Speculators, Floods And Food Prices

June 9, 2008

Elaine Meinel Supkis

Global warming is causing flood/drought cycles in the temperate zones. Huge floods ravage the Midwest farmlands as well as Europe and Asia. These are not continuous rain but rather huge thunderstorms that spawn tornadoes and drop hail. All of which are bad for farming. These persistent storms are now increasing inflation forces as crops are destroyed. The debate about global warming is misguided. It is not about the temperature of the air close to the ground, it is the rise in temperature of the higher stratosphere. And the melting of the glaciers in the extreme latitudes are feeding more moisture into the system. These towering summer storms are a testimony to the dynamics of global warming.

Severe weather kills 8; water rises in Indiana

Wicked weekend storms pounded the country from the Midwest to the East Coast, forcing hundreds of people to flee flooded communities, spawning tornadoes that tore up houses and killing at least eight people.

Rescuers in boats continued to pluck people from rising waters in Indiana on Sunday, a day after more than 10 inches of rain deluged much of the state.

In Iowa, pumps and thousands of sandbags were sent to the Iowa City area, where officials fear a reservoir could top a spillway and flood the city of about 63,000 by Tuesday.

The Indiana flooding killed at least one person, a man who drowned in his vehicle about 50 miles south of Indianapolis, said John Erickson, a spokesman for the state Department of Homeland Security. Another person was reported missing after falling off a boat about 30 miles southwest of Indianapolis.

Ten inches of rain is downright tropical. Over the course of my own life, i have noticed there isn't more rain but rather, it comes in huge dumps more and more. This is why looking at basic statistics of annual rainfall conceals the reality of global warming. Ten inches of rain in a month is normal for the temperate zones. Ten inches in several hours or less is terrible. Even more fearful is the potential for huge snow storms in winter. 10" of rain=10' of snow.

Just like the obvious issue of the Hubbert Oil Peak is hard for people to grasp, global warming is difficult. Like with oil, pollution from burning fossil fuels is something we wish to do more and more because frankly, we love doing it. Our desires tell us to keep burning these fuels and the fuels will last forever. Our hearts wish for this so strongly, we will ignore most of the effects of releasing millions and millions of years of toxins and gases all in one century.

Just as people can't believe that the Hubbert Oil Peak is when the most oil is discovered [not the least oil is discovered] so it is with global warming: people think it has to get hotter right where they live. The concept that the warming of the higher stratosphere and the very highest latitudes is what matters, eludes most people. The equatorial zones won't have much in the way of temperature rises, they get more droughts. The polar extremes are the places where the rise in temperature is the greatest. And humans can't really feel this change so easily. We still think it is cold. But it is plainly obvious that these atmospheric changes are melting the glaciers and ice cover of the oceans at both poles. Ergo: there is some sort of global warming going on.

Editorially, I suggest all pollution by all human actions are unsettling for the natural balance. As humans increase in numbers, this imbalance gets worse and worse.

Major flooding: I-70, I-65 closed

Near record flooding led Gov. Mitch Daniels to declare Indiana's second disaster in as many days Saturday after nearly 11 inches of rain fell in parts of the state.

Waters rose rapidly from the Southside of Indianapolis west to Terre Haute and south to Bloomington Saturday morning, cutting roadways and interstates, flooding homes and putting so much pressure on dams the governor ordered one of them breached to ease the situation even though that led to new flooding.
*snip*
Officials already worry that flooding along the White River from Martinsville south could break records. Coming on the heels of a week of storms and tornadoes, the deluge seemed especially cruel. Just Friday, Daniels had issued a disaster declaration for 41 counties. "Mother Nature has landed another one on our chin," Daniels said. Indiana hasn't seen flooding like this for decades, said State Homeland Security Director Joe Wainscott. The National Weather Service said the White and Wabash rivers and some of their tributaries could rise beyond their record peaks, most set in 1913. Creeks and rivers swelled as 10.94 inches of rain fell in Edinburgh, and NWS reported 8 to 10 inches fell in a swath from Terre Haute to Shelbyville.

