Flash in the Pan

Get ready for your chocolate fix to be a little more dear. Cocoa prices have hit a 28-year high. According to a story in the Financial Times, the reason is concern "over the size and quality of this year’s crop from Ivory Coast, the world’s largest producer." This basic component of chocolate has climbed 52.3 percent this year alone:

The International Cocoa Organisation is forecasting a small supply surplus of 71,000 tonnes in 2008/09, but a poor crop in Ivory Coast could push the market into a supply deficit for a third year in a row.

Similarly, Brazil has reported that its sugal crop will be delayed and smaller because of rain, so sugar prices rose by 3.2 percent. Now here's the real interesting part, I think: prices for October sugar are 12.83 cents a pound. How much do you pay for a pound of sugar? Who gets the rest of that money, and what value do they add to justify their cuts?

In the meantime, in another Financial Times story, food prices are hitting hard enough in Mexico that the "center-right goverment" - which I take to mean on the conservative side - has put price controls into place on 150 basic items, including beans, cooking oil, canned tuna, and fruit juice. Prices will remain frozen from now until the end of the year. But given the hefty jumps we've been seeing in the underlying goods, what happens to the merchants and wholesellers? I understand that people with no money are hurting, but this seems to be a short-sighted approach of addressing a problem. The government shifts the burden onto businesses, which might end up losing money in the long run and possible start cutting jobs, because it wants to appear as though it's active toward the problem. But the dynamics don't change, and the effect is to sweep the pain under a carpet and out of site. The eventual price for this approach may be higher and longer-lasting, but, hey, maybe that will be for someone else to deal with.

Labels: chocolate, government, news, prices, sugar

A report coming out from the Organisation for Economic Co-operation and Development and the UN’s Food and Agriculture Organisation (FAO) will say that biofuel demand and developing countries like China have pushed food prices onto a "higher plateau," according to a Financial Times report:

“Food prices would be considerably higher in nominal terms than in the past but below the current records,” said an official familiar with the report. Compared with average prices for 2005-07, the report forecasts that in 2017 the price of wheat, adjusted for inflation, will be 2 per cent higher, rice 1 per cent higher and corn 15 per cent higher. Oilseed prices are expected to be up 33 per cent.

In a separate report, the FAO said that people will have to get used to higher food prices, even though in the short term, prices will ease a bit from their record amounts. While the report acknowledges the current drop, it says that the overall cost increase won't go away any time soon. These reports do assume that the drive for biofuel won't be heading for a rest stop.

Labels: food, news, prices

The food crisis is getting big enough that even the major media are starting to cover it. According to the United Nations Food and Agriculture Organization (UNFAO), rising prices (48 percent increase since early 2007), particularly for staple grains like rice, are putting 37 countries on the brink of a food crisis. There have been actual food uprisings (or the fear of them) in Bangladesh, Cameroon, Egypt, Ethiopia, Haiti, Indonesia, Ivory Coast, Madagascar, Mauritania, Pakistan, the Philippines, and Thailand.

Driving the rising prices are the conversion of land from producing food to biofuel materials, which are still food crops, but taken out of the global food chain. The EU's subsidized crops, offered at a fraction of their production price, have undercut agriculture in Africa. Toss in low food reserves, and you see exacerbated prices that then become fodder for financial speculators. Food aid money isn't going as far as it needs to, and the UN World Food Program says that it needs $500 million in additional aid by May 1. Even so, 100 million people may find themselves pushed even deeper into poverty because of the unavoidable cost of eating.

Labels: food, grains, poverty, prices, rice, UN

Those who've been watching the escalating cost of food had better ready themselves again: international rice prices have jumped 30 percent, according to the Financial Times. Egypt put into place a ban forbidding exporting rice. It's a big producer of the grain, but is keeping its production at home to help keep lower prices for its own consumers - following a trend:

The Egyptian export ban formalises a previously poorly enforced curb and follows similar restrictions imposed by Vietnam and India, the world’s second- and third-largest exporters. Cambodia, a small seller, also on Thursday announced an export ban.

These foreign sales restrictions have removed about a third of the rice traded in the international market.

That will only exaccerbate a growing problem of food shortages worldwide and, sadly, riots as a result. Expect US producers to look for higher prices along with the rest of the market.

Labels: food, grains, prices, rice