As we hear stories of folks hoarding rice and what not coupled with the Progressive Saviour, His Holiness St. Obama, cries against free trade and for increased protectionism, we can only expect more food shortages as corn and grain is grown for fuel (instead of sugar which is the logical bio fuel) and as markets further contract due to tariffs. Great op ed in today’s WSJ on this phenomena. The piece reads in part:
Consider two key trade policies that are aggravating the current food crisis. Biofuel mandates in Europe and subsidies in the U.S., along with tariff barriers against alternative sources of biofuels, are encouraging farmers to divert food from hungry mouths toward fuel production. Corn-based ethanol production in the U.S. has increased fourfold since 2000 and now takes up close to 20% of total corn production. This not only takes corn – an important human staple and animal feed component in its own right – off the table or out of the trough, but it also leads farmers to switch to corn, thus diminishing supply of other staples like wheat and soy, and driving up those prices as well.
Meanwhile in the developing world, tightened restrictions on exports of foodstuffs are obstructing a long-term solution, even as import barriers come tumbling down. Each country is trying to keep domestic supplies high on the justifiable grounds of food security. But by holding prices artificially low, export bans keep the market from sending accurate demand signals to domestic farmers. This penalizes farmers, who can’t get the full, world price for their produce. That impairs efficiency, and undermines the incentives for investments that can increase long-term supply. Topping it all off, such measures subsidize high-income households, not just the poor.
Moreover, as more countries implement export controls, global supply contracts even further, pushing prices up by at least 10% and possibly much more. A vicious spiral lurks here, as panic- and policy-induced speculative hoarding drives world prices even higher.
So while the lefties blame bush and mccain (who they refer to as bush III for lack of any intelligent arguments) what will aggravate the situation is the dems anti trade policies. Read it here.
Free trade, free markets, will get the food to where they need to go. There is some inflation due to energy prices (cost of shipping), but shortages are a result of trade barriers.
Although I agree with the post, don’t forget the speculators who have adjusted their sights to commodities where they still have leverage.
Corn ethanol is the biggest scam going today. One thing I have to hand it to McCain for is going to Iowa and basically saying that same thing.
Frankly I think this hullabaloo has more to do with “explaining” food shortages in Venezuela than anything else