This isn't the only flood this year.

From March 19th this year, earlier floods:

The City of Evansville and Vanderburgh County Indiana are experiencing what is called a “100 year rain.” As of 10 a.m, Evansville Regional Airport had received a record-breaking 6.52 inches of rain. The single greatest rainfall on record for Evansville was 6.5 inches, set on Oct. 6, 1910. The Ohio River is at 37 feet and rising. It is expected to crest at 43 feet on Monday.

The Water and Sewer Utility had its three vacuum trucks removing water from areas around the City all night long. Crews responded to 147 flood calls; 29 were for storm water in a basement or a home, the remaining 20 were because of sewage backups. A majority of the backups were caused by sump pumps that failed because they couldn’t keep up with the rainfall. This is also a good reminder to check back flow valves to see if they are functioning properly. Back flow valves are required by ordinance to stop the flow of storm water and sanitary water back into homes.

Just 4 months ago, a 7" rain was considered a hundred year flood. Now, we have multiple such floods. Of course, this is fueling inflation. When dire weather hammers the agricultural heartlands, the price of grains and other food stuff rises rapidly.

Corn rises to record with Midwest beset by rain

Corn futures extended their gains into a third session Friday, reaching a record as weather forecasts called for rains in the Midwest, which have already delayed crop development, to continue. Prices of soybeans and wheat also moved up.

"Probably the biggest contributor to the rising prices is the scope of heavy rains that have fallen in the past couple of weeks," said Dale Mohler, senior meteorologist at AccuWeather. Rainfalls have left crop fields saturated, halting the planting of soybeans and delaying corn seeds' development, he said.
Weather reports predicted that excessive Midwestern rain will continue, likely pushing corn and soybeans prices higher. The National Weather Service forecasts above-normal precipitation in the region over the following ten days.

Corn futures for July delivery rose to $6.6325 a bushel in Friday's trading on the Chicago Board of Trade, a new record for the grain's front-month futures contract. It closed up 7.4 cents at $6.506 a bushel.

Since the speculators have half as many 'up' items to play with, they are bidding up food and fuel. Diesel is going up and up and up. I am aghast, I use a lot of diesel. This is going to raise the cost of farming, big time. Most farmers use diesel tractors and such because they run at a lower RPM, cooler engines in the hot sun and are very efficient doing slow, steady hauling or harvesting, for example. Driving at less than 5 mph all day is best done with diesel. So even though grains are rising in value, the profit margin is being squeezed. Also, many farmers who are being hit by the very long drought in Australia or the floods in the Midwest are not reaping any profits at all. They are losing everything.

The Doha rounds come to mind here: the fantasy of the Bilderberg conspirators is to eliminate all supports for all workers especially those pesky peasants who own land and farm. Unlike the footloose city populations, farmers who own land are very tenacious. They also can fuel terrible uprisings if they get motivated enough. This is the difference between nomadism and farmers.

Corn Jumps to Record on U.S. Midwest Rain, Crude Oil, Dollar

Corn jumped to a record on speculation rain in the U.S. Midwest will cut supply and as rising oil costs and the dollar's decline boosted demand for a hedge against inflation. Soybeans, wheat and rice also gained.

Thunderstorms affected areas from the central Plains to the Midwest yesterday, bringing more than four inches (10 centimeters) of rain to parts of Iowa, Massachusetts-based Meteorlogix LLC said in a report. Further storms are forecast for the next five days. Corn and soybeans planted in wet, cool soils develop shallow roots, increasing the threat of damage from dry weather in July and August.

The idle speculators in the big cities place bets on natural events. Sudden deep freezes in the wrong places, droughts, floods, blights: these are all subject to betting wars. Catastrophes for humanity enrich these bettors. The flood of Funny Money™ created by reckless lending always migrates to disasters and makes them much worse. Governments, since the first Pharaohs had to deal with all this. The function of a government was to store excess grain and then give it back out during bad times so speculators couldn't charge an arm and a leg for necessities.

