On Jun 25, 2008, at 10:08 PM, Gautam John wrote:
On Thu, Jun 26, 2008 at 10:24 AM, Udhay Shankar N <[EMAIL PROTECTED]>
wrote:
And a U.S. agricultural executive decides to grow corn instead of
wheat to take advantage of the growing demand for biofuels.
I read, somewhere, that one mistake was in linking the price of a
staple food commodity to that of oil. Is that an explanation that
makes sense?
I'm no expert, but even when I was growing up the cost of getting
grain to markets often exceeded its value in those markets. That would
suggest that transportation cost is a significant factor even if that
is not the primary driver of price increases these days.
Problems with rice in Asia are a case of reaping the consequences of
import/export restrictions. American rice farmers face very steep
tariffs in many parts of Asia to protect local farmers, due to the
very high efficiency of American rice production, and consequently it
is not worth it for American rice farmers to bother with the Asian
export business. I saw an interview of a rice farmer in California a
couple months back where they said that the price of rice in Asia
would have to rise even further before it would offset the tariffs
imposed by many Asian countries even though the rice farmers have the
capacity to produce large quantities of Asian rice varietals and would
be happy to sell into that market. Instead they produce varietals
they know they can sell into other markets even if the value is much
lower. And then you have places like Argentina where beef production
is dropping because of export restrictions intended to control
domestic prices. There is an economics lesson in here somewhere...
I would make the observation that the situation has not yet become so
bad that people are switching to more cost effective grains, choosing
to pay more for their grain of habit instead.
J. Andrew Rogers
