VEGA News Item

Does 2011 Augur Well? Of Well-practised Austerity - 06/01/2011

Turkey Mania Heralds Surge in Prices

1.  A front-page article in the Sunday Times (26 December 2010) carried as its Inside Story how “Turkey mania heralds surge in prices.”  The article, in the paper’s Business Section, spelt out developments in concerns for food security, as distinct from safety and standards, in supplies and the dithering by DEFRA and the Food Standards Agency (FSA) in the reorganization of the functions of these departments.  As with many analyses by economists, the role of the Dept. of Health and FSA are hazy: the FSA is told not to alter diets or eating plans, which nicely excludes VEGA from what influence it has been able to exert in the changes of diet implicit in implementation of the FSA’s own recommendations on consumption of fruit-and-veg, salt, sugars and fats to lower the risks from flaws in present dietaries conducing to obesity, overweight and the consequences of zoonotic diseases and metabolic disease.

2.  VEGA's Grow Food, Not Feed campaign and distribution of leaflets and development of eating plans to curb appetites and self-control by individuals in practicable changes in diet, augmented by educational demonstrations of food security and sustainability learnt from the harvest of 70 years ago, when Britain stood alone against a German threat of invasion that had overwhelmed most of the countries in Europe.  Food security, diet and health, reinforced by blockade by U-boats, forced on the public privations that must be faced now, with due attention paid to survivors of all ages who experienced those conditions and the special circumstances of seriously cold winters in Europe during the early 1940s, and VEGA’s post-war planning and maintained campaign for Real Bread have at last entered into economic, political and social policies that deserve much more attention from governments and the Civil Service, who are still not chastened by the security and safety consequences of epidemic bacterial and viral diseases, many zoonotic, and of greed and self-indulgence in food and drink.  To these factors must be added the demands of increasing populations of humans and their livestock and the price of land and inland waterways.

Spreading the Load

3.  The slogan must now be modified to allow for inclusion of policies of power production, housing, transport and leisure; and for a population of 60 million humans vying with global human consumers of increasing numbers in competition for land, usufruct and variety.  Many calculations of vital resources overlook the components of “imported sunshine” and altitude and geography and geology, as well as the imprints of tourism, travel and war and strife at the altar of productivity.  Our efforts at spreading Britain’s cereal bets into Oat Cuisine, as a means of reducing the volatility of wheat supplies in the “free” world markets, as well as to improve the lot of sufferers of certain allergies and dietary requirements, illustrated a thrifty and prudent change with substantial benefits and to refreshed thinking on environmental matters.  Some potato growers in the Mediterranean islands and shores can produce 2 or even 3 crops of maincrop potatoes a year, so can we afford to grow potatoes on our own land, when we can use it for specialized husbandry and environmental care, albeit at a comparatively cheap rate assessed in terms of “captured” hours of sunlight?  Such commodity crops may also be grown, possibly after GM, as sources of almost pure starches for manufactured products, including food technology, in which microbiology enters the capabilities of scientific enterprise.

4.  Britain’s turkey farmers aren’t the only ones suffering the pain.  Utilities have increased gas and electricity prices in the big freeze.  The cost of other necessities, from sugar and corn and wheat, are all at or near record highs because of poor harvests and surging demand in the developing world.  For anyone else who was taken aback by the cost of this year’s Christmas lunch the answer is clear: inflation is surging.  At its December meeting the Bank of England’s Monetary Policy Committee (MPC) predicted the consumer prices index, its measure of inflation, could reach 4% by spring, roughly twice the target 2% rate. It is already running at 3.3%.

