Midwest Flooding To Spell Huge Food Price Hikes?
By Bryan Reo
ALL RIGHTS RESERVED
I've decided to assume everybody is aware of the situation whereby floods are ravaging large portions of the Midwest that are typically devoted to commercial farming. Because of my assumption of this awareness I shall get right to the point.
Despite the fact that many farmers routinely do not bring crops to market due to an over-abundance that would lower the price, I am willing to wager that the commodity brokers will successfully use the flooding situation to further bid up the price of wheat by playing on fears of shortages.
Even when Hurricane Katrina hit in 2005, and New Orleans was shut down, there was no shortage in the USA. Indeed there was a surplus, because farmers who were counting on being able to use the port to ship wheat products to Europe and elsewhere were suddenly unable to do so, and they had to scramble to sell their crops domestically at lower prices.
Of course in this situation it is the actual crops themselves that are being destroyed, but regardless of whether or not there actually winds up being a shortage, prices will be increased to what may prove to be record highs.
It wouldn't be too hard to imagine price hikes for food products from unaffected crops, as the current situation in the USA seems to be one of an unspoken oligopoly (where many firms collude and the results are monopoly style controls on pricing and such) with the standing order being "follower the leader." Of course they are not openly discussing such tactics on the television, but as soon as one organization raises prices, others will follow, even if there is no compelling need to do so.
Whatever the case winds up being, it will be interesting to see how the government handles this situation. It is one thing to drop the ball with a situation such as Katrina, where the affects were largely confined to the immediate area. If however the relief agencies once again drop the ball in regards to the rapid restoration of valuable farmland, it may very well turn into a prolonged national catastrophe. The government could immediately begin by ceasing the programs which subsidize farmers who do not plant crops. They should immediately begin planting as much wheat and corn as they can, in areas where unaffected fertile land is available. This would of course only be a temporary measure. Some might say that it would drain the soil, but the alternative is to go without those crops. Of course, as I just said, it would only be a temporary measure.
Who knows what the government will actually wind up doing, in the end it will probably be the farmers who resolve their own problems. Our thoughts and prayers, along with whatever material support we can render, should be focused on those impacted by the recent and still ongoing floods.
One thing I'd like to add- much of the corn in the Midwest is no longer slated for food use, or even as animal feed, but rather for use in ethanol production for fuel. However, watch as big corporations claim that they have no choice but to raise food prices, citing bogus concerns about the cost of animal feed and corn related food products, even though it is probable that the corn being lost was most likely slated for ethanol use. They may say they have to switch and buy corn that was previously slated for food uses or animal feed uses, and that is why the price of such corn has risen, but the two are really not related. The corn that exists for food purposes, and thus could be bought by ethanol related folks, would still exist if they are buying it, and thus it would not have been impacted if it happens to still be around for them to buy up and use for ethanol. Also, if they are buying it, it wouldn't impact the farmers as they are still getting paid (they get paid for the corn regardless of whether it is sold to somebody who wants it for ethanol or sold to somebody who wants it for animal feed). When the prices of any given item are raised over this, unless it is due to the direct destruction of crops slated for food/feed use (ie- already contracted to be sold as such) then there is probably something fishy, underhanded, and sneaky going on. People attempting to profit from disasters...
