by Richard Gowan | Jan 3, 2009 | Climate and resource scarcity, Global system, North America, Off topic
Charlie has got some debate going with his ten predictions for 2009, and I’m not going to try to rival it. But after a year of following food prices unusually closely, I’ve decided to go where even Alex Evans has not gone before in an effort to tell the future: the official US Poultry Outlook Report – December 2008. And no, this isn’t about avian flu. It’s about how the global downturn is going to create a rift between increasingly internationalist turkey farmers and isolationist, America-first chicken and egg producers. Feathers will fly!
Let’s start with chickens (to the initiated, “broilers”). For the first nine months of last year, production was growing strongly. But as food prices slumped over the last few months, so did the number of “chick placements” – which I assume is code for “fattening the little critters up in a big shed until they can’t walk”:
Over the last 5 weeks (8 November to 6 December, 2008), the number of chicks placed for growout averaged 7.4 per cent lower than for the same period in 2007. With uncertainties about the domestic and world economies, the trend of year-over-year declines in chick placement is expected to continue well into 2009. With smaller chick placements forecast, the estimates of broiler meat production have been adjusted downward in fourth-quarter 2008 and in the first three quarters of 2009.
Who are we going to blame for this? Foreigners. Unless they like brown meat:
All the uncertainties in the global economy have combined to sharply reduce the demand for broiler exports . . . but declining exports may be slightly mitigated by lower prices for leg quarters, the primary export.
So expect the chicken farming lobby to turn inwards. Their disinterest in foreign affairs will only be compounded by increasing imbalances in the egg market:
Shipments of all shell eggs and egg products in October totaled 17.9 million dozen, down 13 per cent from the previous year. Much of the decline is due to lower shipments to Mexico and Hong Kong.
But it’s all very different on the turkey front. There’s a glut of the damn things – more and more are being put into cold storage – and production is expected to slow as a result. With supply higher than demand, the U.S. needs to offload large quantities of its national bird. Fortunately, there are proven markets available:
Turkey exports remained very strong in October, totaling 71.8 million pounds, up 36 per cent from the previous year. Much of the increase in October’s turkey exports was due to higher shipments to the largest markets — exports to Mexico, Canada, and the combined China/Hong Kong markets were all up considerably from the previous year.
So that’s good news… but wait a minute! Not only is China propping up the U.S. economy by buying vast quantities of American bonds, but now we discover that it will start underwriting the turkey industry? What if Beijing stopped buying? Even Mexico slapped a temporary ban on birds from some U.S. plants just before Christmas on health grounds. And last Tuesday Russia demonstrated its resurgent nationalism by slashing its total poultry import quota from the U.S. by 1.25 million metric tons to 952,000 metric tons. So here’s my first big question for 2009: can the U.S. poultry industry adapt to a multi-polar world?
Next week: a post in which I explain the new world order by tracking trends in the price of tea-leaves.
by Charlie Edwards | Dec 6, 2008 | Conflict and security, Global Dashboard
46°14?00?N 63°09?00?W Prince Edward Island, Canada.
I’m taking part in a roundtable on community resilience, 4&5GW and the decline of the state. The aim of the roundtable is to bring together individuals from a range of backgrounds to challenge current thinking and assumptions in our present political and societal systems. Two presentations which I’ll be live blogging on will be Chet Richards on Mindsets and Character and John Robb on Community Resilience. There is no set agenda for the conference. This afternoon we will be running a series of open sessions… one of which is likley to be on community resilience.
If you have a question for Chet or John send me a tweet. Update: Thanks for the questions – answers will be tweeted soon.
Update: Notes from John Robbs’ presentation after the jump + MP3 of Chet.
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by Alex Evans | Nov 13, 2008 | Climate and resource scarcity, Cooperation and coherence, Global system, London Summit
Ahead of this weekend’s G20 summit, David and I have published a short paper entitled A Bretton Woods II worthy of the name. Key points:
– The summit is unlikely to be able to live up to its billing. Leaders do not yet understand the nature of the problem well enough to be able to implement viable solutions. However, the problem is more fundamental than a simple lack of shared awareness.
– History suggests that leaders will only think the unthinkable on institutional reform once the challenge they face has really hit rock bottom. But history also suggests that we are wrong to think that the worst of the crisis is now past, given that many past banking crises have taken five years or more to unravel.
– Bretton Woods 1 looked across the whole international economic waterfront in 1944, while this weekend’s summit will be much more narrowly focused. Leaders will make a big mistake if they try and tackle finance in isolation, given the growing impact of resource scarcity, and that 2009 is supposed to see another ambitious global deal – on climate.
– We need to recalibrate what we expect from globalization through a serious debate about subsidiarity. Where has globalization gone too far, too fast? Where do we need more integration at a global level? These were exactly the questions that preoccupied Keynes in 1933, when he weighed the relative benefits of global versus local across a range of variables. We need a similar debate today as a precursor to serious international economic reform.
– Leaders need to extend their horizons in (at least) five directions: onto longer time scales; beyond financial regulation into wider resource scarcity challenges; into other international processes, especially climate; towards grand bargains with emerging powers; and beyond government, to non-governmental networks.
Full version after the jump, or better yet here’s the pdf.
