Sunday, June 8, 2008

Oil vs Grain What the Future Holds

With crude oil hitting an all time high this week and gasoline prices over $4.00 per gallon in the U.S. and over $9.00 in Europe, with no end in sight, conventional wisdom would forcast a free falling economy for the world.

Thomas Barnett's Sunday column this week offers up a different prospective on what will be the most desired commodity in the near future. This week's column.
His opening words:

In the global oil industry, there is Saudi Arabia and everybody else. But with the planet experiencing the worst food crisis since the tumultuous 1970s, the question begs, Who is the "Saudi Arabia" of agriculture? Well, it turns out that North America is the OPEC of global grain.
When the professional fear mongers try to scare you with America's "oil addiction," remember this: if the world's got us over a barrel on energy, then we've got the world over a bread basket. Moreover, while global climate change will progressively diminish OPEC's importance as we're forced to improve transportation technologies, it'll only strengthen NAFTA's role as the world's preeminent food exporter.

Anyone who has been keeping up with Barnett's blog will recognize that he did not pick this topic out of thin air. Below are links to recent posts that support his argument.

Grain companies will be the vilified oil companies of the future (like they were in the past)
ARTICLE: "Grain Companies' Profits Soar As Global Food Crisis Mounts," by David Kesmodel, Lauren Etter, and Aaron O. Patrick, Wall Street Journal, 30 April 2008, p. A1. ARTICLE: "Farming Critics Fault Industry's Influence," by Elizabeth Williamson, Wall Street Journal,...

Urbanization yields globalization yields rising income yields more food demand yields bigger farms yields more migration to cities yields ...
ARTICLE: "In Ukraine, Mavericks Gamble On Scarce Land," by John W. Miller, Wall Street Journal, 12 May 2008, p. A1. Ukraine, Russia and Kazakhstan have between them an untilled Idaho's worth of good farmland. Trick is unifying small plots,...

Already Beijing is thinking food security
ARTICLE: "Beijing looks at foreign fields in push to guarantee food supplies: China losing its ability to be self-sufficient," by Jamil Anderlini, Financial Times, 9 May 2008, p. A1. China replicates its own-the-barrel-in-the-ground mentality it currently displays on oil,...
Simple math on food costs
ARTICLE: "Why the World Can't Afford Food: And why higher prices are here to stay," by Jackson Dykman, Time, 19 May 2008, p. 34. Poor harvests and restrictive trade policies + Increasing price of oil + Diversion of crops...
Cool visuals on world food issues/dynamics
ARTICLE: "The Economics of Hunger: A brutal convergence of events has hit an unprepared global market," by Anthony Faiola, Washington Post National Weekly Edition, 5-11 May 2008, p. 6. ARTICLE: "In Mauritania, Evey Meal Becomes a Sacrifice," by Anthony...
The next-order network perturbation
INTERVIEW: "David Hightower on the Explosion in Commodities Markets," by Maria Bartiromo, BusinessWeek, 26 May 2008, p. 021. Rising Asia gets you rising energy costs, which contribute to the rise in food costs, which soon enough (as in, next...
A special note:
Tom Barnett spends an extraordinary amount of time traveling across the globe, spreading his strategic message. Throughout his travels he has been able to maintain his blog, much to the appreciation of his readers.
He also makes the time to be what is most important, a devoted husband, father and son.
And in return gets the best gift a human can receive, Love..
This post did not start out to focus on Tom Barnett, but in order to support the message in the headline it is important to know the messenger.

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