Is another global food crisis in the offing?

Just a quick note that I noticed a news piece yesterday that struck fear into my heart for the vulnerable populations of the world: Corn rallies to two-year high after crop forecast

Corn and other grains futures shot up Friday after a U.S. Department of Agriculture report pointed to the tightest supply and demand balance for corn in 14 years.
The Agriculture Department on Friday forecast a 2010-11 corn crop 3.8% smaller than government expectations just a month ago, as a hot Midwest summer preceded by floods in June takes its toll.
The Agriculture Department said it now expects corn production to reach 12.66 billion bushels, from 13.16 billion forecast in September. September’s forecast itself had been a downgrade from August.
-
The corn surplus by late next summer, the end of the 2010-11 corn crop season, is expected to fall below 1 billion bushels, the least since the 1995-96 crop. The ratio between stockpiles and demand for corn would be 6.7%.
“That means a very, very small margin of error for the 2010-11 crop,” said Darin Newsom, a senior commodities analyst at DTN Telvent in Omaha.
Following flooding in June, the Corn Belt suffered from a hot summer and, more importantly, warmer-than-usual nights that interfered with corn’s ability to pollinate as it normally would, he said.
The rally in corn, widely used as feed and biofuel, also pushed up prices for soybeans and wheat and drove up shares of fertilizer and agricultural-equipment companies. Livestock producer shares fell.

This prompted me to fear that widespread food shortages worldwide will result, just like what happened in 2007-8’s global food crisis.  This year we’ve already seen riots over food in Mozambique, and Russia’s weak wheat crop due to global warming abnormally high temperatures and drought that caused Russia to ban wheat exports, further driving up prices globally.  But this morning, even the Financial Times picked up on this theme, sounding an alarm: Soaring prices threaten new food crisis

In Chicago, the prices of agricultural commodities jumped so sharply that they hit limits imposed on daily movement by the city’s futures exchange, the biggest in the world.
Traders, unable to use futures contracts because of the limits on trading, bid indicative corn prices to $5.65 a bushel in the options market, a rise of 13.3 per cent on the day.
In Paris, European wheat prices rose 10 per cent, while the cost of other commodities including soyabeans, sugar, cotton, barley and oats soared.
The rise in prices sent the Reuters-Jefferies CRB commodities index to a two-year high.

Ah yes, the USDA’s estimate of lower corn yield lead directly to speculators rushing in to buy up commodity futures contracts and further exacerbating the rise in prices, which will, at some point in the not-too-distant future, lead to a rise in street prices for corn, soybeans, wheat, etc. worldwide.  When corn rose significantly in 2006-7, Mexico went through what was then called the “Tortilla Crisis” in which tight corn supplies (largely due to increased use of corn to produce ethanol in the Midwest US) led to, again, increased prices on the street:

There is almost universal consensus in Mexico that higher demand for ethanol is at the root of price increases for corn and tortillas.
Ethanol, which has become more popular as an alternative fuel in the United States and elsewhere because of high oil prices, is generally made with yellow corn. But the price of white corn, which is used to make tortillas, is indexed in Mexico to the international price of yellow corn, said Puente, the Mexico City economist.
A combination of tortilla-maker organizations, farming groups and members of the Mexican Congress are clamoring for an investigation into alleged monopolies, commodity speculation and price fixing.

Sound familiar?  The truly awful thing about corn ethanol (aside from the fact that it’s eco-friendliness is manifestly unclear) is that corn ethanol growers generally use corn that is specially bred to be non-edible by humans to produce the ethanol, so it’s not as though when corn prices rise and the prospect of a global food crisis appears on the horizon those corn stocks can just be released onto the market for consumption by starving humans; that corn field’s output is locked in for use as fuel through at least the next growing season.
But it’s the speculators that have me concerned, as it is truly a nefarious development of our modern world that food is being traded in the same way as any other stock or bond, decoupling the actual substantial item used for nourishment of living beings from the item being traded in the market in Chicago or other commodities markets.  Similar sentiments were expressed at a September 24th emergency meeting of the UN to discuss the impending food crisis:

Green MP Caroline Lucas called for tighter regulation of the food trade. "Food has become a commodity to be traded. The only thing that matters under the current system is profit. Trading in food must not be treated as simply another form of business as usual: for many people it is a matter of life and death. We must insist on the complete removal of agriculture from the remit of the World Trade Organisation," she said.

It’s simply a question of morals and concern for the most vulnerable members of world society triumphing over greed.   Economist Jayati Ghosh, whom I have written about before, continues to make the case that financial speculation is directly responsible for millions starving:

Ghosh argued that the “historic” rise in food prices was driven by speculation on commodity prices and deregulation by the U.S. Ghosh described the use of speculation as highly volatile.
According to Ghosh, the food crisis in developing countries is “intimately related” to the current financial crisis.
The deregulation resulted from the passing of the Commodity Futures Modernization Act in 2000. According to Ghosh, the act allowed financial companies into futures market which allowed banks to influence the prices of food.
According to Ghosh, a popular explanation for the increase in prices is increased demand from China and India. However, Ghosh added that India and China have consumed less, leading her to conclude that the increase in food prices was not caused by regular supply and demand. (emphasis mine)

When prices are not linked to supply and demand issues, there is financial manipulation occurring.  When those manipulations concern the basic staples needed for humans to live and prosper, something must change, lest millions more suffer needlessly.  Mother Nature has dealt us some heavy blows this summer (perhaps a warning of more human-induced climate destruction to come?) that are driving our global food system to the brink of failure, and yet we allow the richest and most powerful financiers among us to exacerbate, indeed to accelerate the level of misery of our poorest fellow humans?  This is just wrong, wrong, wrong, “economic efficiency” be damned.