Playing Catch upThe chart says we have a way to go on the upside while we play catch up to the likes of PPI and AAA. These potash plays are in sizzle mode. See why below....
FOOD CRISIS REALLY FALLOUT FROM CONTRACT WITH DEVILS
By Charles Payne, CEO & Principal Analyst
2/7/2011 9:21:04 AM Eastern Time
As Egypt continues to cobble together some kind of new government, there are certain facts about what's going on around the world that haven't gotten the kind of attention they should. Food prices soaring are not a new phenomenon by any means. Sure, over the past year there have been weather incidents, central banking blunders, increased demand, and now hoarding. The fact is that food is going to be an issue for the world for a long time to come.
Food Inflation Trends:
* Population Growth
* Soil Erosion
* Aquifer Depletion
* Weather
* Crop Capacity Limits
* Food for Fuel
We aren't watching the unfolding of history as foretold by Reverend Thomas Robert Malthus, but some aspects of his opinion that there would be a food catastrophe in the future are beginning to materialize. His is a notion of rapid population growth and dwindling food supplies leading to disaster in part because governments subsidize the feeding of the poor whose population only gets larger and larger. Right now, nations with huge population explosions are the nations that also subsidize food and fuel costs. These are relatively poor nations where citizens have entered into compacts where government can run amok as long as it placates the people.
This has led to a tenuous status quo that can't handle the shocks of commodity price spikes.
People are looking around the world, and no longer have to look across the Atlantic or Pacific at prosperity in America and think it's out of reach. Prosperity in pockets of the planet has become a beacon for possibilities. To counter this newfound hope, autocratic governments have to devise ways to subsidize even more basic staples of life. The funds are not there. So the dominoes begin to tumble. But, we are missing the point that in addition to the trends bulleted above, each year there are 80 million more people on the planet.
I don't think the catastrophic part is we are running out of food, as supply and demand are issues. This isn't the spin-chilling Club for Rome warning on in Limits to Growth. It's about a world where there are Faustian deals between corrupt leaders and complacent citizens which have made their nations less competitive. This is not the world Jimmy Carter envisioned when his Administration released Global 2000. Yes, the world is more crowded and polluted, but people are not poorer than they were in the past. The challenge is that some countries, having sold their souls, some going back to picking the wrong side during the Cold War, aren't keeping up with other nations that loosened the shackles on its citizens.
By focusing on feeding bellies instead of feeding minds, there is a kind of a Malthusian tinge in individual countries to be sure. But it was the West that was supposed to see its nation crumble from masses of poor demanding so much from government as to bankrupt those very governments. This could happen one day through entitlement programs that go beyond just subsidizing food. (With 43 million Americans on food stamps there is a crisis of monumental proportions, yet it's not food but guts there we are running out of.)
So today's crisis of food inflation may find short-term cures like abandoning the use of food for fuel. In 2009, out of the 416 million tons of grain harvested, 119 million went to ethanol. That's enough grain to feed 350 million people for a year. Yes, I've been told the corn used is yellow corn normally used to feed animals so it's not impactful to humans. The problem with that line of thinking is that yellow corn has soared in price, leaving farmers to plant less white corn which means its price has soared, too.
Food prices will ease at some point, but the underlying problems where nations are stuck because they've fallen into the trap that government should artificially lower the price of gas and food even if it means giving up dreams and hope will not abate anytime soon. The problem isn't the haves versus the have-nots within nations, but of nations on the move versus those stuck in a status quo that leave them watching the go-getters while they are coddled by dictatorial, nanny governments.