Year of the "Food Crisis"

We are starting to think that 2011 is going to be the year that everyone wakes up to this food crisis issue. We are playing this from an investment standpoint via DBA, the PowerShares DB Agriculture Fund. The fund holds a wide variety of commodities such as live cattle, coffee, sugar and others. We have been long since early July of last year at around $24.50, and the fund is now trading near $33.

Here is another interesting article on the subject from www.ipsnews.net:

In Corrupt Global Food System, Farmland Is the New Gold

By Stephen Leahy

UXBRIDGE, Canada, Jan 13, 2011 (IPS) - Famine-hollowed farmers watch trucks loaded with grain grown on their ancestral lands heading for the nearest port, destined to fill richer bellies in foreign lands. This scene has become all too common since the 2008 food crisis.

Food prices are even higher now in many countries, sparking another cycle of hunger riots in the Middle East and South Asia last weekend. While bad weather gets the blame for rising prices, the instant price hikes of recent times are largely due to market speculation in a corrupt global food system.

The 2008 food crisis awoke much of the world's investment community to the profitable reality that hungry people will do almost anything, even sell their own children, in order to eat. And with the global financial crisis, food and farmland became the "new gold" for some of the biggest investors, experts agree.

In 2010, wheat futures rose 47 percent, U.S. corn was up more than 50 percent, and soybeans rose 34 percent.

On Wednesday, U.S.-based Cargill, the world's largest agricultural commodities trader, announced a tripling of profits. The firm generated 1.49 billion dollars in three months between September and November 2010.

Meanwhile, U.S. Treasury Bills pay a return of less than one percent.

"We have set up a global food system that supports speculation. And with [such] markets, we can't get speculators out of the food business," said Lester Brown, an agricultural policy expert and founder of the Washington- based Earth Policy Institute.

"Farmland is better gold than gold for speculators," Brown told IPS.

Growing concern over access to food is also creating a new geopolitics around food security, with many countries buying up farmland and banning the export of food, he said.

World leaders have utterly failed to address the simple fact that while there is enough food, a billion people, living in every country in the world, simply can't afford to buy it, said Anuradha Mittal of the Oakland Institute, a U.S.-based policy think tank on social, economic and environmental issues.

"Why were a billion hungry with a record wheat harvest in 2008?" Mittal told IPS.

And how is it there are one billion people who are overweight, with 300 million of those considered medically obese?

The global food system is designed to generate profits not feed people, and nothing has changed since 2008, she said. "There has been no focus on how to achieve food security or on regulating the food trade," Mittal noted.

Instead, the World Bank, World Trade Organisation and other multilateral organisations are pushing for more production and more trade liberalisation, she said. That approach is exactly how Africa became unable to feed itself after being previously food secure.

"Africans have become share-croppers, exporting coffee, cotton, flowers and now food while going hungry," Mittal said.

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Source: www.ipsnews.net