World Food Crisis

[Dinner]

Which is why subsidies and tariffs are so dumb. We pay subsidies to producers, we pay higher prices due to tariffs, then we feel bad and give more aid to poor countries so we'll sleep better. It's a big waste of money. Better to just eliminate the tariffs and subsidies and pay lower prices without all the handouts.

[Arrian]

Originally posted by Aeson
Stop farm subsidies. Especially the paying people not to grow crops (or to burn them).

Stop Ethanol production from edible foodstocks. (Using the chaff and byproducts is ok.)

Stop bailing out banks with rate cuts (among other things) debasing our currency and sending oil (and every other commodity) on a moonshot.

[Vanguard]

Originally posted by Oerdin
Actually food prices are going up which means farming is now more profitable.

Not necessarily. If people can't afford to buy food at the higher prices then farming will not be more profitable. Prices will just go up.

In any event, profitability is always relative. It doesn't matter if farming profit goes up a little, if profit for other uses for oil goes up even more.

In reality, farming profit will probably go up for a while, then fall back down, then continue to cycle in increasingly large oscillations until the system crashes.

It is hard to tell where we are in the cycle however, because food subsidies and the very large debts in the world economy have smoothed the cycle up until now, at the cost of combining all previous oscillations into one large one.

[Spiffor]

Funny: farm subsidies used to be blamed because they made world prices artificially low, thus barring peasants in poor countries from making a comfortable living. Nowadays, farm subsidies are blamed for making prices go too high...

There are plenty of problems with farm subsidies, but their effect is to increase food production in the subsiding countries. And since those countries tend to export (US, EU, Thailand too IIRC), they increase food supply in the world, thus lowering the price.

There should be no food crisis in this world nowadays: the technology and commercial infrastructure is so developed that everybody could get enough food produced and delivered to them, unless there's a war or natural disaster.

There is no fundamental reason for the price of rice to have increased by 50% in the past few monthes. The raising demand from India and China don't justify such a quick raise.
However, you'll notice traders are now investing their throngs of subprime-fleeing money on "sure bets", i.e raw materials.
It's pretty obvious oil, copper, rice etc have a trend of becoming more expensive in the long run. But rather than letting the world adjust to the trend, traders make it go much faster, thus creating famine where there shouldn't be any

[Whoha]

Originally posted by Imran Siddiqui

The thing is, though, this only works if the rest of the world does this.

Not really. When Great Britain ended the corn laws back in the 1846, their standard of living shot up incredibly. Even though less corn was grown in Britain, the people were allowed to afford cheaper corn because of the lack of tariffs (and subsidies are merely a form of tariff).

These countries are talking about or doing export restrictions, which are not quite tariff barriers. They won't prevent said country from buying, only from selling.

[Colon™]

Originally posted by Spiffor
Funny: farm subsidies used to be blamed because they made world prices artificially low, thus barring peasants in poor countries from making a comfortable living. Nowadays, farm subsidies are blamed for making prices go too high...

There are plenty of problems with farm subsidies, but their effect is to increase food production in the subsiding countries. And since those countries tend to export (US, EU, Thailand too IIRC), they increase food supply in the world, thus lowering the price.

There should be no food crisis in this world nowadays: the technology and commercial infrastructure is so developed that everybody could get enough food produced and delivered to them, unless there's a war or natural disaster.

There is no fundamental reason for the price of rice to have increased by 50% in the past few monthes. The raising demand from India and China don't justify such a quick raise.
However, you'll notice traders are now investing their throngs of subprime-fleeing money on "sure bets", i.e raw materials.
It's pretty obvious oil, copper, rice etc have a trend of becoming more expensive in the long run. But rather than letting the world adjust to the trend, traders make it go much faster, thus creating famine where there shouldn't be any

*whoosh*

The complaint was that the CAP's export subsidies for farm products were unfair to farmers in the third world. And it still is. The opposite complaint was for consumers in the EU. Agricultural policies don't just consist of subsidies to farmers, but also of import and export restrictions, quotas, price controls, subsidies for takers of agricultural produce... The policies are different from place and place and so are the consequences, but the end result of it all is that supply is disconnected from demand.

