Thursday, July 19, 2012

The Age of Disruptive Climate Change, and its impact on the supply of food, is a major source of modern-day uprisings, toppling governments around the world.

Global Warming, Grain Prices and Food Speculators

Climate and the Food Crisis 


The Age of Disruptive Climate Change, and its impact on the supply of food, is a major source of modern-day uprisings, toppling governments around the world.
The United States is “the breadbasket of the world,” and the largest exporter of corn, soybeans, and wheat, accounting for one in every three tonnes of staple grains that feed the world. Over the past month, futures prices for corn and wheat are up approximately 50%. The culprit behind this abnormal pricing behaviour is a major drought that is scorching one-half the breadbasket of America. The U.S. Department of Agriculture declared on July 11 that more than 1,000 counties in 26 states are natural-disaster areas, the biggest such declaration ever!
According to The Economist, The End of Cheap Food (Dec. 2007), by the end of 2007, when high grain prices sparked riots in 48 countries, the magazine’s food-price index reached its highest point since originating in 1845. Alarmingly, as of today, corn is back to those same 2007 peak prices, wheat is rapidly approaching the same high levels, and soybeans are at multi-year highs, but the U.S. drought has only begun… maybe. Thankfully, rice, which feeds one-half of the world, is still moderating at its midpoint of the past 5-years… so far… and here’s hoping commodity speculators, with their penchant for riding the contrails of rising grain prices, do not drive the price of rice up as well. Without a doubt, Goldman Sachs is eyeballing this wager.
Food shortages and high food prices pose a huge potential strain for worldwide governments and tottering capitalist socio-economic systems. According to Abdolreza Abbassian, senior economist with the UN Food & Agriculture Organization (Rome), “The world looks to the U.S. as the safest source of supply… Everyone watches the U.S. because they can rely on it. Without it, the world would starve.”
The phenomenon of people rioting in the streets to protest lack of food at affordable prices is as old as recorded history, e.g., Emperor Cicero’s (106-43 BC) house, on Palatine Hill overlooking the Forum, was attacked by angry mobs over food shortages. In France grain crops failed two years in a row, 1788-89, and the price of bread shot up to 88% of the average 18thcentury worker’s wages, preceding the start of the French Revolution. And, in 2007-08 a worldwide price surge of grains triggered riots in streets around the world, causing numerous deaths and leading to toppled governments.
The Arab Spring uprisings of last year brought to surface political and economic issues, but, behind the scenes, climate stress played as big a role. The warning behind Syria’s disruptive climate change, i.e., drought, is chilling. Syrian farmlands north and east of the Euphrates River are the breadbasket of the Middle East, and up to 60% of Syria’s land experienced one of the worst droughts on record from 2006-11. In the northeast and the south, nearly 75% suffered total crop failure. Herders in the northeast lost 85% of their livestock. According to the UN, 800,000 Syrians had their livelihoods totally wiped out, moving to the cities to find work or into refugee camps. Furthermore, the drought pushed three million Syrians into extreme poverty.  As of January 2012, Abeer Etefa of the World Food Programme, states, “Food inflation in Syria remains the main issue for citizens.”  And, it is believed to be one of the major causes of domestic unrest.
With the current fragile state of worldwide economic conditions, the upshot of rapidly rising food prices and/or food shortages may turn the world upside down, and shake it, because much of the Western world is already on life support, addicted to low interest rates, with a “steady-as-she-goes” very tempered economic recovery, and a high-wire balancing act to support uncomfortable levels of debt. The tenuousness of the economic situation takes one’s breath away! Any major imbalances in this quiescent economic tinderbox could be a dagger to the heart of the status quo, causing unprecedented rioting in the streets, which is already a an indeterminate trend in the great metropolises.
Capitalist nation-states are already under more financial duress than at any time since the Great Depression; however, today is different than the 1930s, it is the developed nations that are under water with debt ratios higher than in the 1930s. This is the reverse of the situation in the 1930s when undeveloped nations were most at risk. Thus, the countries that normally weather the storm the best are the weakest. Can Western Civilization handle rapidly increasing food prices, possibly accompanied by street riots, and with severely weakened socio-economic conditions?
The good news is a grain shortage, standing alone, will not develop into an uncontrollable inflationary spiral because the contribution of “agflation” on core PCE Indexes (Personal Consumption Expenditures) are more modest than one might expect, affecting a very limited range of final goods (Current Issues in Economics and Finance, Federal Reserve Bank of NY, Nov. 2008.) However, price increases of food components are brutally severe for individual householders the world over, and herein lays the big problem, like in Syria. According to a landmark study, the World Development Report 2011, Henk-Jan Brinkman and Cullen S. Hendrix, Food Insecurity and Conflict, Aug. 2010,  “Food insecurity is both cause and a consequence of political violence.”
There is direct evidence that disruptive climate change caused the political fires that burned across North Africa one year ago, i.e., the Arab Spring, and it was kindled in Russia. Extreme drought triggered wildfires and destroyed one-third of the Russia’s wheat harvest. Russia refused to export the rest of its harvest. Markets panicked and food prices shot up.
“Definitely, it is one of the causes of the Arab Spring,” says Shenggen Fan, director-general of the International Food Policy Research Institute. It is increasingly clear that the climate models that predicted the countries surrounding the Mediterranean would start to dry out are correct (Human-Caused Climate Change Already a Major Factor in more Frequent Mediterranean Droughts, National Oceanic and Atmospheric Administration (“NOAA”), Oct. 27, 2011.)
