start a local Blessings in a Backpack group. Contact Blessings in a Backpack (1-800-USA-4FOOD) for materials and info on how to get started in your community. Then research local schools with free/reduced price meal programs, and identify local supporters to raise funds to help buy food at a discount. Just $80 provides one child with backpacks full of food for a year! Once you have your volunteers and funds, call Blessings and they'll help you set up your program.
Donate to food banks. If you can't spare the time to start a program, donate directly to Blessings, your local community food bank, or Feeding America, the national umbrella group of food banks. Donating canned goods is helpful, but money is even more so, says Berg. "These groups can buy food at a discount, so where you can buy one can of food with your dollar, they can buy three."
Support national legislative efforts to end hunger. You can urge your senators and representatives to support expanded access to the programs at Feeding America's Hunger Action Center.
Tuesday, November 20, 2012
The Root of the Problem by Eric Holt-Gimnez
The food crisis is a symptom of a food system in crisis. Bad weather, high oil prices, agrofuels, and speculation are only the proximate causes of a deeper, systemic problem. The root cause of the crisis is a global food system that is highly vulnerable to economic and environmental shock. This vulnerability springs from the risks, inequities, and externalies inherent in food systems that are dominated by a global industrial agri-foods complex. Built over the past half-century—largely with public funds for grain subsidies, foreign aid, and international agricultural development—the industrial agri-foods complex is made up of multinational grain traders, giant seed, chemical, and fertilizer corporations, processors, and global supermarket chains.
The Green Revolution (1960-90) was a campaign led by the international agricultural research centers that aimed to modernize farming in the developing world. Impressive gains in national productivity were accompanied by the steady monopolization of seed and input markets by northern corporations. The highly celebrated Asian and Mexican "miracles" masked the loss of 90% of agro-biodiversity, the massive reduction of water tables, salinization and erosion of soils, and the displacement of millions of peasants to fragile hillsides, shrinking forests, and urban slums. Excluding China, the Green Revolution increased food per capita by 11%. However, the number of hungry people also increased by 11%.
Structural Adjustment Programs (SAPs) of the 1980s-90s imposed by the World Bank and the International Monetary Fund followed, dismantling marketing boards, eliminating price guarantees, closing entire research and extension systems, breaking down tariffs, and deregulating agricultural markets. Southern countries were flooded with subsidized grain from the U.S. and Europe that was sold at prices far under the costs of production. This destroyed national agricultural markets and tied southern food security to global markets dominated by rich northern countries.
The rules of the World Trade Organization (WTO) cemented the policies of the Structural Adjustment Programs in international treaties that overrode national laws. WTO rules, like the Agreement on Trade-Related Aspects of Intellectual Property Rights and the General Agreement on Trade in Services, further consolidated northern control over southern agricultural economies. The global South was forced to strip away genuine protections for smallholders and local producers to open its markets to northern goods while northern markets remained largely protected through a combination of both tariff and non-tariff barriers. Regional free trade agreements such as NAFTA and CAFTA, pushed through by the North, continued trade liberalization, forcing southern farmers out of business and making countries of the South dependent on northern food imports."The idea that developing countries should feed themselves is an anachronism from a bygone era. They could better ensure their food security by relying on U.S. agricultural products, which are available, in most cases at lower cost."
U.S. Agriculture Secretary John Block, 1986
World food aid in 2007 reached its lowest level since 1961 (5.9 million tons), precisely when more people than ever are going hungry. Why? Because when prices are high—and food is unavailable to the poor—food aid decreases. When prices are low—and food is abundant—food aid increases.
Sound backward? That is because food aid responds to grain prices on the international market—not to the food needs of poor countries. When the price of cereals is low, northern countries and transnational grain companies seek to sell their commodities through food aid programs. When the price is high, they prefer to sell their grains on the international market. When more people suffer from hunger, less food aid arrives. Global food aid is dominated by U.S. food aid, whose objective since 1954 has been to "lay the basis for a permanent expansion of our exports of agricultural products with lasting benefits to ourselves and peoples of other lands."
Food banks: canaries in the mineshaft
Prices are up, but just how bad is the food crisis in the United States? The recent trends in the nation's food banks are a good indicator: there is less food available, it is more expensive, and the lines outside the food banks are growing.
Federal support for food banks began during the food crisis of the 1970s as an emergency anti-poverty measure to close what was thought to be a temporary food security gap. In the 1980s, despite a downturn in the economy, the Reagan administration cut support for social safety nets, pushing poor people into the street and forcing food banks to turn to the private sector for donations. Food banks fought hunger by collecting unwanted food from distributors and individual households. Religious institutions, nonprofits, and an army of volunteers set up soup kitchens, food pantries, and food banks, giving rise to a rapidly growing emergency food movement. Between 1980 and 1982, the Salvation Army's food pantry's demand increased 400%.