[Spiffor]

Originally posted by Colon™
The complaint was that the CAP's export subsidies for farm products were unfair to farmers in the third world. And it still is. The opposite complaint was for consumers in the EU. Agricultural policies don't just consist of subsidies to farmers, but also of import and export restrictions, quotas, price controls, subsidies for takers of agricultural produce... The policies are different from place and place and so are the consequences, but the end result of it all is that supply is disconnected from demand.

1. When we talk about "world food crisis", we tend to talk about the recent food riots and famine, not about the moderate inflation on food products felt by middle-class westerners. At least, that's how I understand this thread - and how I understand the current attacks against the evil farm subsidies.

2. Be they export subsidies or tariffs, those agricultural policies end up creating a higher supply outside of the mercantilist countries (thus being unfair to third-world farmers). The current situation is that of an insufficient food supply in the world, whereas farm subsidies can legitimately be blamed when there is an excess.

3. Agricultural protectionism creates a world imbalance between supply and demand, such is true (lower supply than normal in protectionist countries - higher supply than normal in non-protectionist countries).
But in the current context, this is a fairly good thing, as far as the world food crisis is concerned. If there was no such imbalance, prices outside the protectionist countries would still be higher, thus worsening the famines.

[Colon™]

Spiffy, not all agri-policies are aimed at keeping prices artificially low or have this as a consequence.

Let's go back to that statement of yours:

Nowadays, farm subsidies are blamed for making prices go too high...

Ethanol subsidies are (partially) blamed for the run-up of prices. The impact of subsidising corn production and subsiding the purchase of corn is totally the opposite.
Moreover since the run-up new policies have been implemented, such as export tariffs, that have exarcebated the run-up.

[Spiffor]

Originally posted by Colon™
Ethanol subsidies are (partially) blamed for the run-up of prices. The impact of subsidising corn production and subsiding the purchase of corn is totally the opposite.

I fully agree.

Aeson rightly bashed this. However, he and Imran also bashed the old-generation agrosubsidies, which made for a convenient boogeyman in the past. Naive attacks on agrosubsidies have long been a pet peeve of mine

[Colon™]

Well, if you'd stop enforcing quotas and import tariffs or paying farmers to not farm, you'd also achieve lower prices. It's fair to argue this should be done instead of creating yet another layer of policies.

[Imran Siddiqui]

Indeed... Spiffor, there aren't just one version of agrosubsidies. There are subsidies that actually reduce supply, at least in the home country.

not about the moderate inflation on food products felt by middle-class westerners

Read the OP. Floyd was concerned about how this effects the US.

[Aeson]

Originally posted by Spiffor
Aeson rightly bashed this. However, he and Imran also bashed the old-generation agrosubsidies, which made for a convenient boogeyman in the past. Naive attacks on agrosubsidies have long been a pet peeve of mine

A factor which in general times keeps prices artificially low rids the system of many competitors, and a system of few competitors will lead to higher prices during times of "crisis".

Subsidies are part of the problem. Just because they've been a consistent negative factor on the world food economy doesn't change that they're a negative factor now.

By limiting the areas which can be commercially productive, you are increasing the risk that events (natural, economic, political) in the commercially productive areas will lead to a major change in prices. That is what has happened. Subsidies are part of the reason why it can happen.

Also, by limiting the areas which can be commercially productive, you are ensuring that areas which are not commercially productive will stay so, and thus will be harder hit in times of crisis. Which is part of the reason why you have food riots in some places, while in others people are still gorging themselves into obesity.

Subsidies have long been part of the reason why farmers in poorer countries don't have the capital to become more efficient or expand their operations. This is a self-reinforcing cycle that limits their ability to compete, or to fill in if the major producers are for one reason or another not supplying an area.

Diversity > All your eggs in one basket.

[DanS]

Originally posted by Sandman
Most of the time, hungry people can access food, they just need money to buy it. So global pressure would be for more US cash aid. Not that anyone would expect much.

There could be national pressure for more farm subsidies, with the justification of 'feeding the world', since Americans seem to believe that the world is dependent on their grain exports.

As far as I know, the world is indeed dependent on our grain exports. The world is dependent on several countries' exports.