Regulating the markets is an important function. The libertarian fad of 'let the market set the price' can turn into massive riots and outright rebellions if the government stands back and leaves everyone at the mercy of speculators seeking to suck up all the wealth from desperate people who need to stay alive. Sometimes the festering anger from such times can simmer for 100 years. The Irish who were left to starve to death in 1846 couldn't riot against the Crown and its military. Disarmed and far from the Fortress Island of England, they were forced to flee their homelands. But when WWI and WWII came and England desperately needed the Irish to save Her, they said firmly, 'Go die, bitch'.

It pays to take care of the lower classes! It pays to feed them, to care for them! Only a government can do this! Anyone who thinks we can do this with voluntary charity is nuts. For charity collapses exactly when the speculators bid up the price of all necessities.

It is interesting to me that inflation in food always runs alongside sudden price hikes in oil. Oil=food in modern technological systems. I remember the first gas crisis: right on its heels came a food crisis. The government always creates money as fast as possible during wars and especially oil-related wars. And within a year or two, the food system goes down in flames. Here is an older story from the early days of the Hubbert Oil Peak crisis. Namely, when the US hit the Peak first.

Monday, Apr. 22, 1974--- Cropping the Price

Of all the forces driving up U.S. living costs, none has been more powerful than the two-year climb in the prices of American farm goods, which has kicked the nation's food bill to record levels. The prime cause of the boom has been the global demand for American-grown food. More recently, speculators bid up U.S. farm prices higher than even the heavy press of foreign orders warranted. Now, however, American consumers are getting the first signals that the worst is over. Since late February, prices on the Chicago Board of Trade and other commodities markets have been falling along a broad range.

Contracts for July delivery of wheat, which sold in February for as much as $5.85 a bushel, are now down to about $4.10. Corn has dropped from $3.50 a bushel to $2.55; and soybeans have fallen from $9.03 to $5.35.

A major reason for the price decline was that speculative fever began to cool as optimistic crop reports began rolling in. Rumors that the Arabs were about to lift their oil embargo against the U.S. also eased fears of uncontrollable inflation. The present prices, however, are still far higher than a year ago, and few experts are predicting any further substantial drop until the dimensions of this year's harvest are clearer, both in the U.S. and abroad. Rising costs of farm labor, fertilizer and machinery will also work against a further price drop.

In 1973, farm products shot up in price. I remember that well, I had my first child. Buying food was difficult. In Tucson, I had my own chickens, rabbits and gardens. But I moved to NYC and was suddenly hit by these high prices. Note the price of wheat! Only slightly less than 1974 for wheat and corn was half of what it is today at the present high peak. Since inflation was much greater than the differential, the price of corn is about the same as during that earlier spike. Also, look at the price of soybeans back then! This feeds livestock as well as other industrial uses. It is similar to oil in some functions. It shot way up there!

This was rightfully considered to be a national catastrophe. Since most farmers sell their FUTURE harvest to speculators, they usually do not get much benefit from soybeans doubling in price. The extra profits are made by the people who give money to the farmers. Over the years, this has grown into a serious problem. For it is laughably easy up until this year for speculators to get LOANS and use this to buy FUTURES. This is why nearly all commodities are shooting up! The speculators bet that things will go BAD and everyone will have to pay DOUBLE for necessities and raw materials! Since certain national central banks have been pushing the concept of 0% lending, the flood of this sort of money has landed directly on everything we need to survive. This way, we can't escape the speculators who need to see higher and higher returns because even though the lending is super-cheap, they are grossly overextended. So they need high profit margins to keep the ball rolling.

Study: S.D. land prices soar

A South Dakota State University report says the average value of South Dakota's agricultural land in February was 22.5% higher than a year earlier.

An economist says most of the people who participated in the survey agreed the increases are directly related to booming markets for corn, soybeans, wheat and other crops. The economist says higher prices for corn, wheat and soybeans have boosted farm income, putting pressure on ag land values and rental rates.