5.  The analysis reported by the Sunday Times describes useful information on the prospects in 2011 as “Prices soar as world fights for food.”  By the middle of last week Andrew Dennis’s flock of 400 free-range turkeys in Lincolnshire had been killed, butchered and boxed up.  They were dispatched to families around the country who “agreed to fork out £11 a kilo for the ‘pampered poultry – nearly 4 times the £2.75 a kilo that Asda was charging for frozen birds last week.“  Dennis, 52, is nonetheless struggling to make ends meet.  He says: ‘the main reason is the price of feed.  Feed wheat has gone up from £70 a tonne last year to £170.  Our profit margins are very small.  It’s hard to make a reasonable living.”

6.  He continues:  The soaring cost of feed has translated into more expensive turkeys.  All of a sudden, they are a hot commodity.  Some of Dennis’s rivals reported parts of their flocks disappearing in the night, forcing them to hire extra security to keep thieves at bay.  Supermarkets were resorting to fitting turkey with security tags.

7.  Philip Shaw, an economist at Investec Securities, says: “The key difference between now and previous inflationary episodes in British history like in the 1970s and 1980s is that now wages remain subdued. This will likely impinge on real incomes next year: we are becoming poorer.”  The biggest components of our rising cost of living are energy and food.  Dennis said “Rather we are simply returning to the way things used to be.  After the war we spent more than 20% of our household income on food.  It’s been coming down ever since and now it’s less than half that.  Food has been far too cheap for far too long.  People should get used to paying more.  We note that these figures are glib and need expanding to illustrate special (and not all-that-special) requirements for groups by age, education and disability, of which unemployment will be high on the list.  It’s a return to the charities and churches expected to realise that “it’s the poor what helps the poor” and to smouldering discontent, easily erupting into violence – let us not forget the history of bread and the events of the mid – 1850s in England and Ireland.

The NPK Cycles

8.  A merger pending in the market in potash, an inorganic fertilizer, prominent in the NPK requirements to uphold yields of cereals and enrichment of depleted soils, portends the takeover by Uralkali of its rival Silvinit, the combined group being worth 24 billion dollars.  It will be the biggest supplier of potash to Brazil, the world’s largest agricultural exporter (the units – volume, weight or value not being stated; however, a point is made in the consistency in these huge portents: the combined group will also yield nearly a third of China’s needs, as well as significant supplies to Europe and North America.  With population growing, demand rising and other commodity prices going up, analysts predict the beginning of a very good period (for potash prices) and a rise of about 50% in the price of fertilizers.

9.  The Sunday Times article thumps home more impressive statistics.  It states: The mineral deposits that Uralki mines at the foot of the Ural mountains end up on the fields of wheat, beans, and barley that Dennis feeds to his flock.  It is spread on the cornfields in America’s Midwest, the sugarcane fields of Brazil and the rice paddies of Vietnam.  Demand for it and the food it helps produce is soaring.  “We are vulnerable for 2 reasons.  Population is exploding – global headcount is growing by the equivalent of a new Germany every year.  Amid the seething masses Britain is just another player clamouring for food, for oil, for clothes, for cars.  Which leads to the other problem: We make less of all the aforementioned than we used to.”  (It is curious that farmers resort to the level playing field in their games of metaphors.  To the hoi-polloi of these islands farmers have the more serious devices of cultivation on areas of varying tilt, slope and drainage and under-surface rhizosphere.  Even the colour of surfaces plays a part in capturing warmth from darkened sources, by manure or plastic.)

10.  Philip Bicknell, senior economics adviser to the National Farmers Union, says:  “The things we are self-sufficient in, like milk, eggs and cereals, have risen by less than the average.  The ones we import, like meat and corn, have gone up by much more.”  (VEGA must remind him of the importance of imported “prairee meal” and sources of beans and cereals in “self-sufficient” milk and eggs in intensive production of these examples of “cheap”  British outputs with a heavy price to pay in terms of the environment and animal welfare.)

