History Lesson(s) #3

By the end of the month, the price of oil had dropped below $125 a barrel. In the previous six months, the price of arable land had risen by 32% to nearly £14,500 a hectare. After increases in prices of agricultural commodities, the price of wheat had doubled in the year to March [2008]. There had been riots in Egypt and several other countries. In the UK there were 2.1 million hectares of wheat, a 14% increase in the previous year. Sample yields gave early indications of a record harvest.

Though cultivated in Britain for over 3000 years, field beans were grown in the UK mainly for animal feed. Field beans for human consumption were exported, mostly to Egypt, to be used in a variety of dishes, especially during Ramadan. Wheat has been domesticated for at least 10,000 years. It is the UK’s predominant crop, one of the world’s three major staples. In an average year, the UK grew about 15 million tonnes of wheat, of which about 25% was exported. About 40% of the crop was used as animal feed, much of it for cattle. Only the best wheat could be sold at a higher price for milling. Milling wheat was typically about a third of the total harvest.

Despite record yields with the falling price and steep increases in the costs of fertiliser and fuel, farmers would find it difficult to make much profit from their wheat, unless they could sell the grain for milling. The better-prepared had pre-sold part of their crop already, and prices were higher earlier in the year. If the wheat were harvested when damp, drying would add 15% to the cost of its production, and less would be sold as suitable for milling. In the middle of August, farmers began to cut their crops, despite there being no sign of any prolonged improvement in the weather.

At the end of August, the harvest was still only about half-complete. In some parts of the country it continued until the end of September.

--Robinson in Ruins, 2010, narration by Patrick Keiller.

Robinson in Ruins - Patrick Keiller, 2010, 35mm

From about late 2006, a lot of financial firms — banks and hedge funds and others — realised that there was really no more profit to be made in the US housing market, and they were looking for new avenues of investment. Commodities became one of the big ones: food, minerals, gold, oil. So you had more and more of this financial activity entering those markets, and you find that the price then starts rising. And once, of course, the price starts rising a little bit, then it becomes more and more profitable for others to enter. So what was a trickle in late 2006 becomes a flood from early 2007. You have a massive expansion. It sounds incredible, but world rice prices increased by 320% between January 2007 and June 2008. So in just 18 months you have tripling of world rice prices. World wheat prices go up by 240%, maize prices by 218%.

--Jayati Ghosh, 05/05/2010. Cited in WDM's The Great Hunger Lottery, July 2010.

The FAO Cereal Price Index averaged 245 points in January, up 3% from December and the highest since July 2008, but still 11% below its peak in April 2008. The increase in January mostly reflected continuing increases in international prices of wheat and maize, amid tightening supplies, while rice prices fell slightly, as the timing coincides with the harvesting of main crops in major exporting countries.

World food prices surged to a fresh record high in January for the seventh consecutive month.The UN Food and Agriculture Organisation in Rome said its food price index averaged 230.7 points last month and was up 3.4% from December, marking the highest level since the organisation started measuring food prices in 1990. It topped the high of 224.1 hit in June 2008.

All food commodity prices showed strong gains last month, except meat, which remained unchanged. "The new figures clearly show that the upward pressure on world food prices is not abating," said FAO economist and grains expert Abdolreza Abbassian. "These high prices are likely to persist in the months to come. High food prices are of major concern especially for low-income food deficit countries that may face problems in financing food imports and for poor households which spend a large share of their income on food."

He added: "The only encouraging factor so far stems from a number of countries, where – due to good harvests – domestic prices of some of the food staples remain low compared to world prices."

Cereal prices were up 3% from December and the highest since July 2008, but still 11% below their peak in April 2008. The recent rises in wheat prices are one factor that triggered the growing unrest in Egypt, and the recent protests in Tunisia. Egypt is the world's largest wheat importer.

--The Guardian, 03/02/2011.