The study says cropland value and cash rental rates are the highest they've been in the nearly two decades that SDSU researchers have tracked ag real estate.

The last two major oil price spikes created the exact same hike in farm prices. If a farmer wants to give up and join the nomadic hordes in the cities, he or she can get a lot of money before giving up on farming forever. This process has been going on for the last 200 years. Every year, there are fewer farmers. Just like in ancient Rome, ancient Egypt or ancient Mesopotamia and China, the lands are increasingly held by financiers, government officials or other organized hyper-powers. Huge estates operated by slaves or near-slaves who don't own hardly anything, not a house nor cow, swell in size as the cities fill up with excess population.

It is very simple: the farmers like to lease other plots or buy them piecemeal. But they can't even begin to compete in the bidding for land if the speculators and officials want these lands. But absentee landlordism is pure evil! Our Founding Fathers struggled with this. The Free North believed in '40 acres and a mule' while the slave South wanted absentee landlords who live in the cities off of the profits of slaves toiling in the sun. This was a very big crisis for the US. The slave South lost their bid to continue this system and the farmer-landholder system expanded rapidly. A strong, FREE farming base is the backbone of democracy.

Just for example, whenever we have an election, I hear lots of city people yelling, if they supported the losing side, 'I'm LEAVING. Go to hell!' But farmers, accustomed to battling the weather, disease and knowing every inch of their farmland is watered by their sweat and blood. They would DIE before being uprooted. Grimly, they fight on! This is why urban uprisings are relatively easy to suppress. Peasant uprisings are nearly impossible to stop.

Here is a Time magazine article from last summer:

Global Warming's Next Victim: Wheat

We're used to watching the price of oil mock gravity, but there's an even more essential commodity that's also become scarcer and pricier in recent months: Traders are paying record prices for wheat on world markets, thanks in part to shortages caused by a mix of drought and flooding. Canada, the second-biggest wheat producer after the U.S., looks set to harvest its smallest crop in five years, due to an unusually dry July, while production in the European Union may be down nearly 40% from last year after flooding rains followed long droughts. Growing global demand for biofuels is also eating up grain production, and boosting prices.
*snip*
Lobell says global warming has already begun to take food off the world's table. According to a recent study he and his colleagues conducted, the temperature increase that occurred between 1981 and 2002 reduced major cereal crop yields by an annual average of 40 million metric tons — losses worth $5 billion a year. Those losses are sobering, but nothing compared to what might be in store: A recent study sponsored by the Consultative Group on International Agricultural Research forecast a 51% decline in India's wheat-growing land, potentially leaving hundreds of millions hungry. And, last week, China's top meteorological official warned that global warming could cut the nation's grain harvest by 5 to 10% by 2030. And all this will be happening while both countries add more mouths to feed.

Reading today's news while remembering yesterday's news: the head of the United Nations called for a 50% hike in farm output. This bizarre demand flies in the face of reality. We have a Hubbert's Food Peak: the earth can produce only so much food. Either the population shrinks to fit this fact or we have a mass die off. In Nature, when any animals are too many, they strip the land of their food and then have a fast die off. Hubbert Oil Peak people know this and foresee this happening to humanity if we continue to overpopulate the earth, driving all systems into instability and shortages.

The Bilderberg group started up due to fears about this. This secretive, nasty group of elites pull to their bosoms anyone who hacks their way uphill to seats of power. Then they are shown the Truth, the Real Future. And either they join the conspiracy to eliminate 3/4ths of all humans or they die, themselves. Note that these people do NOT invite Jimmy Carter to their coven's little meetings! Nope. He, like myself, is locked outside. He is the only one who took the Hubbert Oil Peak seriously. He is the only one [and now al Gore] who tried to alert the public about these matters. Al Gore is now tolerated, since he has no power anymore, because he has joined the speculators and hell hounds. His solution to all this is to create a new monetary black hole, the carbon swap markets. Speculators love this! And are very, very happy as they use this as a platform to create infinite Funny Money™. Now that we have the Japanese carry trade back, this machine will turn the present high inflation into hyper-hyper inflation.

