More than 50% of counties in the United States are now officially designated "disaster" zones. The reason given in 90% of cases is due to the continent-wide drought that has been devastating crop production. 48% of the US corn crop is rated as "poor to very poor", along with 37% of soy; 73% of cattle acreage is suffering drought, along with 66% of land given to the production of hay.
The ramifications of the drought go far beyond what happens to food prices in the United States. With the US producing half of all world corn exports, as corn and soy crops wilt from the heat, without coordinated governmental action we can expect a replay of the disastrous rise in food prices of 2008, which caused desperate, hungry people to riot in 28 countries. In that instance, food was available, but hundreds of millions of people couldn't afford to buy it. Should food prices increase to anywhere near the levels of four years ago, it will be a catastrophe for the two billion people who are forced to scrape by on less than $2/day.
The poor in developing countries spend 80% of their income on food, much of it directly as grain, rather than as manufactured products like bread or cereal, and so any increase in the price of basic necessities immediately puts them in dire food distress. In the US, prices for a loaf of bread or a corn muffin are unlikely to see major increases because, in a nod to capitalist priorities, the cost of those products is largely determined by packaging, advertizing, transportation and storage costs – and ultimately the labor that is embodied in those activities, not the cost of growing the corn or other natural base material.
However, because about one third of corn in the US goes to feed animals, the US dept. of agriculture predicts that the price of animal products such as beef, dairy products, chicken, eggs and turkey will increase by 4.5% or more, depending on just how bad the harvest turns out to be. There will be a similar impact on vegetable oil due to the dire predictions on soy production, though these effects will likely not be felt until early 2013. The UN's Food and Agriculture Organization (FAO) publishes its monthly Food Price Index figures on August 9th. Abdolreza Abbassian, a senior economist at the FAO commented, "It will be up…How much up is anyone's guess", ominously, he adds; "It would really surprise me if we didn't see a significant increase."
For the 1 in 5 children in the United States living in food insecure households and the millions of Americans living from hand to mouth, still trying to recover homes, jobs and a stable livelihood after the crash of 2008, let alone tens of millions of other poor people around the world, any rise in food costs will be a crushing, and for many, life-threatening, calamity.
With the possibility of food shortages, the vultures of finance, otherwise known as commodity speculators, will once again begin to circle the food markets, looking for a killing. As the financial markets were not re-regulated after the economic crisis of 2008, hedge funds and short-sellers will inevitably be on the look-out for additional profits by gambling on the price of food, exactly as they did four years ago. Rather than any lack of actual food, most analysis indicates that the primary cause of the dramatic escalation in food prices that caused the 2008 food crisis was financial speculation in the food commodity sector. That is to say, a human tragedy manufactured by the laws of motion of capitalism, rather than the laws of nature.
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