183 Cm Food Prices Supplement

Food Prices Supplement DDI 2008 CM Joy Goel

Food Prices Supplement Food Prices Supplement .......................................................................................................................................1 Non-Uniqueness – FP Rising (1/3)........................................................................................................................2 Non-Uniqueness – FP Rising (2/3)........................................................................................................................3 Non-Uniqueness – FP Rising (3/3)........................................................................................................................4 High FP Good (1/2)...............................................................................................................................................5 High FP Good (2/2)................................................................................................................................................6 China Inequality Turn (1/2).....................................................................................................................................................................7 China Inequality Turn (1/2).....................................................................................................................................................................8 Poverty Turn ...........................................................................................................................................................................................9

High FP Bad.........................................................................................................................................................10 Alt Causes - High FP Not because of AE............................................................................................................11

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Food Prices Supplement DDI 2008 CM Joy Goel

Non-Uniqueness – FP Rising (1/3) Biofuels/Alternative Energy Increasing Now – New Factory in Tennessee THEO EMERY, Staff Writer The Tennessean, 7-24-08, http://www.tennessean.com/apps/pbcs.dll/article?AID=/20080724/BUSINESS01/807240340/1003/NEWS01 Gov. Phil Bredesen and UT President John Petersen on Wednesday announced the public-private initiative to develop socalled "cellulosic ethanol" on Capitol Hill. The project relies in part on more than $70 million in state funds as well as federally funded research from Oak Ridge National Laboratories. The state has invested in the project, Bredesen said, "because of a strong belief that we in Tennessee are very well positioned to be a leader in alternative fuels." "We have the right conditions, we have the right climate and resources to grow large quantities of biomass, we have the agricultural community, we also have the scientific and research communities in our universities and laboratories," the governor said.

Biofuels Increasing now - $30 Million Grant approved The Business Journal of Milwaukee, “Federal grant approved for Park Falls biodiesel plant” 7-15-08, http://www.bizjournals.com/milwaukee/stories/2008/07/14/daily12.html A company that wants to build a biodiesel fuel plant at a pulp and paper mill in Park Falls has had a $30 million grant request approved by the U.S. Department of Energy. Flambeau River BioFuels said the final award value will be subject to final negotiation with the Department of Energy. The firm plans to construct and operate a biorefinery that, when in full operation, will produce at least six million gallons of liquid fuels per year in the form of renewable sulfur-free diesel.

Food Prices Will Continue to Rise means Non-Unique Damian Mann, Mail Tribune, 7-27-08, http://www.mailtribune.com/apps/pbcs.dll/article?AID=/20080727/NEWS/807270314 The U.S. Department of Agriculture predicts food prices will increase 4.5 percent to 5.5 percent this year and another 4 percent to 5 percent in 2009. Those increases come on the heels of a 4 percent increase last year.

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Food Prices Supplement DDI 2008 CM Joy Goel

