Supply and Demand - Tough to Chew Upon

Four grains - wheat, corn, rice and soybeans - are the basis of the global food system. We still produce enough food to meet the world's needs, but the margin of safety - the overall surpluses of grain - has shrunk. Like all other commodities, supply and demand influence grain prices. In reality, the level of grain in storage significantly determines those prices. These "stock levels" are quite well-known in the U.S. and Europe due to their regulations, but are less well-known elsewhere. A key trigger for determining whether or not prices will rise is grain stock levels falling to the point that people fear there won't be enough to supply the demand. For wheat, this trigger is about 75 days of supply. When stocks approach this level, prices start to shoot up. In recent years the changing balances between supply and consumption prices have become unstable and international grain prices swing wildly. This price volatility, for speculators, offers the potential for making a lot of money.

In developing countries, the implications are disastrous. Many of these countries rely on the international food market to provide the food they are unable to produce themselves. To do this, they must budget for these purchases. When international prices rise suddenly, the cost of their food imports skyrockets, stretching already limited resources. In some cases, they can't buy food at all -- their suppliers have sent the food to more lucrative markets elsewhere.

Well-equipped farmers in Canada or the United States can earn more income, if they time their sales right. For smallholder farmers in the developing world - people who own small plots of land, have limited resources and are most vulnerable to risks such as drought, floods or fluctuating prices - even high prices, if unstable and unpredictable, are bad news. They can escape poverty if prices and their production both rise, but are often reluctant to risk their limited resources by renting more land or planting more crops if they fear prices will collapse by harvest. Poor farmers in the developing world don't have bank credit or government programs to help them if prices suddenly collapse at harvest time. Their understandable caution means they often miss the chance to increase the local food supply.

Food security for all the people of the world will only be possible whem the profit motive is taken out of food supply. Food production should be about meeting the needs of people, not a profit-motivated venture for corporations and shareholders and hedge funds. Food security for the world is just not possible in a capitalist system. The iniquity of the market, in control or out of control, controlling or controlled – can have no moral or ethical standards, for these are human qualities to be included or discounted in the decision-making, policy-making processes. But isn't the market meant to send signals between consumers and producers? That is its claim to fame surely, that it efficiently lubricates supply and demand, matching the two. In reality the signal which the market often responds to is not one regarding supply and demand but the one identifying profitability. The entire edifice of the money system is not geared to satisfying the needs of the majority for even the simplest means of living, such as food. Those who need the food to live, rather than those who desire the profit to speculate, are the least likely to be consulted regarding the supply. The invisible hand of the market can send all the signals it wants, but there is often an invisible hand picking up a telephone to tell fellow investors to restrict sales and keep prices up. This society offers little security – food or otherwise – except the security to make profit.