Imported Oil and Food, and Betting the Farm

US National Security, Imported Oil and Food, and “Betting the farm”

US National Security – Imported Oil and Food: Energy Bulletin (energybulletin.net) on 6/1/09 presented a post authored by Rick Munroe: “Review of Rand study, Imported Oil and US National Security (May 2009)”. Although this was a summary of the full report, there were three areas of concern that seemed to stand out as particularly pertinent to the American family.

Here are some of the highlights:

• b. Policy recommendations: “… on corn ethanol: “Using corn for ethanol is economically inefficient and has harmed US national security.”
• c. Agri-food concerns: “The UK – truckers blockade indicated how quickly a fuel supply shortage can cause a food supply crisis. The vulnerability of the agri-food sector is particularly noteworthy. When oil prices spike, there is a direct and fairly immediate effect on the price of food (and eventually on the viability of the import-export model itself). Any threat to food imports must be offset by domestic food production. However most family farmers cannot readily absorb high fuel prices, so they may be forced to curtail on-farm activities at the very moment when their nation needs them to produce more, not less. Given the seasonal narure of most agricultural production, a price spike during the critical months could effect an entire year’s production”
• e. Civil disorder: An important Energy Bulletin reviewer’s observation of a possible short-coming in the report – “The authors appear to have complete faith in the “unseen hand” to efficiently sort out all resulting difficulties during a major fuel emergency. There is barely a hint in this study of the potential for civil disorder despite the nation’s extreme dependence on oil products, it’s suburban configuration and it’s reliance on just-in-time delivery for many essential goods. Nor is there any consideration of how low-income Americans may react to suddenly being immobilized by fuel poverty.”

Betting the farm: Why Jim Rogers Is Betting The Farm is the Lew Rockwell (lewrockwell.com, on 6/2/09) headliner to the Garry Whit piece in The Standard (thestandard.com.hk) on 6/1/09.

The article speaks to commodities in general but food in particular regarding future prices and investment possibilities. One of the worlds most savvy investor’s observations/opinions are highlighted but it may be more valuable to the average family to look at the root causes for future food price escalations. Here are some of those causes;

Long term: “…the rising global population will be a fundamental driver of the rising price of food.” Also, “.. global warming. Dry places getting dryer and wet places getting wetter and this is playing havoc with farming.” In addition, “ Rising wealth leads to rising food consumption, but it also leads to more meat consumption, Raising cattle or sheep requires significantly more grain and stimulates demand… .”

Short term: “ …the credit crunch.”, as “Farmers cannot get the finance they need to buy the inputs (i.e. seed, fertilizer, and pesticides) that go into growing food.” Also, “A tumbling dollar is likely to cause food prices to rise …. Debased currencies stimulate an appetite for investment in real assets.”

The two articles we’ve reviewed today point clearly to the need for the prudent home to develop both a significant home storage program for food (and essentials) and a home food production program for sustainable family welfare.

Until next time, keep your eyes on the horizon as the weathers changing fast.