Van E. Harl
WHEAT RUSTLERS AND RICE RATIONING
There is a grain shortage coming to the world this year. I have been doing research on this subject for the past month and I found most people did not know or even care about it. But just let Wal-Mart and Costco announce that they are limiting the amount of rice you can buy when you shop at their stores and now North America is paying attention.
China has just experienced the worst winter weather that nation has had in 90 years. They are fixing to have a food production melt-down. In China’s history, when they have a dramatic weather-related crop failure like they will have this year, within ten years there is civil unrest, civil war and then regime change.
But you say the Communist will never allow it to happen. The issue is, China has not had this drastic of a weather-food problem during the 60 years the Communist have control that country. When this happens the Communist will not know how to handle it. China is the largest exporter of fertilizer in the Pacific. They have placed a 135% export tariff on their fertilizer products. I suspect it is not to make more money but rather to try to keep as much fertilizer as they can in their own country because of their coming food production problems.
Some of the biggest wheat exporting countries in the world, such as Argentina, the Ukraine and Kazakhstan, have all placed large export tariffs on their grain to try to keep more of it at home. Smaller countries that do not produce grain will be at the mercy of the inflated prices of the world grain market. The price of grain has gone through the roof this year. US wheat was in the $3-$3. 50 a bushel price range a year ago. It hit $13 a bushel recently. Soy beans, as I write this column, are at $13 a bushel. If you have invested in bio-diesel I hope you did not use your retirement money.
I was talking to a professor of agriculture economics who was telling me farm land is selling in Iowa for $5000 to $8000 an acre. My question was, “How can you pay for land that expensive?” A “house of cards” was used in our conversation. The professor advised me not to cash in my Roth IRA and put the money into ethanol. Of course he also told me he had a thousand acres of his own farm land in corn. So as a grain farmer himself, right now he is riding the positive wave of high grain prices. The prices of fuel to run farm machinery, along with the chemicals that are used on the growing grain are rapidly eating away at the $6 corn or $13 wheat.
A contact in South Texas advised me they have started cutting wheat down there. As this year’s new crop goes to market the price will drop some. One of the other problems is the amount of grain in storage in the US. Twenty five years ago this country had a much as 115 days’ supply of grain in the silos and elevators across the nation. We are now approaching a fifty day supply of grain. “What if” there is a meltdown in China and the rest of the grain producing work hoards its grain? Is the US somehow honor bound to sell off or worst yet be expected to give away its grain to those who have none?
The “world” is always unhappy when the US takes action against some country that most rational people know needs to be brought to heel, but out of the other side of their mouth they truly expect the US to be the policeman to this planet. If this grain issue gets worse, is the US expected to be the baker and soup kitchen to the world?
Grain has become very valuable. There are already cases of grain rustling in Oklahoma. Grain farmers have to put all their grain under lock and key. Criminals are driving trucks right up to farmer’s grain bins and filling the bed with stolen wheat. A farmer friend of mine in Virginia has all of her animal feed locked up and she keeps the gates to her farm locked. She cannot afford even a pickup load of feed to go missing in the middle of the night.
Sadly somewhere in the country a dope user will make the front page of the newspapers after he is shot trying to steal chicken feed to support his drug habit. I did go to Sam’s Club and bought my limit of rice. I also figured if I only had rice to eat in an emergency it would take 1100 pounds to keep me fed for a year.
©Copyright April 24, 2008 by Van E. Harl