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Editorial -- Could a grain embargo be possible? Tuesday, June 24, 2008
With Iowa crop losses expected to crack the $1 billion mark and significant damage reported across the Midwest, the corn market responded as expected. USDA may very well reduce its grain production outlook on June 30, making the bull market even stronger.
With food costs soaring and consumers paying record prices for gasoline, the squeeze is on. There is growing concern that there won't be enough corn to meet consumption later this year. Some consumer groups -- here and abroad -- demand that ethanol production from corn be halted at least temporarily to allow the market to catch its breath.
Faced with soaring food prices and concerns about supply, the Nixon administration way back in the early 1970s placed a grain embargo on U.S. exports and froze prices. The twin moves proved disastrous for U.S. agriculture, as soybean and wheat prices tanked. Nixon was vilified for his handy-handed invasion of the marketplace.
President Jimmy Carter, in response to the Soviet Union's invasion of Afghanistan, placed a grain embargo on the communist nation. Carter's embargo was roundly criticised by farm groups and deservedly so. The Soviets didn't withdraw from Afghanistan. The Nixon and Carter moves helped brand the United States has unreliable suppliers, and provided the impetus for foreign buyers to turn to South American suppliers.
The South Americans proved to be remarkably adept at soybean production within a couple of years became top competitors.
Foreign demand for American grain and meat remains strong and will likely continue to do so. The cheap American dollar makes U.S. foodstuffs a great buy.
Few, if anyone, are calling for any sort of grain export embargo at this time. In the 1970s, consumers took to the streets to protest high meat, bread and flour prices. There isn't any consumer revolt yet, but it could happen. Additional weather disasters, like the historic floods in Iowa, could cause momentumto build in that direction, however.
November's general election could put additional pressure on politicians to do something to ease the strain on consumers' budgets.
These are tough and dangerous economic times, for the general population and farmers.
Consumers hear plenty about record-breaking grain prices, but not so much about soaring fertilizer, diesel fuel and feed costs. If those feed costs cause livestock producers to liquidate herds, consumers might catch a short-term break on meat prices. That break will be followed by excalating grocery store costs when supplies tighten.
What will the situation be like when the growing season ends and fall turns into winter?
It promises to be very interesting indeed. |
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