DAILY ARTICLE - 4/18/08


Why Grain Prices Are So High

Todd Strandberg


For the past couple of years, news about the price of oil has dominated the headlines. In recent weeks, there has been a growing concern over the soaring prices for grains.

The spot price for wheat, corn and soybean have doubled and tripled in price since 2005. Just last week, corn prices jumped to a record $6 a bushel, driven up by cold, wet weather in parts of the U.S. corn belt that may force farmers to delay spring planting.

In February, wheat spiked to an all-time high of $13.495 a bushel. Weather remains a big concern for this commodity. Excessive dryness in parts of Oklahoma and Texas is threatening to severely damage the hard-red winter wheat crop. Meanwhile, heavy rain in Kentucky, Missouri and southern Illinois has flooded soft-red winter wheat crops, further driving prices up.

There are four long-term forces unrelated to weather that are putting upward pressure on grain prices.

  1. In the 1990s we had a huge problem with too much corn. We were producing more corn than the world could consume. When oil began to rise, ethanol biofuel seemed like the perfect solution. We could cut our dependence on foreign oil by growing our own fuel. I live in a farming state, but I think this a bad strategy. If you run out a gas for your car, you can always walk. If you run out of food, you end up starving. Despite the rising criticism of biofuels, the U.S. corn-fed ethanol industry enjoys wide political support.

  2. Another factor is the economic growth in the third world. As citizens become wealthier, they acquire more of an appetite for meat to make their bodies run. As Alec Walsh, an analyst at Harding, Loevner Management, noted, consumption of pork in China has doubled since 1990. And more meat means more grain: It takes up to five tons of grain to produce a ton of meat.

  3. The rising price of energy contributes to the problem. As crude oil and natural gas rise, the cost of production gets passed on to the price of food. Fertilizer, farm equipment, and the transportation of grain from the field to store shelves are all very energy intensive.

  4. The fourth factor is the booming population. The number of people on planet earth is increasing, but the increase in grain production has not been keeping pace. The urbanization of once-productive farmland is overriding any gains in crop yields.

For over a decade, the supply of grain has been slowly shrinking. Our suppliers are now at history lows.

World Bank President Robert Zoellick, in a speech last week, called for world leaders to address the looming food crisis. He said, "The World Bank Group estimates that 33 countries around the world face potential social unrest because of the acute hike in food and energy prices. For these countries, where food comprises from half to three quarters of consumption, there is no margin for survival."

There are already signs that the supply system is at a breaking points. The soaring price of food staples is triggering consumer panic, including food riots in Yemen and Morocco, and hoarding in Hong Kong. Mexican peasants have been venting their frustration over the rising price of tortillas, a flat bread made of white cornmeal.

Several governments around the world have already taken radical measures in recent weeks to control their countries' supplies of rice. Egypt said last week it would ban all rice exports for six months. Cambodia has stopped all private-sector exports of rice, and India and Vietnam also have imposed restrictions.

All it would take to push the world into chaos is a large drought in a key food-producing nation. I drove through eastern Kansas last week, and could see first-hand the waterlogged fields that are evidence that the nation is already off to a shaky start.

The Bible very plainly says that the last days will be plagued by famine. Just as oil is a catalyst for prophetic progression, hunger on a massive scale would set the wheel of Bible prophecy into motion.

“And I heard a voice in the midst of the four beasts say, a measure of wheat for a penny, and three measures of barley for a penny; and see thou hurt not the oil and the wine” (Revelation 6:6).


SOURCE:  Rapture Ready

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