History is about ready to repeat itself in a number of ways. We are seeing the basic feed grains rise on a global basis in such a way that the global poor (which I have written about in previous blogs) are having serious problems gaining access to the minimal food needs that sustain them.
Stories are beginning to populate the news about Egyptian bread riots, rice riots in the far east and india and countries pulling out of the global market in agriculture to preserve what they produce locally for local populations. Exports are being banned so that the inflated global prices don't suck out all the local supplies leaving domestic consumers with a huge and unacceptable increase in food costs.
In Egypt, the government subsidizes daily bread baking and distribution so that the poor can buy loaves for a penny or less a day. As flour prices have pushed higher and higher, some bakeries are selling their flour on the black market and reducing bread for the subsidized distributions. The army in Egypt has been pressed into duty to bake bread to replentish this supply http://voanews.com/english/2008-03-24-voa49.cfm
It is noted that the last time this happened was in the 1970's. Does that sound familiar? Commodity prices went through their last scale-up in the 1970's when countries like the Soviet Union finally admitted that their command economy couldn't supply the basic food needs of the people and entered the global markets in a big buying way. I think we know what happened next in the 1980's in U.S. agriculture.
Compounding the current problem is the flight to commodities by hedge funds trying to escape the volatility of the stock market. These leveraged investments in commodities have inflated the price bubble even higher bringing world-wide tension, the beginning of capital rationing in agriculture and the potential for a major financial backdraft that will leave U.S. agriculture as well as most global agriculture in some significant turmoil and major equity transfers.