Non-Uniqueness – FP Rising (2/3) Food Prices will increase for a number of reasons Jeffery Strain, The Street, 7-7-08, http://www.mainstreet.com/eight-reasons-food-prices-will-keeprising?puc=msgoogle&cm_ven=MSGoogle Be prepared -- food is going to become more expensive, even if oil prices stabilize. Agriculture tends to be heavily dependent on energy for fueling tractors and field equipment, as well as having a heavy reliance on petroleum-based fertilizers and herbicides. But what most people don't realize is that even if oil prices level off, food prices are likely to continue to rise. Here are some reasons food prices will continue to increase. Bees The number of bees has been dramatically declining over the last few years. In 2006, Colony Collapse Disorder wiped out 30% to 90% of beekeeper hives. The losses continued last year through this year with over 30% of hives being destroyed in both 2007 and 2008. The exact cause of Colony Collapse Disorder is not known. Since roughly 75% of flowering plants rely on pollination to help them reproduce, bees are an important link in the chain that produces much of the food that we eat. Without bees to pollinate crops, the crops can't bear fruit, causing crop yields to drop. The end result is higher prices in the supermarket for these foods. Hoarding A growing number of countries have sharply curbed food exports in order to ensure an adequate supply of food at affordable prices for their country. While this trend is a much bigger problem for poor countries that rely heavily on imported food than the U.S., it also puts pressure on world food prices including those foods being imported to the U.S. To make matters worse, the hoarding creates the perception of food shortages, which can lead to more hoarding and further increases food prices. World Demand for Food There is a growing demand for food around the world with the emergence of a middle class in such places as China, Latin America, Africa and the Middle East. With more disposable income, these people demand more and a greater variety of food. These middle classes will likely continue to increase, placing more pressure on world food prices. The Lowly Dollar The dollar has fallen against other world currencies over the past year. When the dollar goes down in value against other currencies, any dollar-denominated commodity tends to go up in price. Part of the huge increase in oil prices can be attributed to the fall of the value of the dollar against other currencies. In the same way, most major food commodities are traded in dollars, which makes foreign-produced food more expensive. Hidden Price Increases Normally, food manufacturers would be hard-pressed to increase food prices further if they had already raised prices with their increased costs from oil. There is always fear among food manufacturers when they must raise prices that doing so will cause a decline in the amount they can sell. One way around this that manufacturers have been using is that instead of raising the price marked on the product, they simply place less into the package. Many people don't notice the change so they don't lose as much in sales. Having done this, food manufacturers still have room to raise the actual prices where they would have been much more reluctant to do so if they had previously raised prices the same way. Weather Recent flooding in the Midwest and Corn Belt has prevented farmers from planting soybeans and damaged the corn crop, which had recently been planted. Analysts have estimated that there may be a shortfall of 15% or more in grain produced this year compared to last year due to the flooding. The bad weather hasn't been limited to the U.S. Poor weather has reduced overall global food production from Canada, the European Union and Eastern Europe over the last couple of years. A drought has resulted in a major Australian wheat decline. This has tightened world food stocks, which has contributed to rising food prices. Speculation Speculation's role in increased food prices is hotly debated, but it appears that investors have taken an interest in food prices and are playing a larger role in the commodity markets. As food supplies tighten, there is a good chance that speculators will increase in the hope of making a quick buck, further increasing food prices.

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Food Prices Supplement DDI 2008 CM Joy Goel

Non-Uniqueness – FP Rising (3/3) No Signs of Food Prices Stopping By Harry Wallop, Consumer Affairs Correspondent, Telegraph – an English news source, 7-25-08, http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/07/21/nflation121.xml The situation is likely to worsen over the coming months with energy bills expected to increase further, food prices showing no signs of calming down and private school fees on the rise. Even the cost of lunch at most state schools will increase by more than the rate of inflation when children return from the summer holidays, with most London schools putting up the price from £8.50 a week to £9.

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Food Prices Supplement DDI 2008 CM Joy Goel

High FP Good (1/2) Increased Food Prices Key to Ugandan Economy The Monitor, Africa News, 4-14-08, Lexis, http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?start=13&sort=RELEVANCE&format=GNBFI&risb=21_T424 5340224 On food prices, apart from the effect of increased oil prices, normally food prices rise during the planting season. That not withstanding the increasing food prices are good. Why? Other factors remaining constant, Uganda is now a food basket for the region. A lot of Ugandan food is being exported to southern Sudan, DRC, and Kenya. For Kenya the food exports from Uganda are bound to increase as the most fertile part of Kenya was the one which was most affected by chaos in that country and many are still displaced, some in Uganda while some are within Kenya. The likelihood is that agricultural production might fall calling for food imports from Uganda and other countries. Apart from the regional market which is impacting on the local food prices, the world food prices are experiencing an upward trend. This is good for the Ugandan farmer. The writing is on the wall that the demand for agricultural commodities has increased. Meat prices in Kampala had gone up as a result of the cattle in Uganda being shared between the Uganda and the Sudan market. Almost everything goes to Juba these days from locally manufactured goods including mineral water, to unprocessed farm produce. In short, increased prices are good for the Ugandan manufacturer and farmer. The challenge now is for the planners of the economy to ensure increased agricultural production and Naads comes in handy.

