Bartering for Food and Looming Shortages

A spike in food prices is looming, along with massive shortages throughout the world. Food security will become a mainstream concern in the months to come, and we will almost certainly see a repeat of the food riots again this summer. Prepare now!

From the Financial Times:

In a striking example of how the global financial crisis and high food prices have strained the finances of poor and middle-income nations, countries including Russia, Malaysia, Vietnam and Morocco say they have signed or are discussing inter-government and barter deals to import commodities from rice to vegetable oil.

The revival of these trade practices, used rarely in the last 20 years and usually by nations subject to international embargoes and the old communist bloc, is a result of the countries’ failure to secure trade financing as bank lending has dried up.

The countries have not disclosed the value of any deals, and some have refused even to confirm their existence. Officials estimated that they ranged from $5m for smaller contracts to more than $500m for the biggest.

Josette Sheeran, head of the United Nations’ World Food Programme, said senior government officials, including heads of state, had told the WFP they were facing “difficulties” obtaining credit to purchase food. “This could be a big problem,” she told the Financial Times....

The countries’ struggle to obtain credit to import food is boosting the price of domestic crops. Ms Sheeran said that prices of crops in some African countries were rising sharply even as international food commodities prices had fallen from last summer.

In addition, agricultural commodities prices have recovered in the past two months on the back of lower winter plantings in the US and Europe and a severe drought in Brazil and Argentina, two of the largest producers of food commodities.

Since December, wheat prices have risen 15 per cent, corn 17 per cent and soyabean 22 per cent. In contrast with other raw materials such as oil or aluminium which have plunged back to the levels of 2002-05, agricultural commodities are trading higher than they were 12 to 18 months ago.

During the medium term, the report states that "long-term resource scarcity trends, notably climate change, energy security and falling water availability", will put pressure on prices and production, together with "competition for land and higher demand resulting from increasing affluence and a growing population". The report recommends investment in farm production and international aid.

http://www.nakedcapitalism.com/2009/01/credit-crunch-leads-nations-to-barter.html
http://www.economicdiscourse.com/2009/01/nations-barter-for-food-amid-credit.html