The New Economics of Hunger:
A brutal convergence of events has hit an
unprepared global market, and grain prices are sky high. The world's poor suffer most.
By Anthony Faiola,
Sunday, April 27, 2008
The globe's worst food crisis in a generation emerged as a blip on the big boards and computer
screens of America's great grain exchanges. At first, it seemed like little more than a bout of bad
In Chicago, Minneapolis and Kansas City, traders watched from the pits early last summer as
wheat prices spiked amid mediocre harvests in the United States and Europe and signs of
prolonged drought in Australia. But within a few weeks, the traders discerned an ominous
snowball effect -- one that would eventually bring down a prime minister in Haiti, make more
children in Mauritania go to bed hungry, even cause American executives at Sam's Club to
restrict sales of large bags of rice.
As prices rose, major grain producers including Argentina and Ukraine, battling inflation caused
in part by soaring oil bills, were moving to bar exports on a range of crops to control costs at
home. It meant less supply on world markets even as global demand entered a fundamentally
new phase. Already, corn prices had been climbing for months on the back of booming
government-subsidized ethanol programs. Soybeans were facing pressure from surging demand
in China. But as supplies in the pipelines of global trade shrank, prices for corn, soybeans, wheat,
oats, rice and other grains began shooting through the roof.
At the same time, food was becoming the new gold. Investors fleeing Wall Street's mortgage-
related strife plowed hundreds of millions of dollars into grain futures, driving prices up even
more. By Christmas, a global panic was building. With fewer places to turn, and tempted by the
weaker dollar, nations staged a run on the American wheat harvest.
Foreign buyers, who typically seek to purchase one or two months' supply of wheat at a time,
suddenly began to stockpile. They put in orders on U.S. grain exchanges two to three times
larger than normal as food riots began to erupt worldwide. This led major domestic U.S. mills to
jump into the fray with their own massive orders, fearing that there would soon be no wheat left
at any price.
"Japan, the Philippines, [South] Korea, Taiwan -- they all came in with huge orders, and no
matter how high prices go, they keep on buying," said Jeff Voge, chairman of the Kansas City
Board of Trade and also an independent trader. Grains have surged so high, he said, that some
traders are walking off the floor for weeks at a time, unable to handle the stress.
"We have never seen anything like this before," Voge said. "Prices are going up more in one day
than they have during entire years in the past. But no matter the price, there always seems to be a
buyer. . . . This isn't just any commodity. It is food, and people need to eat."