A November 18th Bloomberg article illustrates what’s happening:
China’s State Council said on its website yesterday that price caps will be used on “important daily necessities” and production materials, if necessary. U.S. soybean inventories before next year’s harvest will be 30 percent less than forecast in October, and corn reserves may drop to the lowest since 1996, the U.S. Department of Agriculture said last week.
The Chinese are worried that we aren’t producing enough Soybeans and Corn to sustain their requirements. Surprise, we aren’t producing enough to satisfy ours either.
Some believe that China, the world’s second largest corn producer behind the U.S. is a net exporter – no longer. The Bloomberg report continues:
China became a net importer of corn this past year for the first time in 14 years, USDA data show. The nation will buy 57 million metric tons of soybeans in the marketing year that began Oct. 1, up 13 percent from the previous year, the USDA said Nov. 9.
China no longer produces enough corn to feed its own people. There is no fall back position. How long until we can’t feed Americans any more? We won’t have anyone to import from, so then what? In Obama’s words costs, “..would necessarily skyrocket”.
By itself the huge climb in corn prices is alarming. Many grocery items that we all rely on require corn or its derivatives -corn syrup, corn flour, corn meal, etc. But that’s not the only thing that should have your alarm bells ringing. Just as corn, soy and cotton prices have started to climb, our government has decided to act – to regulate food.
Senate bill 510 (S. 510) is the “FDA Food Safety Modernization Act”. This bill seeks to update the “Federal Food, Drug, and Cosmetic Act”. If passed, it would certainly update existing law, but the changes are disconcerting.
When first read, the bill appears harmless. It’s only when read again, with the context of the global food crisis that things stick out. Let’s take the wording of the very first two titles (emphasis mine):
TITLE I–IMPROVING CAPACITY TO PREVENT FOOD SAFETY PROBLEMS
TITLE II–IMPROVING CAPACITY TO DETECT AND RESPOND TO FOOD SAFETY PROBLEMS
Granted, the “capacity” statements seem to be around building larger government agencies and capabilities. The question is why? Are we expecting a sudden threat to our food supply or perhaps such a shortage that we will have to try to get corn, soy and other food stuffs from someplace else.
These first two sections certainly illustrate a known concern about our ability to produce enough food, the third .. nails it:
TITLE III–IMPROVING THE SAFETY OF IMPORTED FOOD
Digging into S. 510, the details are not comforting. Title one contains registration section. It forces even the smallest food producers to register with the government. Why? Why does the government care about someones cucumber and tomato garden if there are already plenty of cucumbers on the market. Then again, what happens when there are no longer enough cucumbers?
There is no way to know if this is coincidence or happenstance. Corn and Soy prices skyrocket and suddenly the Senate takes a cloture vote on legislation that is more than a year old. This bill was introduced in March of 2009 and just sat there for 18 months. Then food prices rise, the Chinese signal a shortage and the Senate thinks this bill needs attention. Always the question – why?