High Food Prices Solve Obesity Business Week, 2-2-6-07, Lexis, http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?start=6&sort=RELEVANCE&format=GNBFI&risb=21_T4245 340224 The justification that increasing food prices would be beneficial in terms of reducing food consumption, and therefore obesity, is scandalous. Some people will do anything to make a buck.

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Food Prices Supplement DDI 2008 CM Joy Goel

High FP Good (2/2) High Food Prices Stimulate African Economy John Downes, The Irish Times, 9-4-07, http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4254042494&format=GNBFI&so rt=RELEVANCE&startDocNo=51&resultsUrlKey=29_T4254042497&cisb=22_T4254042496&treeMax=true&treeWidth=0&csi=14 2626&docNo=67 Biofuels are already impacting on world food prices, but other factors such as the drought in the southern hemisphere are also playing a part, a leading expert in the area said yesterday. Speaking at the Institute of European Affairs in Dublin, Prof Peter Hazell also said that the development of the biofuels sector and accompanying high food prices could have long-term benefits by stimulating agriculture in poorer countries such as those in Africa.

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Food Prices Supplement DDI 2008 CM Joy Goel

China Inequality Turn (1/2) Chinese Food Prices Follow Global Trend Tom Holland, South China Morning Post, 4-21-08, Lexis, http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4245267957&format=GNBFI&so rt=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4245267960&cisb=22_T4245267959&treeMax=true&treeWidth=0&csi=113 14&docNo=1 And what happens to international food prices happens in China. Dr Rozelle has little patience with the often cited argument that because China only imports 1 per cent to 2 per cent of its food, domestic prices are not affected by international fluctuations. He points out that although the state interferes in the pricing of some staples such as wheat and rice, most foodprices are set by the market and there are few barriers to international trade. As a result, prices in China closely follow global food prices (see the second chart below).

High Food Prices Solve Chinese Income Inequality Tom Holland, South China Morning Post, 4-21-08, Lexis, http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4245267957&format=GNBFI&so rt=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4245267960&cisb=22_T4245267959&treeMax=true&treeWidth=0&csi=113 14&docNo=1 With energy prices expected to remain high indefinitely, that means China had better get used to more expensive food for the foreseeable future. Unlike most observers, however, Dr Rozelle and Dr Huang believe higher food prices have positive implications - provided Beijing can resist the temptation to tinker with the market. Although higher food prices are not popular with city-dwellers, with wages rising at close to a 20 per cent annual rate, few urban workers have been left substantially worse off by the recent increases, says Dr Rozelle. In contrast, the structural shift to more expensive food driven by rising energy prices will encourage investment in the agricultural sector and significantly raise rural incomes. So far, Beijing has sought to keep a lid on grain prices by selling from reserves. But that is short-sighted, argues Dr Rozelle. For one thing, the policy cannot continue indefinitely and, for another, by artificially holding down the price of grain, the government is encouraging farmers to switch to other crops such as soya bean, which risks creating a grain shortage in the future. If Beijing would just butt out and leave the market to do the work, the fundamental structural shift in global agricultural markets driven by energy prices will help narrow the income gap between China's cities and countryside and go a long way to alleviating rural poverty. Now that would hardly be the disaster so many observers are predicting.