Meanwhile, today in the United States, NOAA says, as of June 2012, “… the 12-month period from July 2011 to June 2012 was the warmest on record since recordkeeping began in 1895.” And, to make matters even worse, Central and Eastern Canada’s drought is “baking crops,” says David Phillips, senior climatologist with Environment Canada, who goes on to comment, “… it’s almost as if the atmosphere has forgotten how to rain,” And, Michael Oppenheimer, professor of Geosciences at Princeton University states, “What we are seeing is a window into what global warming really looks like.”
These concerns with global warming are poppycock according to one leading Republican, Rick Santorum, who tersely informed Rush Limbaugh in an interview in June 2011, “… global warming is ‘patently absurd’ and ‘junk science’.”  Leading Right Wing mouthpieces like Ann Coulter claim climate researchers are “cult members,” who practice deception. As for Mitt Romney, while holding one finger up in the air, testing the direction of the latest polling breeze, he claims, on the one hand, he’s not sure “if humans are causing climate change,” but on the other hand, he is not a “denier of climate science.” Talk about a safe bet! Talking out of both sides of his mouth, which climate science does he refer to?
It is patently disturbing that anybody would deny climate change with 97% of scientists saying man-made climate change is real, according to the National Academy of Sciences, after posing the question to 1,372 scientists (USA Today, June 2010.)  Considering the fact that three percent are not onboard, it prompts one to wonder if these three percent are the scientists Rick consults and Mitt refers to when he says he is not a “denier of climate science,” which, come to think about it, could go either way. Thus, Romney has safely straddled the fence for himself while the Santorums and Coulters of the world do the heavy lifting for powerful Right Wing proponents of global warming.
Contrary to American politicians’ positions on global warming, including several former Republican presidential candidates who recommend ‘gutting’ the EPA, Yale University’s list of the world’s greenest nations demonstrates sensible/sober/prudent politics at work, “… countries that are attentive to good environmental management have good business management as well.” For example, the Scandinavian countries have made investment in environmental business an important part of their economic base. The largest solar power company is in Norway, which country is No. 3 on the Yale University list. The United States is No. 39, behind Costa Rica and several Eastern European countries as well as Japan, Germany, and the UK all of which rank much better than the U.S. And, even though the U.S. has a stellar reputation for invention, it does not have the political heart to overcome a deathly addiction to hydrocarbons, the likely source of today’s drought conditions.
What a strange paradox, indeed, that the United States of America built interstate highways connecting every corner of the country, measuring 3000×1500 miles, but yet, it does not even consider construction of solar panels or wind turbines along the same right-of-ways, producing electricity for every community from Maine to California.
There is no doubt about disruptive climate change ravishing crops, which is especially obvious to Americans witnessing it firsthand in the heartland. According to Marco Lagi, New England Complex Systems Institute (“NECSI”) Cambridge, MA (Technology Review, MIT, August, 2011), he claims to have discovered the single factor that triggers riots around the world: The Price of Food! The evidence comes from two sources: The first is data gathered by the United Nations that plots the price of food against time, the so-called food price index of the Food and Agriculture Organization of the UN. The second is the date of riots around the world, whatever the cause. Lagi’s work proves the old maxim: Society is three square meals away from anarchy. 
December 13, 2011, four days before Mohamed Bouazizi set himself on fire in Tunisia, starting the Arab Spring riots, the NECSI contacted the U.S. government, warning that global food prices were about to cross the threshold they had identified as the tipping point when almost anything can trigger riots. The NECSI study was presented, by invitation, at the World Economic Forum in Davos and featured as one of the top 10 discoveries in science in 2011 by Wired Magazine. Interestingly, Lagi and colleagues have isolated two serious predominate causes for out-of-control food prices, in addition to normal supply and demand: (1) deregulation of commodities, resulting in speculators who can control unlimited purchase contracts and (2) conversion of corn into ethanol. Here we go again… the deregulation quandary… the predominate theme of the Right Wing and a favorite of Mitt Romney, popping up every time trouble brews, similar to the 2007-08 financial meltdown and the direct connection between that travesty and the U.S. Congress’s deregulation (killing) the 1933 Glass-Steagall Act, which act kept commercial banks out of speculative securities for over 60 years.
Yes, disruptive climate change is the “fons et origo” or “source and origin” of uprisings. In this regard, it is fascinating, and horribly frightening, how the political Right Wing continues to support policies, by ignoring the ravages of global warming, that inevitably bite back at society, and the biggest bite, or carnage, will likely be global warming itself, caused by hydrocarbons in the atmosphere from oil & gas and coal. In this same vein, one of the most alarming results of manmade global warming, other than drought conditions devastating the breadbaskets of the world, is the fact that the world’s glaciers are melting like ice cream cones in July (See: The Extreme Ice Nexus, Z Magazine, Vol. 25, No.6, June 2012.)
With grain prices cranking up once again, and with commodity speculation wide open, blessed by deregulation, providing for unlimited purchase contracts that conforms to manipulated control of pricing, theGreat Betting Game on Grains will most likely result in food riots, leading to blood in the streets, and as certain as the riots are expected in many underdeveloped countries of the world, a North American Springis not entirely out of the question.
Robert Hunziker earned an MA in economic history at DePaul University. He lives in Los Angeles.