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Comments

[Frederick N. Chase]

As usual, you've covered a lot of ground and I see an added distinction (good vs. bad speculation) that I think we want to make.

When you say that the idle speculators in the big cities place bets on natural events, you identify the "good" kind of speculation where there are no insiders: instead, we should identify and curtail the bad kind (which is associated with insider information).

I didn't figure this out myself. I learned it by reading Antal Fekete.

Here are some of the things he says:

SUPPLY SHOCKS:

--- Briefly stated, man is in a continual struggle with supply-shocks in the market. They come in two varieties: bumper crops and crop failures. The former is the Nemesis of producers, the latter that of consumers. Either way, the whole society suffers. However, supply-shocks can be mitigated through foresight, organized speculation, and intelligent warehousing. The fulcrum is the activity of warehousemen who, following the example of Joseph, allocate scarce storage space in a most efficient manner in order to provide for future contingencies.

--- "the basis" ......makes for an early warning system exposing potential supply shocks threatening society. Moreover, the basis also digests information such as the producers’ estimate of what is a good price for their product, comparing it with the speculators’. The basis picks up all signals, including producers’ forward sales and speculators’ purchases of futures contracts, bringing the two into balance.

--- Why is speculation successful in reducing risks inherent in nature, but a miserable failure when used to reduce risks artificially created by men? Why is it that when the government wants the speculative markets to reduce the fluctuation of foreign exchange and interest rates, or that of gold and silver prices .... the result is always contrary to purpose?

DEMAND SHOCKS:

--- ..false prophets ... preach that in exactly the same way as speculation can counter the untoward effects of supply-shocks, it can also meet the challenge of demand-shocks. Just as speculation can face risks inherent in nature, it can also face risks artificially created by man. However.... When man meets risks artificially created by other men (including the government), it is .... akin to bets placed by the gambler on future events which may appear to be random but aren’t: they are rigged artificially by the casino owner for his own benefit. The false prophets, being apologists for government-induced gambling, are anxious to blot out this distinction.

BOND INSURANCE:

--- Mainstream economists betrayed their sacred duty of searching for and disseminating truth. They started preaching the false gospel that it is possible to take out insurance against losses in the bond portfolio. However, the thesis that bond futures can be used for purpose of hedging the bond price (in exactly the same way as wheat futures can be used for the purpose of hedging the wheat price) is an outright lie. Only those price risks can be hedged where the price variation is nature given, as in the case of agricultural commodities. If the price variation is artificial, that is, subject to government and central bank manipulation as are foreign exchange and bonds under the regime of irredeemable currency, then it is preposterous to talk about hedging.

Fekete's stuff is *not* easy reading. But I find it worth extra time.

You can find his articles here: http://www.professorfekete.com/articles.asp .

-Fred

[Elaine Meinel Supkis]

Fred, you are correct. Fekete is always a good read and we learn a lot from him. He has played the markets and tries to explain to us its dynamics.

Man made inflation: it always is there along with deliberate depression a la Japan, for example. But it can't kick into gear unless there is something going on to give it a 'boost'. But like ALL systems run by humans; prone to crashing or taking off to infinity.

If we look at all religions, they try to curb this with prohibitions. Yet always, always, the sexual/financial prohibitions collapse when power grows! All religions are failures because of this dynamic. We are crazy apes. Rational apes don't reach for infinity. They just want to eat and have sex and pick fleas off of each other.

[Gary]

I was at the barber shop a few ys ago in
beautiful downtown Puyallup.

The weather was filthy and vile that day.

I was talking to an old timer about 90ys
old and he said that the rains were getting
harder and harder. Its always rained a lot
here in the NW but it was always a slow drizzly rain that you could be out and about in for an hour or more without really getting soaked

I had to spend thousands of dollars,mostly to the chiropractor, 10 ys
ago putting a french drain around my yard because we had an 8" rainfall that filled up
my crawl space with 2 feet of water. Almost came up to the joists.Everybody said they had never seen this kind of rain before in Puget Sound.

