Friday, February 04, 2011

profit -seeking, not supply drove the MENA governance crisis








Catastrophic storms and droughts have been battering the world's leading agriculture countries in recent months, including flooding and a massive cyclone in Australia and a powerful winter storm that swept across parts of the United States.

Dubbed "Stormageddon," one of the biggest snowstorm in decades dumped up to 20 inches of snow in some parts of the U.S. grain belt this week, paralyzing grain and livestock movement. Meanwhile, more cold weather in the U.S. Plains ignited concerns the region's winter wheat lacked adequate insulating moisture.

U.S. wheat prices surged to 2-1/2 year highs on Thursday before retreating slightly on profit taking, along with prices of the other big crops such as corn and soybeans. But traders said pressure remains on wheat prices with forecast for more cold in the U.S. Midwest.

Sugar prices also surged to three-decade highs on fears of damage Cyclone Yasi would bring to the Australian cane crop. Prices for Malaysian palm oil, a cooking staple in the developing world, hit 3-year highs on flooding.

Big companies have had to adjust to higher raw material costs. Kellogg Co, the world's largest breakfast cereal company, said on Thursday it has boosted prices on many of its products to offset rising costs for ingredients such as grains and sugar.

"Today's announcement by the Food and Agriculture Organization should ring alarm bells in capitals around the world," said Gawain Kripke, a policy and research director for Oxfam America, an international development group.

"Governments must avoid repeating the mistakes of the past when countries reacted to spiraling prices by banning exports and hoarding food. This will only make the situation worse and it is the world's poorest people who will pay the price," he said.