Well, everyone who's been conscious knew the day was coming: the now wealthy Chinese (where only 45 years ago people were starving under Mao's absurd agrarian policies) have developed an appetite for MEAT! Especially pork, and they are encouraging their farmers to adopt Western methods of hog feeding, which includes lots of corn.
Who can provide the corn they need? The U.S.! In July alone, according to The Wall Street Journal ('Chinese Hunger for Corn Stretches Farm Belt', p. C1) China ordered 21 million bushels of corn from the U.S. in "one hit". This was more than the U.S. expected the Chines to buy in one year. Then, the Chinese purchased another 2.2 million bushels early this month.
The result? Corn commodities prices are spiking (see accompanying graphs). In fact, corn prices - which have nearly doubled for U.S. consumers over the past year (have you noticed the increased costs of our pork?) climbed another 1% Tuesday. And as the Journal article observed:
The corn futures contract for December delivery at the Chicago Board of Trade rose 7.5 cents to settle at $7.275 a bushel.
This is in addition to China's gigantic soybean consumption, as they now also buy one fourth of all U.S. soybeans - also mainly for feed, including to mix in for catttle - since millions of the Chinese middle classes have now developed a taste for burgers, meat loaf and Chinese variants of them.
If the Chinese keep getting rich off the U.S. - by lending it money (with interest) to pursue stupid "wars" and wasteful defense spending (like building 2,443 F-35 jets) - you can expect they'll have even more cash capacity to expand their middle class, especially given that in the last quarter their GDP rose at an electrifying 9.5% (ibid.) That means commodities prices will soar even higher, and not only for corn and soybeans, but OIL too! (Since many more Chinese are now ditching their bikes and buying automobiles)
Of course, as the Journal notes, that 9.5% spike in GDP is a direct result of government spending and investment, not private entrepeneurs. China is, after all, still a communist nation although it uses the machinery of capitalism to create wealth capacity for its government to do more. So much for the baloney from the Right, and U.S. Tea Baggers that "governments can't create jobs". Yes, they do - and China is the proof. BUT to do that they need revenue! China gets it from the U.S. and we could easily get another $5 trillion in revenue if we had the brains and the balls, just by allowing all the Bush tax cuts to expire from next year, andf pulling out from all further Afghan operations. (A losing wicket we ought to have recognized years ago!)
But whatever the source of the Chinese GDP spike, it's fueled their 1.3 billion population's taste for meats, and this is transferring into economic hurt to U.S. consumers- who are faced with major continued price hikes in beef, pork as well as chicken in the coming months. Bad news for a nation with 14 million still unemployed, and the true figure closer to 19 million (including those who've deerted the job hunt and given up, though the BLS doesn't count them). Oh and let's not forget the other 10 million under-employed! Then people wonder why 43 million people are on food stamps?
However, at least the corn end of the commodities hikes could easily be solved if the government had the gumption to do it. We know the price hikes are being created by a standard supply and demand problem: the Chinese have majorly increased their demand, so the existing corn supply has shrunk, causing prices to spike to over $7.27 a bushel.
The obvious answer then is to increase the corn supply to meet the increased demand. This doesn't take a genius to figure out, only someone with basic Econ 101 background.
How to do that? Simple! Stop using corn (a basic FOOD crop) to make the foolish fuel known as ethanol! Right now, nearly one third of the U.S. corn crop is burned up as ethanol each year. This is a damned disgrace and an outrage, especially given a world wherein starvation is still rampant - check out Somalia now if you need a book mark.
Apart from that ethanol is inefficient! It takes on average 1.1 gallons of oil to create one gallon of ethanol, so in processing it one is not only wasting food, but oil as well!
At least a start has been made in halting a perverse subsidy to the ethanol manufacturers. But more must be done, and that means stopping the conversion of one third of our corn crop each year to ethanol. If people still want ethanol, it's much better to use sugar cane as Brazil has done. In the case of sugar cane, it takes only 0.9 gal of oil to make 1.1 gals. of sugar-cane based ethanol. This is a sensible option since sugar isn't really a food, and is largely responsible for the diabetes epidemic in this country. By doing this, Brazil has rapidly gone from a state of national debt to being in the black.
Something the U.S. could use as an example. If it has any sense left!
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