Agroecology Group Paper

Aline Woolley

Kyle Bradley

Drew Shutts

Agricultural commodity includes positives and negatives not only in our country but as an individual stance as well. The World Bank has also realized that the importance of agriculture in developing countries is just as important as in those that are developed. Cause along with effect is starting to hit every country dealing with different problematic situations that need the support of others to correct. Focusing on the United States on its current issue in agriculture, deals with grain and how it’s affecting not only the consumer but the producer. With this top agriculture concern of grain, which route do we stand next to, the old equilibrium or the new equilibrium?

     As prices rock the world markets, it’s beginning to directly pay a price in the agricultural system. These rises in prices of products are causing protests and riots within the cities of many countries. The thought of limited trade to protect short domestic supplies would decrease this cry of help from the people. As seen in key-rice producing countries that imposed an export restriction that led to a huge sticker shock of 60%-70% price increase in the last few months has not been a positive outlook. The World Bank recognized this problem and issued an urgent call to the rich nations. This relayed a message that was more of a warning that poor countries are spreading. The United Nations Secretary General, Ban Ki-Moon, urged a seize saying, “Historic opportunity to revitalize agriculture”, (Henry Bahn) to tackle the food crisis.

     The current 2008 problems are rising without notice in other countries and also in the United States. The food demand is rapidly growing and developing countries are targeted at the top of the list as a priority. The unpredictable demand for oil from China and India has seen a drastic problem with prices. Subsidized biofuel production and reckless speculation in commodity can be a sign of weak U.S. dollars. With these situations on the rise, is it a direct relationship to supply and demand changes from a decade ago, structural adjustments to the markets, or just plain bad luck?

     With the top agricultural concern involving grain prices, the blame could be directed here. The changing behavior of grain producers comes into play when it comes to selling their crop.  Their choices can lead into helping the economic crises of food shortage, or they can operate on what is going to bring the most return value. This is usually not a hard choice to many producers who are struggling. The potential impact of food demand and grain supplies is only going to give the producer more of an advantage to make more revenue. The negative point on the grain prices increasing is that consumers are going to have to pay the price when purchasing everyday items from food to fuel.

     The demands for biofuel feedstocks spark moral and economic debate about the consequences. Domestic grain merchants are facing high transaction costs, leaving producers to finance the price risk burden directly. The issuance of institutional loans dropped more than 90% in the first half of 2008 resulting in almost $12 billion. (Federal Reserve Bulletin) The United States food inflation is not only caused from grain prices rising due to biofuel, but the consideration of a harsh year of weather patterns that have hit from coast to coast decreasing the 2008 yields of grains.

     When preparing for the future there’s an issue of which way to steer the United States. The old equilibrium is based on lower grain prices and export driven livestock and poultry production. This method allows for products to stay at lower prices and also provides an opportunity for them to stay within the country for the people to consume without so much trade. The new equilibrium deals with the demand for grain also driven by the energy demand. With the increase of grain products, there’s the big value of energy to get the market flowing in a form of maximum return on its main product.

    The great agricultural problem facing the reality of grain production also brings up another world issue, meeting of everyone’s basic needs to survive. As in Biotech, seeds are controlled by Monsanto and a few other companies, all of which have the purpose of profitability and control. (The Political Economy of False Solutions) The only problem with biotech meeting the needs for which it was created is that they are failing to increase yields and are proving to not be as positive of an influence as first promised. Technology today draw’s attention away from less intensive alternate techniques with more promise in agroecological farming and that will reform the land, wind, and solar power efficiency. (Multinational Monitor)

    In the coming year, this new equilibrium is looking promising in every way that it is heading, and the direction is not from just one source. The grain market prices will continue to rise with technology becoming more advanced, developing countries needing the product, and the supply market just screaming to enjoy the benefits from the rise in price. The consumers will have to become stronger to deal with the price increases for basic products consumed on an everyday basis. The 2008 year has changed not only the United States in how it must deal with export and inflation, but has brought many new challenges to the table for the entire rest of the world. 

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References:

1. Bahn, Henry. "Commodity Prices Rock World Markets: Structural Shift or Short Term Adjustments?" The Magazine of Food, Farm, & Resource Issues 2008: 4-5.

2. "Geographical Distribution of Delinquency Rates on Selected loans Held by Small Banks." Federal Reserve Bulletin 6/1(2008): a20-a21.

3. "Market for U.S. Leveraged Syndicated Loans." Federal Reserve Bulletin 6/1(2008): a6-a7.

4. "The Political Economy of False Solutions." Multinational Monitor 29(2008): 6.