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Food Prices Supplement DDI 2008 CM Joy Goel

China Inequality Turn (1/2) Chinese Inequality leads to social unrest and economic decline Chua Chin Hon, China Bureau Chief, The Straits Times, 9-9-06, Lexis, http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4253928352&format=GNBFI&so rt=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4253928355&cisb=22_T4253928354&treeMax=true&treeWidth=0&csi=144 965&docNo=2 The official Xinhua news agency also reported last week that China's richest families - those in the top 10 per cent - owned over 40 per cent of the country's wealth. In contrast, the poorest 10 per cent of Chinese families owned only 2 per cent of the country's wealth. A Chinese urbanite also earns at least three times more than his rural counterpart. This urban-rural gap widens further when non-monetary factors are considered, as urban Chinese enjoy better access to public health care and education. Such inequities, coupled with endemic corruption and widespread abuse of power by officials, have fuelled growing resentment of the ruling Chinese Communist Party (CCP) and sparked social unrest in some instances. 'Policy-makers have realised that improper handling of the complicated situation will lead to economic stagnation and social instability,' Xinhua reported yesterday. Analysts said this 'rethink' reflected a significant shift from the country's decades-long obsession with all-out economic growth in favour of greater social equity and justice. Reports here suggested that income inequality, particularly among civil servants and employees of state-owned enterprises (SOEs), would be among the first tasks that the CCP would tackle.

Economic Collapse leads to Nuclear War Walter Russell Mead, Fellow for U.S. Foreign Policy at the Council on Foreign Relations, "Depending on the Kindness of Strangers," New Perspectives Quarterly 9.3 (Summer 1992) pp. 28-30. There is, or there should be, nothing surprising about the fix we are in. Everyone has known since the ‘70s that the U.S. could no longer, single-handedly, manage the global economy. But, like Blanche Dubois, America’s leaders preferred to ignore the unpleasant reality, and made no provisions to meet the coming challenge. There is something breathtakingly casual in the way the American elite responds to its failures. The savings and loan debacle, the disintegration of our inner cities, the budget deficit: Our public and private elites don’t care about them. Perhaps because they grew up in the years when the U.S. faced no real economic challenges and knew no real limits, they don’t understand that failure has a price. If so this new failure—the failure to develop an international system to hedge against the possibility of worldwide depression—will open their eyes to their folly. Hundreds of millions—billions—of people around the world have pinned their hopes on the international market economy. They and their leaders have embraced market principles—and drawn closer to the West—because they believe our system can work for them. But what if it can’t? What if the global economy stagnates—or even shrinks? In that case we will face a new period of international conflict: South against North, rich against poor. Russia, China, India—these countries with their billions of people and their nuclear weapons will pose a much greater danger to the world order than Germany and Japan did in the ‘30s.

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Food Prices Supplement DDI 2008 CM Joy Goel

Poverty Turn High Food Prices Redistributive, Solves Poverty Paul Donovan, The Edge Malaysia, 5-26-08, Lexis, http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?start=42&sort=RELEVANCE&format=GNBFI&risb=21_T424 5340224 It is important to note that (as with any price increase) the economic consequences of higher food prices are not positive or negative as such, but redistributive. Higher food prices are bad for food consumers (which is everyone, of course, but in this context particularly urban consumers). Countering that, higher food prices are good for food producers. Money is redistributed from urban to rural areas as food prices rise - reversing the trend of the last decade or so of economic development, when wealth tended to accumulate in urban areas.

Poverty Outweighs Genocide and Nuclear War, it kills over 14 million a year James Gilligan, Department of Psychiatry Harvard Medical School, Violence: Reflections on Our Deadliest Epidemic, 2000, p 195196. The 14 to 18 million deaths a year cause by structural violence compare with about 100,000 deaths per year from armed conflict. Comparing this frequency of deaths from structural violence to the frequency of those caused by major military and political violence, such as World War II (an estimated 49 million military and civilian deaths, including those caused by genocide--or about eight million per year, 1935-1945), the Indonesian massacre of 1965-1966 (perhaps 575,000 deaths), the Vietnam war (possibly two million, 1954-1973), and even a hypothetical nuclear exchange between the U.S. and the U.S.S.R (232 million), it was clear that even war cannot begin to compare with structural violence, which continues year after year. In other word, every fifteen years, on the average, as many people die because of relative poverty as would be killed in a nuclear war that caused 232 million deaths; and every single year, two to three times as many people die from poverty throughout the world as were killed by the Nazi genocide of the Jews over a six-year period. This is, in effect, the equivalent of an ongoing, unending, in fact accelerating, thermonuclear war, or genocide, perpetrated on the weak and poor every year of every decade, throughout the world.

