Global Food Riot Warning - 6 June 2011

The spike in corn prices could portend trouble...

ONE OF the things bureaucrats and dictators fear most is a big spike in food prices. After all, as long as his food is cheap, the average Joe – whether he lives in Miami, Madrid, Mumbai, Moscow, or Mexico City – will willingly march to war for the stupidest of reasons, writes Brian Hunt in Steve Sjuggerud's Daily Wealth.

He will endure putative tax rates. He will cheer on the dumbest of government programs. 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. Corn is a staple of the world's food supply. As you can see from our chart, corn was around $3.50 per bushel this time last year. But bad weather, record-low inventories, rising ethanol usage, and surging demand from emerging markets like China have caused a 100%-plus surge in the yellow stuff.

Professional "ag" analysts note we'll need a monster US corn crop in order to blunt the recent spike in prices. But any "blip" in the growing season this summer will eliminate the chance of a monster harvest... it will cause corn to remain at elevated levels... and it will put the possibility of food riots on the table.