11.  “The same goes for energy,” continues the Sunday Times article.  “Dwindling supplies of North Sea oil and gas mean that Britain, for decades self-sufficient is now a net importer, making us more vulnerable to the vagaries of international markets.  A surge in spot gas prices has led 4 of the big 6 utilities to raise their household tariffs in recent weeks.  A fifth, Eon, will raise its rates in the new year.  Likewise for petrol, which reached a record average of 122.14p a litre as oil price surged forward to a 2-year high of $91.63 a barrel.  Heating oil, meanwhile, has shot up by more than two-thirds in the past 3 months:  Production of many commodities, such as oil, has never been higher; however, even wheat, which suffered by a 50% price increase after drought obliterated Russia’s crops, had its third-best production year on record.

12.  Sudakshina Unnikrishnan, a commodities analyst at Barclays Capital, says that “production has risen quite a bit but these developing economies such as China and India have recovered faster than expected and demand has been very inelastic.  The strength of demand has outstripped our ability to supply.”  For you and me, states the analyst, that means higher prices for the foreseeable future.  The delicate state of the British economy makes it worse.  Unemployment is stuck at about 2.5 million or 7.9% of the working population.  Those in work feel fortunate to have a job and so have been largely willing to accept an extended period of wage freezes or reduced working hours over the past couple of years.  Our dwindling spending power will be further limited by the 2.5% increase in VAT, taking effect on 04.01.11.

13.  The Sunday Times article introduces a term called resource nationalism, which covers a description to old stagers in the Green Planning campaigns equivalent for food security.  A conspicuous absence in the account is the concept of global warming and at least some reckoning of acute, chronic, and long-term exigencies.   We are proud that our motto Grow Food, not Feed has stood the test of time rather than what are the still ephemeral attractions of the global warming ideas, especially when readers are more concerned at present with the weather in northern Europe and the consequences in “cheap” travel and tourism.  Even the Boxing Day Hunts have been severely affected.  The article mentions, “spats over commodities such as iron ore have become more common.  Wars have been fought over oil.  But, increasingly, governments have begun to look at food in national security terms.”  (This should be no surprise to Green Planners, whose thoughts in this context would turn to the significance of the granaries of the world and flows of food resources in the politics of Free Trade, which cover the staples in cereals, grains and pulses and thence the dependence on animal derived foods.)

14.  Richard Ferguson, a commodities analyst at Renaissance Capital, deals with the wild card as “prices soar as world fights for food He says: “You only have to type the words food security into Google and 221 million references come up in one fifth of a second….. it places such a crucial part in the human psyche that it will always be a motivating factor in the development of the sector.”  Ukraine’s curb on wheat exports was set to expire next week.  Instead it extended it to the first quarter of next year.  The Mexican government, keen to avoid a repeat of the tortilla riots of 2007, when protesters took to the streets over the soaring price of corn, “has taken the unusual step of buying futures contracts to fix the price.  Moves like that have a knock-on effect throughout the market.”

15.  Here’s the rub, when “good news for City traders who make money when volatility is high.  For the cash-strapped masses, though, it’s not so great.  Which leaves Mervyn King, governor of the Bank of England, with a difficult choice.  Raising interest rates, which remain at record lows, could curb inflation.“  Rates - sooner than later – should return to about 5%, ten times the present level, forecast some City suits; and we have to bear in mind that Mervyn King commented on David Cameron and his Chancellor, both alumni of the City of dreaming spires (and bleeding liars) as dominated in their decisions by political expediency rather than the challenges of the Common Good.  The Sunday Times reporter states on this situation that tackling the risks “too aggressively” may mean “knocking the legs out from under the economy, which has only recently started to find its feet.”

16.  These commodity analysts agree on the likely imminence of early changes.  They don’t evince, however, any overt sympathy and demonstration of the factors informing the Green and committed customer/consumer; and they lack any exertion of consumer power, in the form of prudently expressed austerity and boycotting.  If Prince Charles can exclude foie gras from the catering in his households and entertaining, the City types and Bankers must show similarly unambiguous trends in the corporate hospitality that they provide.  Their present hypocrisy is too much to stomach in the hard times ahead and parlous lack of leadership and personal discipline.



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