[Elaine Meinel Supkis]

In Arizona, we have the fierce flood/drought cycle in spades. When it rains, it comes down like a huge firehose, all at once. Everything is running water which rushes off to the Colorado. Only in El Nino years do we get regular, gentle rains.

[Gary]

I'll send some awesome pics of Baboquivari, Organ Cactus NP,
Saguaro NP, Chirachua NP and Sabino Canyon sometime

BTW is that great Mex restaurant, Casa Molina, still open on
Speedway Blvd ? You know, the one with the big fiberglass bull
out front.

I havent been to Tuscon in 15 ys now.. We will see it
again when we see my nephew in Phoenix this Sept ( ie, unless Obama or our 51st state bombs the Persians. If they do that, ALL of the airlines plus Boeing will goto the big runway in the sky.

[GK]

What keeps the earth warm? The Sun.

What would you think should happen if the sun has massive solar flares that create more heat radiation? The Earth warms.

Earth warms, melts snow and releases C02 from the Artic bogs.

Here are the charts the show correlation between Solar Flares and Earth Temperature.

http://en.wikipedia.org/wiki/Solar_variation

I just talked to a Greenpeace activist on the street about stopping GM food (Good!) and about stopping coal plants (Hmmm...)

Now that New Zealand has no new coal plants, us peasants have no more 5 cents per KWH electricity. We have renewable electricity from dams...that run out of water. Now we pay 38 cents per KWH because they have to run old diesel generators to fill the gap.

Restricting Carbon is part of the Bilderberg plan to restrict the growth of the peasantry.

Don't get me wrong, I think it is FANTASTIC that we are finally starting to invest in renewable energy, but do you really think the Queens offshore windmills are going to help the peasants have cheap electric heat in their hovel, or will it make sure she can keep the Bank of England computers humming, Windsor Castle and maybe a few other selected survivors with the juice of life?

[thirsty]

Elaine,

I just want to point out that the last great die off during the Black Plague actually benefitted the peasantry in the long run-economically anyways. As the body count increased a true shortage in labour resulted that had many landlords and manors outbidding each other with wage increases and better rental terms. As well, there was an oversupply of goods due to mortality rates and the peasantry saw costs for basic neccessities drop through the floor.

I think a peak oil-die off scenario would be quite unappealing for the elites. Coupled with a much better educated and better equipped peasantry than during the 14th century it would be hard to see how the elites might be able to take advantage of this. It's my opinion that large pools of labour and large populations controlled by fear of quasi-malthusian disasters is far more appealling to the elite than a die off that will force them to work their own fields and factories.

[GK]

I to am gradually changing from believing in die-off, global warming, wwIII threats as real actual threats and that they are actually veiled threats by the ruling elite that you better keep your head down and do what we say or we will unleash hell upon us.

Human labor, both physical and intellectual is one of the most valuable items in the world.

Basically they are saying you have a choice; let us control/own your labor or we will kill you.

Most people are too scared of the police, army, cia, mob, drug dealers, terrorists, neighbors, gangsters hoodlums to challenge this threat.

Imagine if 300 million citizens woke up from their TV coma and mentioned that they would be taking 'action' upon one senator for each 10 billion increase in the debt ceiling over $10 trillion.

[Elaine Meinel Supkis]

Go to Old Tucson Cafe in downtown Tucson! I hope it is there: real Sonoran food.

I should write about the Black Plague. It certainly changed the affairs of the survivors. They suddenly went from being extras to being necessities. Great Lords had to go forth and appease or appeal to the peasants. Leaders of peasants rose up out of the fertile soils.

One which I am very fond of was Joan of Arc. She was a typical post-plague peasant girl who had a much, much better diet and thus could lift a sword and shield and had the ability to ride a horse which was also better fed!

Peasant uprisings grew after the plague. They found they could fight back.