Since 1991, the year Egypt yoked itself to an IMF structural adjustment programme and embarked on a series of wide-ranging economic reforms, the country has been something of a poster child for neoliberal economists who point to its remarkable levels of annual GDP growth as proof that "Washington consensus" blueprints for the developing world can work. Coming on the back of an economic crisis precipitated partly by profligate government spending on arms sales (subsidised by US aid), the regime of President Hosni Mubarak signed up to an IMF loan that was conditional on economic liberalisation. Those conditions – relaxed price controls, reduced subsidies, an opening up of trade – were met with gleeful abandon.

Ever since, the country has been subject to successive waves of neoliberal reform. In 1996 a huge privatisation drive kicked off – resulting in sham sales to public banks and regime cronies, a rapid deterioration of working conditions and a wave of strikes so powerful that one analyst labelled it the largest social movement seen in the Middle East in half a century.

Then 2004 brought a new cabinet which swiftly cut the top rate of tax from 42% to 20%, leaving multimillionaires paying exactly the same proportion of their income into government coffers as those on an annual salary of less than £500. Special economic zones were created, foreign investment reached dizzying heights ($13bn in 2008) and, in the past three years, economic growth has clocked in at a consistently high 7%. The minimum wage, incidentally, has remained fixed at less than £4 a month throughout. The global business community applauded Mubarak's rule as "bold", "impressive" and "prudent".

So Egypt is now a glitzier, more prosperous land with pharaonic-style riches to match its pharaonic-style leader (now entering his 29th year in power). Except, as the GAFI report inconveniently points out, 90% of the country has yet to see any of the bounty. Foreign investment has been largely channelled into sectors like finance and gas which create few new jobs. While national resources like natural gas have been sold at subsidised rates to the tycoon owners of iron and fertiliser factories, the cost of ordinary commodities like bread and cooking oil has spiralled. In fact since the IMF began hauling Egypt's economy into modernity, Egyptians have got steadily and dramatically poorer: when structural adjustment began 20% of the population were living on less than (inflation-adjusted) $2 a day; today, that figure stands at 44%. In the past decade, when GDP growth was at its strongest, absolute poverty has climbed from 16.7% to almost 20%. Chomsky called neoliberalism "capitalism with the gloves off"; it's hard, looking at this jumble of statistics, to discern anything but a shameless hit-and-run job perpetrated by a tiny band of Egypt's business elite.

--Jack Shenker, The Guardian, 08/09/2009.

The Nasserist state, for all its flaws, gained legitimacy because it was seen as a state for the mass of Egyptians, whether abroad or domestically. The present regime is widely seen in Egypt as a state for the others – for the US, Israel, France and the UK – and as a state for the few – the Neoliberal nouveau riche. Islam plays no role in this analysis because it is not an independent variable. Muslim movements have served to protest the withdrawal of the state from its responsibilities, and to provide services. But they are a symptom, not the cause.

--Juan Cole, Egypt's Class Struggle, 30/01/11.

Film socialisme - Jean-Luc Godard, 2010, digital video


JeanRZEJ said...

Volatility is great if you're able to jump from crest to crest. If you're stuck in the crashing of the waves, though, it's not so nice.

Robin Bastien said...

This is pretty odd - I was just thinking about the amount of crops used for animal feed compared to amount for human consumption when I hit this post, it's as if it read my mind. Specifically corn, where appx 80% of corn is used as feed and 20% is for humans. Interesting to take into perspective considering the over-population issues.

Matthew Flanagan said...

Paul Krugman wrote a piece in the NYT the other day dismissing the effect of market speculation on food prices. It's debunked here.

Matthew Flanagan said...

Also related.

Matthew Flanagan said...

'Nearly all assessments of the 2008 food crisis assigned biofuels a meaningful role, but much of academia and the media ultimately agreed that the scale of the crisis resulted from a "perfect storm" of causes. Yet this "perfect storm" has re-formed not three years later...'

Matthew Flanagan said...

Report on China's drought, likely to continue, and its pressure on global food prices.

Matthew Flanagan said...

Still 'skyrocketing'.