As the number of hungry people in the United States has grown, food banks have increasingly taken up the slack where government food stamps and federal school and nutrition programs leave off. Today, the nation's largest food bank, Feeding America (formerly Second Harvest), distributes two billion pounds of food annually to 200 national food banks.
A survey done by Feeding America in 2008 revealed that 99% of food banks have witnessed a significant increase in the number of people served since last year. Though the demand for food has increased, food stocks are down. USDA surplus has declined by $200 million and local food donations are down nationally about 9%. (The USDA distributes surplus when stocks are high or commodities prices fall below a certain level. Like international food aid, they respond to the needs of the grain market first, tending to decrease distribution when food is most needed and increase it when it is less needed.) The Food Bank Association of New York state reports that USDA commodities are down 60% this year, a decline of 67 million pounds of food. Because many food banks across the nation rely heavily on government surplus, the decline in USDA bonus commodities has pressured them to find alternative suppliers and sources of food. Many food banks are making substitutions for traditional sources of protein and dairy, and others are reorganizing their operating structures.
The California Association of Food Banks asserts that food banks are at the "beginning of a crisis." The concerns of food banks in California are not isolated; strain and worry resounds throughout the food bank community, as they cope with the food crisis. Food Banks are also suffering due to decreased monetary donations from middle class Americans who are tightening their belts in response to the national financial crunch, and decreased food donations from food corporations due to the emergence of lucrative "secondary markets" (e.g., Big Lots, Dollar Tree, Grocery Outlet).
Food crises and farm crises are never far apart. In the 1970s, the government had been managing grain supply and market fluctuations by maintaining national reserves and paying farmers to idle their land. But when oil shortages and inflation pushed up food prices—provoking widespread hunger abroad—then U.S. Secretary of Agriculture Earl Butz told U.S. farmers to save the world from hunger by planting "fence row to fence row" and putting their entire harvest on the market. Policies that curbed overproduction and protected farmers from price swings were replaced by ones that encouraged maximum production and low prices.
When it turned out the hungry people of the world were too poor to buy all the food U.S. farmers produced, prices fell. Secretary Butz then told farmers to "get big or get out." The result was widespread bankruptcy and the painful exodus of over half of our farming families from the countryside. The average farm size went from 200 to 400 acres, reflecting a steady agrarian shift to mega-farms. Large-scale corporate and non-family farms now control 75% of agricultural production.
Under new agricultural policy, farmers were guaranteed a minimum price for their grain. True to its word, over the next two decades, the government paid out billions of dollars to maintain surpluses of cheap grain. Cheap grain became the bulwark not only of the feedlot explosion, but of U.S. foreign policy as well. This policy was later incorporated into the rules of the WTO that prevented developing countries from raising tariffs to protect their agriculture from cheap foreign imports.
But membership in the WTO also required the United States to drop its farm subsidies. The 1996 Farm Bill called for a phase-out by 2001. The so-called "Freedom to Farm" Act abandoned our national grain reserves and gutted the positive, New Deal aspects of the U.S. Farm Bill (like price floors to rural economies, conservation, and diversified livestock programs). Counting on unimpeded exports, U.S. farmers borrowed heavily to crank up production—too quickly, as it turned out. When global grain prices crashed, the government responded with billions of dollars in "emergency payments" that they claimed were "not technically" subsidies. In 2002 corn and wheat exports from the United States were priced at 13-43% below the cost of production. It is no surprise that these "non-subsidies" became the foundation of the 2002 Farm Bill.
Food, finance and speculation: bailing our way out of crises? The main beneficiaries of these policies were large farms, multinational grain traders including Cargill and Archer Daniels Midland, the feedlot industries (e.g., Tyson and Smithfield), and chemical-seed companies including Monsanto, DuPont, and Syngenta.
"The current financial crisis might be mitigated by going to the Federal Reserve Bank and the U.S. government to tap capital reserves. But what happens if we have a devastating drought or other natural or man-made disaster which results in a food crisis in the United States? There are no food reserves! The United States has a Federal Reserve Bank for money, and a Strategic Petroleum Reserve for oil, but absolutely no federal reserve for grain and other emergency foodstuffs."The District of Columbia (pg 3.)
Larry Matlack, American Agricultural Movement
- 16 percent of DC residents (approximately one in 6) are food insecure. Among children under the age of 18, the rate of food insecurity climbs to 32 percent (or one in three children). (USDA via Feeding America, 2010).For senior citizens, as many as 40 percent are at risk of hunger. (Hunger in America, Mathematica Policy Research, 2010)
- 31 percent of children in the District of Columbia live below the federal poverty line, a six percentage point increase since 2007. (US Census, 2011)
- The average monthly food stamp benefit for individuals in the District is $141.68, and for families, amounts to $251.12. (USDA FNS 2011)
- For many families, especially those in the lower income Wards 7 and 8, access to supermarkets with nutritious food options is limited. (DC Healthy Corner Store Report, DC Hunger Solutions, 2008)
- Food stamps last, on average, 2 ½ weeks. 70 percent of clients served report that food purchased with food stamps does not last and they do not have money to buy more (Hunger in America 2010, Mathematica Policy Research)
- In 2011, 46.2 million people (15.0 percent) were in poverty.
