October 29, 2010

ARE WE HAVING ANOTHER FOOD CRISIS? “The world food price index is at its highest since 2008, when food prices rocketed and millions of people suffered. This year the crisis seems to be happening again. Prices for the staple grains that underpin the world’s food supply soared after forecasts for the US and Chinese maize harvests fell in October, Pakistan lost its wheat to floods, and crop losses to drought and wildfire led Russia to ban grain exports until 2011. Food prices have soared in India, Egypt and elsewhere and are being blamed for riots in Mozambique.”

UPDATE: Reader Matthew Hennessy writes:

Inflation in food prices is explained by deleveraging: stuff you NEED to have that’s paid for in cash goes UP in price (inflation), while stuff you WANT to have that’s paid for with borrowed money goes DOWN in price (deflation).

Before asking about a food crisis, ask this: how much sugar/wheat/corn can you buy with an ounce of gold now vs. an ounce of gold 1, 2, or 5 years ago? If the amount is roughly the same, then you have your answer.