Wednesday, November 28, 2012

~~~~~~~~~~HUNGER: 4th Course~~~~~~~~~~~

From Mainstreet Hunger to Market Indulgence
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.
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.
 Several issues received priority attention in the Food Crisis report, and they are the focus of ongoing GDAE research:
  • 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.

With the US experiencing a rerun of the drought "Dust Bowl" days of the 1930s and Russia suffering a similar food crisis that could see Vladimir Putin's government banning grain exports, the senior economist of the UN's Food and Agriculture Organisation, Concepcion Calpe, told The Independent: "Private companies like Glencore are playing a game that will make them enormous profits."
Ms Calpe said leading international politicians and banks expecting Glencore to back away from trading in potential starvation and hunger in developing nations for "ethical reasons" would be disappointed.
"This won't happen," she said. "So now is the time to change the rules and regulations about how Glencore and other multinationals such as ADM and Monsanto operate. They know this and have been lobbying heavily around the world to water down and halt any reform."

Glencore announced pre-tax global profits of £1.4bn. The G20 is considering holding an emergency summit on the world food crisis.
Oxfam was scathing about Glencore's exploitation of volatile world food prices. Jodie Thorpe, from the aid agency's Grow Campaign, said: "Glencore's comment that 'high prices and lots of volatility and dislocation' was 'good' gives us a rare glimpse into the little-known world of companies that dominate the global food system."

A Glencore spokesperson said: "Regardless of the business environment, Glencore is helping fulfil global demand by getting the commodities that are needed to the places that need them most."...yeah, directly into their fucking off shore accounts 

 So the unwanting soul
sees what's hidden,
and the ever-wanting soul
sees only what it wants
lao tzu



    I posted that on May 2011.
    Rj commented that he had heard of them. LOL

  2. bloomberg /couple hrs ago
    Mick Davis, chief executive officer of Xstrata Plc (XTA), sold $10.7 million of option shares due to expire in February after Glencore International Plc (GLEN) won approval from the European Union and shareholders to acquire the company.

    Davis sold 661,590 shares at 10.22 pounds ($16.30) each on Nov. 27, the biggest thermal coal exporter said in a statement today. He paid 1.82 pounds apiece for the shares under an option plan, granted in February 2003, Xstrata said. Davis made a profit of 5.5 million pounds from the sale before U.K. tax.

    Glencore, the world’s biggest publicly traded commodities supplier, and Xstrata said last week they expect the plan to create the fourth-largest mining company to be completed by year end. Davis was prevented from exercising his options since November 2011, according to the statement by Zug, Switzerland based Xstrata.

    *****a little more history on the swiss darlings...

    Financial and accounting manipulations

    Five non-government organisations have filed a complaint to the OECD against a subsidiary of Glencore over allegations that a mine it owns in Zambia may not be paying enough tax on its profits. The cause for the complaint lies in the financial and accounting manipulations performed by the two companies’ subsidiary, Mopani Copper Mines Plc (MCM), in order to evade taxation in Zambia.[28][29] In 2011 Grant Thornton found that tax avoidance by Glencore in Zambia cost the Zambian Government hundreds of millions of dollars in lost revenue. The avoidance was facilitated through mechanisms such as transfer pricing and inflating costs at Glencore’s Mopani Copper Mine. The Mopani mines are controlled through the British Virgin Islands, a recognised tax haven.[30]
    Dealings with "rogue states"

  3. ABC Radio reported that Glencore "has been accused of illegal dealings with rogue states: apartheid South Africa, USSR, Iran, and Iraq under Saddam Hussein", and has a "history of busting UN embargoes to profit from corrupt or despotic regimes".[8] Specifically, Glencore was reported to have been named by the CIA to have paid $3,222,780 in illegal kickbacks to obtain oil in the course of the UN oil-for-food programme for Iraq. The company denied these charges, according to the CIA report quoted by ABC.[8][25]
    Investments in Colombia

    Moreover, Swiss public television (TSR) reported in 2006 that allegations of corruption and severe human rights violations were being raised against Glencore on account of the alleged conduct of its Colombian Cerrejón mining subsidiary. Local union president Francisco Ramirez was reported to have accused Cerrejón of forced expropriations and evacuations of entire villages in order to enable mine expansion, in complicity with Colombian authorities. According to TSR, a representative of the local Wayuu Indians also accused Colombian paramilitary and military units, including those charged with Cerrejón mining security, of forcibly driving the Wayuu off their land, in what she described as a "massacre".[31]

