Eyes of the Fleet

Eyes of the Fleet

Wednesday, June 06, 2007

Another dictator puts his country on the international dole: Zimbabwe Short of Food for 4 Million

Oh, what a place: Zimbabwe Short of Food for 4 Million:
The United Nations says Zimbabwe will need emergency food aid for four million people before the harvest that begins in March of next year. Peta Thornycroft reports for VOA that statistics provided by the U.N.'s Food and Agriculture Organization and the World Food Program show that Zimbabwe grew less food last summer than at any time previously.

The FAO, allowed back into Zimbabwe for crop assessment for the first time in four years, painted a grim picture of food security for the next year.

It said Zimbabwe in the coming months will need to import more 350,000 tons of corn, its staple food. The FAO says 2 million people will need food aid by July, less than a month away. By next March, the FAO says, a third of the country's population, 4 million people, will be needing food aid to stay alive.

The FAO said "the long-term decline in the large-scale commercial sector has been dramatic, mainly due to land reform activities." It says food production dropped by more than 40 percent in the last year.

In the years before the land-reform program introduced by the government of Robert Mugabe, agriculture played a major role in Zimbabwe's economy, and white commercial farmers provided the backbone of the sector. Small scale and communal farmers were dependent on the infrastrucure built up around commercial agriculture. The communal farmers used to produce about 60 percent of the country's corn.

In 2006, the FAO said, Zimbabwe produced slightly more than a third of what it regularly produced before President Mugabe began to expropriate white owned farms in 2000.
To add to Zimbabwe's woes, the power authority this week hiked prices for electricity by 50 percent at a time of the worst outages since the economic crisis began in 2000.

Consumers, especially those in Harare, are in the fourth day of major outages with no power for a minimum of 14 hours in a 24-hour period.

Zimbabwe imports 40 percent of its power needs from the region, but the central bank is short of hard currency to settle its bills.

The crisis, economists say, is hyperinflation, which is at nearly 4000 percent, according to government statisticians. But private sector economists say inflation is more than double that figure.

Statistics from the street money changers indicate that the real value of the Zimbabwe dollar is declining 30 percent a week, its fastest decline since the crisis began in 2000.

I'm sure, somehow, this is all Bush's fault.

Oh, by the way, corn prices may be heading up due to demand for use in making ethanol. See here and here
The U.S. Department of Agriculture released the May agricultural prices report on Thursday and corn prices, at $3.48 per bushel, were up nine cents from last month, $1.31 above May 2006 and four cents above February and March levels. The report measures the average prices received by farmers for corn and other crops.

Farmers and other agriculture experts expect corn prices to continue to rise as ethanol producers like Archer Daniels Midland Co. (ADM) and Pacific Ethanol (PEIX), Verasun (VSE) and The Andersons (ANDE) drive demand for corn. Investors had expected the high corn prices to hurt profits at ethanol producers, but in fact all but Verasun correctly hedged against the spike and actually reported an improvement in corn processing results despite never before seen high corn prices. ADM actually reported a 15% improvement in corn processing operation in Q1 2007, despite the then record prices. The increase in prices seems to have actually helped corn processors as they were easily able to pass along the increase to end users of HFCS like Coke (KO) and Pepsi (PEP).
. Oh, those "end users" who pass the increased costs to the consumer. A recent local television reporter noted that the price of beef in the stores is increasing due to the increased price of feed, such as corn. See here:
n the past year, food prices have increased 3.7 percent and are on track to jump by as much as 7 percent by year's end. The current increase is more than double the 1.8 percent jump seen the year before, according to the consumer price index.

Meanwhile, gas prices rose 2.9 percent. Only the cost of health care rose more, and then just slightly.

While companies up and down the food chain see the increases, they're only beginning to pass them on to consumers.

While food prices are rising pretty much across the board, items related to corn are affected the most. That's because increasing demand for ethanol, made from corn, is driving up corn prices, which farmers use to feed their poultry and cattle. The high price of corn is also affecting prices of everything from cereal and other products with corn as an ingredient to the oils used to make potato chips.

But corn is only one culprit. Higher labor, packaging and fuel costs all play a role.
Fuel cost include the increased cost of using ethanol. Thank you, U.S. Congress for your help in solving the energy crisis by driving up all my other living expenses.

My guess is that the poor Zimbabweans will not be getting a price break on foodstuffs, either.

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