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by Leo Horn Phathanothai | Oct 16, 2008 | Climate and resource scarcity, Global system
With a global recession looming, international efforts to curb greenhouse gas emissions may be in jeopardy, as concerns are voiced in the US, Canada and Europe about the wisdom of adopting measures that would impose an additional cost burden on already fragile economies. Such thinking is misguided, and it is dangerous. A recession may in fact ease the introduction of carbon emissions trading schemes.
At the recent EU summit in Brussels there was widespread reluctance to meet pledges all EU governments made last year to cut CO2 emissions by 20% by 2020. Eight Eastern European countries – including Poland, Hungary, Romania, Bulgaria, Slovakia, Latvia, Lithuania and Estonia — released a joint statement urging the EU to balance the wish for cleaner air against “the need for sustainable economic growth” at a time of “serious economic and financial uncertainties.” Italy threw its weight behind these countries, threatening to veto the proposed EU plans.
Likewise in the US, top power industry executives seized the opportunity to lobby for delaying carbon emissions legislation, at the recent New York Utility Conference. More dramatically in Canada, the Liberals were dealt an electoral defeat on Wednesday largely on the basis of their strong advocacy in favour of a carbon tax (see story here).
All this backtracking is akin to forfeiting the forest for the tree. Financial crises are short-term phenomena, global warming on the other hand is with us for the long haul, and the window of opportunity for addressing it is fast narrowing. The prospect of economic recession does not in any way reduce the magnitude or the urgency of the climate problem, nor does it provide any compelling reason for delaying action. Or as EU President Barroso put it:
“Saving the planet is not an after-dinner drink, a digestif that you take or leave. Climate change does not disappear because of the financial crisis.
Moreover, as David Wheeler of the Center for Global Development argues, smart carbon regulation will be easiest, not hardest, to introduce during a recession, since a slowing economy emits less, and smart cap-and-trade regulation can “lock in” this head start on emissions reduction at almost no cost during the recession. His proposal for the US is to:
• Immediately pass a cap-and-trade bill that sets the initial total limit at the pre-recession emissions level, and schedule a progressive decline in the overall limit that will achieve the needed long-run goal.
• Establish an annual auction for 100% of the emissions permits.
• Set aside a healthy share of the auction proceeds to provide a compensating rebate for every American
In this way the consumer is shielded from cost increases, and the power provider incentivised to develop less carbon-intensive energy options for the future.
It is amply clear that big emitting developing countries such as China and India will not make significant commitments to curb their greenhouse gas emissions unless the US and EU lead by example. With only about a year to go before the new global deal to replace the Kyoto Protocol is due to be reached in Copenhagen conference, the US and EU have no room to falter. More than ever, political courage and leadership is needed to ensure global efforts to address climate change are not jeopardized.
by Alex Evans | Oct 13, 2008 | Climate and resource scarcity, Conflict and security, Cooperation and coherence, Global system
Letters of Credit (LOCs) are the crucial lubricant without which the wheels of international trade cannot turn. Here’s how John Mauldin explains them:
If you are a manufacturer of a product and want to sell to someone outside your borders, you typically require a letter of credit from the buyer before you load any cargo at a port. A letter of credit from a prime bank is considered to be proof of your ability to pay. It not only can be a source of ultimate payment, it can be a source of inventory financing while goods are in transit.
And if you are a business which is buying a product, you do not want to release money until you know the product is on the way. There are buyer’s and seller’s agents who make sure these things happen seamlessly, and world commerce had grown because of it.
Just one problem: it looks like LOCs may be no more immune from the credit crunch than any other form of credit. Here, for instance, is Canada’s Financial Post on Wednesday last week:
The credit crisis is spilling over into the grain industry as international buyers find themselves unable to come up with payment, forcing sellers to shoulder often substantial losses.
“There’s all kinds of stuff stacked up on docks right now that can’t be shipped because people can’t get letters of credit,” said Bill Gary, president of Commodity Information Systems in Oklahoma City. “The problem is not demand, and it’s not supply because we have plenty of supply. It’s finding anyone who can come up with the credit to buy.”
As Alan Beattie reported in the FT on Saturday, Brazil has now offered a blanked guarantee for all trade credit involving its companies, which will commit fully a tenth of its foreign exchange reserves. WTO Director-General Pascal Lamy, meanwhile, has announced that he’ll convene a summit on the issue next month: here’s an excerpt from his speaking points on Friday –
The financial crisis may also be having an impact on developing country access to financing of imports and exports. As you know we have held a number of meetings on this issue at the WTO with both multilateral institutions and private banks, the last one last April, to check availability of trade financing at affordable rates. Up until then, the situation seemed to be stable with volumes and rates at normal levels. But just this week Brazil brought this issue to the forefront.
Given the deterioration of the financial landscape, and despite the welcomed announcement yesterday by the World Bank IFC of an increase in its trade financing programme by $ 500 million, I have today convened major providers of trade finance to a meeting on 12 November to examine this issue and find ways to alleviate the situation if it was to deteriorate.
Bottom line? Naked Capitalism quotes an email from “a well connected international investor not prone to alarm”:
At the end of the day, if every counterparty is bad then you don’t have a market and you don’t have an economy. I spoke to another friend of mine this afternoon, whose father has been in the shipping business forever. Pristine credit rating, rock solid balance sheet. He says if he takes his BNP Paribas letter of credit to Citi today for short term funding for his vessels, they won’t give it to him. That means he can’t ship goods, which means that within the next 2 weeks, physical shortages of commodities begins to show up.
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