    Glencore/Xtrata's "huge coal operation in Colombia, Prodeco, was fined a total of nearly $700,000 in 2009 for several environmental violations [running in earlier years], including waste disposal without a permit and producing coal without an environmental management plan."[11]

    A BBC investigation in 2012 uncovered sale documents showing the company had paid the associates of paramilitary killers in Colombia. In 2011, a Colombian court had been told by former paramilitaries that they had stolen the land so they could sell it on to Glencore subsidiary Prodeco, to start an open-cast coal mine; the court accepted their evidence and concluded that coal was the motive for the massacre.[32]
    Investments in Bolivia

    Through its Bolivian subsidiary, Sinchi Wayra (which it acquired in 2005), Glencore operates six businesses in Bolivia that mine and process tin, silver, gold and zinc.;[33][34] notable among these has been Empresa Metalurgica Vinto, reportedly the world's largest privately-run smelter complex, located in the department of Oruro, which was seized and nationalized by Bolivian President Evo Morales on February 9, 2007. At the time of the seizure there were no plans to compensate Glencore.[35]
    Investments in Ecuador

    "In Ecuador, the current government has tried to reduce the role played by middle men such as Glencore with state oil company Petroecuador" due to questions about transparency and follow-through, according to Fernando Villavicencio, a Quito-based oil sector analyst.[11]
    Investments in Zambia

    "[O]fficials in Zambia believe pollution from Glencore's Mopani mines is causing acid rain and health problems in an area where 5 million people live."[11]
    Investments in the Democratic Republic of the Congo

    The company's Luilu copper refinery uses acid to extract the copper. For three years after taking over the mine it continued to allow the waste acid to flow into a river. The chief executive, Ivan Glasenberg, was interviewed for Panorama by John Sweeney and said 'It was impossible to remedy any way faster'[36]

    They have also come under scrutiny for acquiring illicit "conflict minerals"[37]


  4. Glencore has acquired stakes in the Kansuki mine in Congo’s southern Katanga Province: Congo’s government transferred a 75 per cent stake in Kansuki mine in secret and at vastly undervalued prices in July 2010 to a company in which Dan Gertler, who is a close friend of President Joseph Kabila, has an interest. Just a month later in August 2010, Glencore took half the shares of the company that acquired that 75 per cent stake, becoming the operator of the mine. Glencore is financing the entire development of the Kansuki mine, thereby carrying the costs for its other partner companies which are associated with Mr Gertler.[38]

    Glencore has a 50 per cent share in SAMREF Congo SPRL, a Congolese registered company holding 80% of the Mutanda mine. SMREF Congo SPRL recommended on 1 March 2011 that Congo’s state-run company Gecamines, holding the other 20% share in the Mutanda Mine, sell this share to Rowny Assets Limited, an entity associated again with Dan Gertler. The state-owned share was sold in secret and undervaluated. Glencore has been designated operator of the Mutanda Mine.[38]
    Associations with mining companies

  5. Glencore is also noted for its association with the publicly traded Xstrata mining group, also headquartered in the low-tax[11] Canton of Zug, Switzerland. Glencore is reported to serve as a marketing partner for Xstrata.[25][39] As of 2006, Glencore leaders Willy Strothotte and Ivan Glasenberg are on the board of Xstrata, which Strothotte chairs.[40] According to The Sunday Times in 2005, Glencore controlled 40% of Xstrata stock and has appointed the Xstrata CEO, Mick Davis.[25][41] In 2011, Reuters put the ownership stake at 34.4%, and said that the Glencore IPO would facilitate a full merger between the two companies. Alternatively, if a merger were not consummated, "a messy competitive battle" between the affiliated companies could ensue, the report speculated.[11] On 10 September 2012, Glencore offered 3.05 of its shares for each share of Xstrata in pursuit of a merger deal.[42] This remained below the 3.25 shares demanded by Qatar Holding, the sovereign wealth fund which has a 12 per cent stake in Xstrata.[43] Relationships also exist with Century Aluminum Co. (CENX; 44% economic ownership interest)[44]) in the U.S.; Glencore partial subsidiary Minara Resources Ltd (AU:MRE), a 70.5% stake in one of Australia’s top three nickel producers[44]);[45] and 8.8% in United Company Rusal (HK:486), the Russian aluminum giant that went public in 2010.[44]

    In mid-2011, Century was called "one of the most harrowing stocks of the past few years" but identified as a risky but potentially profitable investment going forward.[46] the song goes GODDAMN THE PUSHERMAN