Food May Eclipse Oil As Spending Threat

[Purveyor]

(Reuters) - Food, not oil, may prove to be the bigger threat to global growth, with the pain falling disproportionately upon the developing economies that powered the latest economic recovery.

Oil market investors are pricing in only a small risk that Middle East unrest spreads to top oil producer Saudi Arabia -- an event that would instantly catapult oil to the top of the global economic risk list.

Assuming Saudi Arabia's oil flows unimpeded, the blow to global consumer spending looks relatively modest. Food prices, however, are expected to remain elevated for some time, which puts more pressure on household budgets.

"At the moment, the increase in food prices is much more of a concern," Thomas Helbling, an advisor in the International Monetary Fund's research department, told Reuters Insider.

U.S. Treasury Secretary Timothy Geithner echoed that view last week, pointing out that rich nations could tap strategic oil reserves if needed, while food prices will remain high "for a long period of time."

MORE...

http://www.reuters.com/article/2011/03/07/us-economy-weekahead-outlook-idUSTRE7262T820110307

[AKDavy]

1. Energy and food are one thing

Modern agriculture is energy intensive.

You may pay for food and fossil fuels separately, but when you pay for food you are, in fact, paying for fossil fuels.

[AndyTiedye]

5. Fuel Costs Affect Food Prices, But Weather Affects Them More

Weather is also a big factor in food prices, and the weather is getting more extreme, perhaps due to global warming.

[AKDavy]

7. Weather is, of course, important

But planting, irrigation, fertilizer, harvesting, crop transportation, food processing, packaging, food transportation, storage, retailing...

All extremely energy intensive. A few pennies of the cost of a can of tomato sauce has anything to do with the cost of a tomato. When I worked for Heinz and Del Monte, the tomatoes and peaches in the can were literally a few cents on the dollar. It's the same in the ethanol industry, where I also worked--the corn farmers watched the weather, but our corn buyers predicted corn cost and ethanol prices based on fossil fuel prices.

Extreme weather will, of course, have extreme consequences.

[joeybee12]

2. To translate what Geithner said, he was telling his cronies to move their

money into food stocks so they can screw us over on this, too.

[SpiralHawk]

4. + 1,000

You nailed it

[AndyTiedye]

8. Plant More Food Crops

Geithner's prognostication seems a bit long-term for the commodity speculators. They're already in anyway.

This is more usefully a call to grow more food crops. That is a good thing.

This is also a good argument (if any more are needed) to end the use of corn to make motor fuel.
The market will end that practice in time anyway, despite the subsidy.

[joeybee12]

3. To translate what Geithner said, he was telling his cronies to move their

money into food stocks so they can screw us over on this, too.

[Hutzpa]

6. My prediction is coming to past.

I predicted this awhile back that if we do not control food price we will live to damn the day.