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Four points higher, the FAO Food Price Index for 2012 January

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In the first major indication of the way food prices will move in 2012, the UN Food and Agriculture Organization (FAO) has announced that its Food Price Index rose by nearly 2% or four points from December 2011 to January 2012. This is the Index’s its first increase since July 2011. A close look at the FAO Food Price Index shows that prices of all the commodity groups in the index have risen (oils increasing the most). At its new level of 214 points, the index is about 7% lower than what it was in January 2011 (when it reached 231).

In 2010 July, the Food Price Index has begun a steep upward climb it maintained for 7 months until 2011 February, from 172 to 237. Now, this 4 point jump in a month is the sharpest since the rise from 231 in 2011 January to 2011 February. “There is no single narrative behind the food price rebound – different factors are at play in each of the commodity groups,” said FAO’s Senior Grains Economist Abdolreza Abbassian. “But the increase, despite an expected record harvest and an improved stocks situation, and after six months of falling or stable prices, highlights the unpredictability prevailing in global food markets,” he added. “I can’t see that the usual suspects – the value of the dollar and oil prices – were  much involved in January. But one reason is poor weather currently affecting key growing regions like South America and Europe. It has played a role and remains a cause for concern,” he concluded.

What FAO is seeing and saying is routinely misunderstood or deliberately miscast by the mainstream business and financial press. An example of this can be seen in a recent opinion found on Forbes, the business magazine, which links “a slowing UN FAO food price index” and “falling commodity prices” to the global economic slowdown. This, the magazine has said, is “putting further downward pressure on food inflation”. Of course this is completely untrue, as wage labour, informal sector workers and middle class residents in many cities and towns of the South know.

Thus the ‘market’ view is that global demand for agricultural products appears to be slowing. This view exists because this sort of media represents the interests of its owners – the 1% targeted by the Occupy movement. Ever since 2011 July, when the FAO Food Price Index ceased its steady upward march, organs and media representing the interests of the global money markets and the interests of the speculators have attempted to leaven their crooked discussion of the matter by saying that the global dynamic in food and commodity markets took a structural turn. Their insistence on linking “quantitative easing in the USA” and what they call “emerging market demand” (meaning mainly China and India) for food staples has been a consistent feature of this disinformation.

What we are seeing is that the FAO Cereal Price Index averaged 223 points in January, up 2.3% (5 points) from December. International prices of all major cereals with the exception of rice rose, with maize gaining most, 6%. Wheat prices also gained, though less significantly. Prices mostly reflected worries about weather conditions affecting 2012 crops in several major producing regions. Fears of decline in export supplies in the Commonwealth of Independent States also played a part.

[The FAO Food Price Index data sheet is available here (xls).] [The FAO Deflated Prices data sheet is available here (xls).]

According to FAO’s latest forecast world cereal production in 2011 is expected to be more than sufficient to cover anticipated utilization in 2011-12. Production is expected to reach 2,327 million tonnes – up 4.6 million tonnes from the last estimate in December. That would be 3.6% more than in 2010 and a new record. FAO lowered slightly from December 2011 its cereal utilization forecast for 2011-12, to nearly 2,309 million tonnes, still 1.8% higher than in 2010-11. That would put cereal ending stocks by the close of seasons in 2012 at 516 million tones, 5 million tonnes above FAO’s last forecast.

A sober note has been sounded in the Jakarta Globe. The Indonesian newspaper reported the Asian Development Bank warning that Indonesia and other nations in Southeast Asia should be prepared for a possible rise in food prices, which might stoke inflation. Changyong Rhee, chief economist at ADB, is reported by the newspaper as having said the global financial turmoil, marked by the euro zone debt crisis and a possible slowdown in the US economy, might increase the volatility of prices for food and other commodities. According to the ADB, research funding [in agriculture] is being depleted amid climate change, making it difficult for food production to keep up with growing demand. “Food price increases have become more persistent than in the past,” he said in Jakarta. “It has a major impact on food security for millions [of people].” The Jakarta Globe reported that the FAO Food Price Index has risen by 50% in the last four years, compared with a 16% increase from 1991 to 2006.

A two-speed Europe, chronic unemployment and the Euro experiment

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Illustration: Presseurop / Chinese illustrator and cartoonist Luo Jie (William Luo) works for the Beijing English newspaper, China Daily.

There is worry in Europe about the euro, its ten-year-old currency, and about unemployment, which has stayed persistently high throughout 2011. The Euro press has reflected the worries and concerns of the salaried and the informal workers of Europe, and is now talking about whether there is already a ‘two-speed’ Europe. Presseurop has provided some insight:

In ‘Eurozone crisis – Will the EU end up like Yugoslavia?’ Serbian daily Politika remarks on the similarities with the years preceding the break-up of the federation founded by Tito. The Politika opinion said: “Seen from Belgrade, Zagreb or Sarajevo, the economic and institutional crisis that has struck the European Union has a certain air of déjà-vu. Relatively speaking, the European Union (EU) is beginning in many ways to resemble Tito’s Yugoslavia. As At a time when the EU is attempting to reinforce centralised control of its periphery, its foundations are being threatened by excessive nationalism and accumulated incompatibilities between member states.”

The “democratic deficit” suggests yet another parallel, according to the Serbian paper: in the one-party system in Yugoslavia, leaders were not elected by universal suffrage, just like the highly placed civil servants that manage today’s EU – in spite of the fact that all of the members of the Union have multi-party systems. In both cases, the fear that the more populous states would have too much influence has prevented the introduction of the principle of ‘one citizen, one vote’.

