Food Riots Ahead? - 19 August 2011

The price of corn contains a warning for the world's despots...

LOOKING at the price action in corn this week, the world's dictators need to be on their guard, writes Brian Hunt for Steve Sjueggerud's Daily Wealth.

One of the great fears of dictators around the world is a big spike in food prices. After all, the average Joe – whether he lives in Madrid, Mumbai, or Mexico City – will willingly march to war for the craziest reasons. He will endure putative tax rates. He will cheer on the dumbest government actions. But should his food become expensive, he'll be rioting tomorrow...alongside every one of his neighbors.

That's why the giant rally in corn prices is a concern. The grain is a staple of the world's food supply. As you can see from the chart below, corn traded in the $3.50 to $4 per bushel range for much of 2009 and 2010. But bad weather, record-low inventories, rising ethanol usage, and booming demand from emerging markets (like China) have caused a 100%-plus surge in the yellow stuff.

Earlier this year, professional "ag" analysts noted that we'd need fantastic growing conditions and a bumper crop to blunt the big price spike. Instead, we're getting lots of rain when we don't need it, and lots of heat when we don't need it. Thus, corn prices remain elevated... and the possibility of worldwide food riots remains on the table.

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