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Food Prices Supplement DDI 2008 CM Joy Goel

High FP Bad High Food Prices Kill Retail Industry Investors Chronicle, 3-5-08, Lexis, http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?start=2&sort=RELEVANCE&format=GNBFI&risb=21_T4245 267957 The reason for this is simple. We spend more on food than on oil - four times as much in the UK and three times as much in the US. And when food prices rise, people have less to spend on other things, so demand falls. In the US, there has been a strong correlation (minus 0.38 since January 1992) between annual changes in food prices and in retail sales.

High Food Prices Lead to Inflation Investors Chronicle, 3-5-08, Lexis, http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?start=2&sort=RELEVANCE&format=GNBFI&risb=21_T4245 267957 But higher food prices don't just weaken demand and hence profits. They also add to inflation - in the UK and US, food represents around 15 per cent of the CPI and RPI. Worse still, because food prices loom large in households' consciousness, there's a risk that higher prices will raise inflation expectations generally, which can lead to further rises in actual inflation. And that in turn makes it harder for central banks to cut interest rates.

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Food Prices Supplement DDI 2008 CM Joy Goel

Alt Causes - High FP Not because of AE Food Prices high because of government subsidies Tom Holland, South China Morning Post, 4-21-08, Lexis, http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4245267957&format=GNBFI&so rt=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4245267960&cisb=22_T4245267959&treeMax=true&treeWidth=0&csi=113 14&docNo=1 Dr Rozelle has no doubt at all why Chinese food prices are rising so steeply. He blames the US government's misguided subsidies for biofuels. With the price of oil at a record high of $117US a barrel, as much as 40 per cent of the US corn crop is now being used to produce ethanol, says Dr Rozelle, crowding out food and animal feed cultivation. As a result, prices are going up. "What happens to the oil price happens to food prices," he says (see the first chart below).

Biofuels not causing High Food Prices Derek Sands, Inside Energy with Federal Lands, 6-2-08, Lexis, http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?start=5&sort=RELEVANCE&format=GNBFI&risb=21_T4245 340224 At a time when many are criticizing biofuels for driving up food prices, Schafer reiterated his department's position that the increasing use of biofuels, which are now largely produced from corn, account for only 2% to 3% of rising food prices. The Energy Independence and Security Act of 2007, passed at the end of last year, mandated the use of 36 billion gallons of biofuels annually by 2022. "We think it's an important initiative, and while people do have some concern, I think we can point out the facts here ? that this is not distorting the global price of food," Schafer told reporters Thursday.

Ethanol Offset by Higher Yields Derek Sands, Inside Energy with Federal Lands, 6-2-08, Lexis, http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?start=5&sort=RELEVANCE&format=GNBFI&risb=21_T4245 340224 Schafer defended the US position however, telling reporters that the increasing use of corn for ethanol under the US biofuels mandate does not translate to a decreased availability of food. "I would point out that in the United States and in other countries as well, all ethanol production specifically has come from increased yields in the corn crops. So we're not pulling out (of) any traditional markets," Schafer said. "Our export markets are up in corn out of the United States. The yield increases are taking care of it, and certainly the benefits derived are much more than the 2 to 3% that is contributing to the rising inflation in food costs internationally."

High Food Prices Because of increased Demand Investors Chronicle, 3-5-08, Lexis, http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?start=2&sort=RELEVANCE&format=GNBFI&risb=21_T4245 267957

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Food Prices Supplement DDI 2008 CM Joy Goel Worse still, some of the forces behind rising food prices - higher demand from India and China, and a fall in supply as agricultural land is transferred to ethanol production - won't go away soon.

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