The 'La Tribune' front page on a 'two-speed' Europe

Presseurop also invokes the ‘two-speed Europe’ meme in ‘Employment – A two-speed Europe’. Mentioning the front-page headline ‘Europe split in two by unemployment’ of La Tribune, Presseurop has quoted the paper’s reporting on the growing gap between Southern and Northern Europe: “The rate in Germany has declined to a level not seen since 1991 while soaring to new high in Spain, where it is now almost 23%.”

The Paris business daily continued: “This European dichotomy is first and foremost a reflection of the state of the continent’s economies. While some countries have sunk into recession (Greece, Portugal, Spain), others have succeeded in maintaining growth, albeit modest.” Citing reforms undertaken before the crisis as one of the reasons for the healthier economies in the North, The Financial Times remarked that changes to labour legislation in Luxembourg, the Netherlands, Austria and Germany “have helped make the workers of these countries internationally competitive – a factor which is sorely lacking in the eurozone periphery”. Typically arrogant and dismissive opinionating from the British paper, which is notorious for kowtowing shamelessly before industry and American foreign policy dictates.

The Berlin leftish newspaper Tageszeitung (Taz) takes issue with this argument, and notes that the reforms undertaken by Berlin have not created new jobs, but simply redistributed them to a larger number of workers – a process that has resulted in the creation of a new low-pay sector. Reporting that 8.4 million Germans are ‘under-employed’, the Taz recalls that economic inequality in Germany has grown more rapidly than in other industrialised countries. Finally, the Berlin newspaper notes that to ‘celebrate’ the record of 41 million wage earners, the German government has spent 330,000 euros on a poster campaign ‘Danke Deutschland – Wirtschaft. Wachstum. Wohlstand.’ [“Thank you Germany – Economy. Growth. Prosperity”].

Taz is close to the truth, quite the opposite of what the feckless Financial Times, a speechwriter for predatory capitalism, would have us believe. Almost one in four people in the European Union was threatened with poverty or social deprivation in 2010. This is the conclusion of an official report by the European Commission presented in December. According to the report, 115 million people, or 23 percent of the EU population, were designated as poor or socially deprived. The main causes are unemployment, old age and low wages, with more than 8 percent of all employees in Europe now belonging to the “working poor”.

Single parents, immigrants and young people are worst affected. Among young people, unemployment is more than twice as high as among adults. Some 21.4 percent of all young people in the EU had no work in September 2011. Spain leads all other EU countries with a youth unemployment rate of 48 percent. In Greece, Italy, Ireland, Lithuania, Latvia and Slovakia youth unemployment is between 25 percent and 45 percent.

In countries such as Germany, the Netherlands and Austria, youth unemployment rates are lower only because training takes longer and many unemployed young people are ‘parked’ in all sorts of schemes that exclude them from the official statistics – so much for the crafty and misleading ‘Danke Deutschland’ campaign. But even in these countries the chance of getting a decent-paying job is diminishing. Some 50 percent of all new employment contracts in the EU are temporary work contracts. For workers aged 20 to 24, the proportion is 60 percent.

Written by makanaka

January 8, 2012 at 14:47

Billions of euros, and the zero-rupee note

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The German weekly newspaper, Die Zeit, is easily among the best designed papers in the world. It is also consistently critical in its investigations and reporting, and just as consistently innovative in the manner in which it presents subjects. Visually, Die Zeit’s pages have few peers worldwide, if at all.

Billions swallowed up (Die Zeit, Deutschland)This is a typical example of how Die Zeit is able to hold its readers’ interest, dramatically present numeric data and at the same time make a strong political statement about state spending.

The title of this arresting full page graphic is ‘Seid verschlungen, Milliarden!’, which means ‘Billions swallowed up’. The graphic purports to be an aid to politicians who notoriously have no idea, says Die Zeit, how many zeros there are in a billion but who blithely continue to agree to spend billions (of public money).

There are some eye-popping numbers represented by the coloured squares on this page. The German healthcare system is 245 billion euro, the income of the church in Germany is 330 billion euro, Germany’s federal budget for ‘Bildung und Forschung’ (education and research) is 11 billion euro, Germany must reserve 283 billion euro for pensions (which is separate from the 36 billion euro to be spent on pensions for its government officials).

Billions swallowed up (Die Zeit, Deutschland)The cost of sending all children in developing countries to school for five years is reckoned to be 321 billion euro, the development aid of the richest developed/industrialised countries is 72 billion euro, the cost of halving the incidence of poverty in developed countries (as under the UN’s Millennium Development Goals) is 32 billion euro, the cost to the USA of the 2003 Iraq war was 40 billion euro, and the cost to date of the Iraq and Afghanistan war to the USA is 1,242 billion euro.

While on the subject of money and public spending, The Economist has reported the issue of the zero rupee currency note. The surprising note looks like the typical 50-rupee note, except it is for ‘zero rupees’. In place of ‘Reserve Bank of India’ it says ‘Eliminate Corruption at all Levels’ and in the same vein has replaced the usual “I promise to pay the bearer…” with “I promise to neither accept nor give bribe”. This excellent public campaign has been launched by a Chennai-based NGO called 5th Pillar (P O Box No 5338, Chennai 600024, phone +91 44 65273056).

The zero rupee noteVijay Anand is president of the NGO and is also, according to the Economist report, an expatriate Indian physics professor from the University of Maryland “who, travelling back home, found himself harassed by endless extortion demands. He gave the (zero rupee) notes to the importuning officials as a polite way of saying no.” 5th Pillar reportedly had 25,000 zero rupee notes printed and publicised to mobilise opposition to corruption. The idea caught on and the NGO says it has distributed a million zero rupee notes since 2007. Haven’t seen any in Mumbai though – although in Mumbai it’s at least a hundred that the most junior traffic policeman will settle for and for municipal jobs one starts with 500 rupees, so 5th Pillar will need to do a Mumbai and Delhi set of zero-rupee notes in those colours, not 50-rupee colours.