- In 2011, 9.5 million (11.8 percent) families were in poverty.
- In 2011, 26.5 million (13.7 percent) of people ages 18-64 were in poverty.
- In 2011, 16.1 million (22.0 percent) children under the age of 18 were in poverty.
- In 2011, 3.6 million (9.0 percent) seniors 65 and older were in poverty.
- The overall Poverty Rate according to the Supplemental Poverty Measure is 16.0%, as compared with the official poverty rate of 15.1%.ii
- Under the Supplemental Poverty Measure, there are 49.1 million people living in poverty, 2.5 million more than are represented by the official poverty measure (46.2 million).iii
- In 2011, 50.1 million Americans lived in food insecure households, 33.5 million adults and 16.7 million children.
- In 2011, 14.9 percent of households (17.9 million households) were food insecure.
- In 2011, 5.7 percent of households (6.8 million households) experienced very low food security.
- In 2011, households with children reported food insecurity at a significantly higher rate than those without children, 20.6 percent compared to 12.2percent.
- In 2011, households that had higher rates of food insecurity than the national average included households with children (20.6 percent), especially households with children headed by single women (36.8 percent) or single men (24.9 percent), Black non-Hispanic households (25.1 percent) and Hispanic households (26.2 percent).
- In 2011, 8.8 percent of seniors living alone (1 million households) were food insecure.
- Food insecurity exists in every county in America, ranging from a low of 5 percent in Steele County, ND to a high of 37 percent in Holmes County, MS.v
The past few years have seen a rapid rise in real food prices – especially, fruit, vegetables and meat. At the same time, we have seen falling real incomes for low income decile groups. The consequence is that those on low incomes have been changing their diet in response to higher prices. With squeezed real incomes, there has been a greater preference for ‘cheap calories’ and lower demand for ‘more expensive calories’ – such as fruit and vegetables. Some fear the poorest are struggling to buy sufficient food.
Income Decline for Low Income Groups
Median income after housing costs fell 12% between 2002-03 and 2010-11 for low income deciles households – while rising in all other income groups.
Food prices have risen 12% in real terms over the last five years taking us back to 1997 in terms of cost of food relative to other goods.
Food Price Inflation Relative to CPI Inflation
How did changes in food prices affect demand for different food groups?
Fruit saw the second largest increase in price (35% and also the second largest fall in demand (-25%). This suggests that fruit is highly sensitive to changes in price and income. It is hard to separate the income and price effect because we have seen falling incomes and rising prices at the same time. But, it suggests demand for fruit is price elastic – people don’t see it as a necessity, – they can substitute other types of food. It may also be a ‘luxury good’ – a good with an income elasticity of demand. This means falling incomes cause a bigger percentage fall in demand.
- In England in 2010 obesity rates increased in all age bands with adults aged 25-34 showing the largest rise at 36%.
- Overall, 26% were obese in 2010.
Such hunger is not due to a shortage of food – globally there is enough to go round and if (a big if) we make the right decisions now, we can continue to feed the world despite population growth and climate change. By some estimates, stopping the waste of food after harvest due to poor storage or transport infrastructure, and then in our own kitchens, could free up half of all food grown. The number of overweight and obese people in the world, suffering their own health problems, including a sharp rise in heart disease and diabetes, is roughly equal to the number of hungry people. That highlights one of the underlying causes of hunger – extreme levels of inequality, both within and between countries.
It requires action at several different levels. At a national level, progressive governments in Brazil and Ghana have shown how to cut hunger sharply, through cash transfers to poor people, raising the minimum wage and investing in smallholder farmers (especially women), who both produce food, and are some of the poorest and hungriest people in the Alice in Wonderland world of a brutally unfair farming system.
Beyond supporting aid for food and agricultural investment, what else can we in the well-fed countries do? Start by putting our own house in order. The rich countries are part of both the solution and the problem. Europe and America's push to reduce their dependence on imported oil and gas has led them to introduce targets and subsidies for biofuels, but these compete directly with food production, forcing up prices for poor people. Rich country greenhouse gas emissions are driving climate change at a pace that outstrips even the most pessimistic projections of the climate modellers, and there are few signs of governments agreeing (still less achieving) the kinds of reductions needed to avoid catastrophic temperature rises that will particularly harm tropical agriculture. We urgently need an international effort to find a way to feed the planet's growing population without destroying its ecosystems, yet current investments are feeble.
Hunger is both a cause and a symptom of poverty. Damaged bodies and brains are a moral scandal and a tragic waste of economic potential. That hunger exists at all shows the urgency of redistributing income and assets to achieve a fairer world. Providing the additional calories needed by the 13% of the world's population facing hunger would require just 1% of the current global food supply. That that redistribution has not already taken place is truly something to be ashamed of.