On the Fed and food prices

Should the United States curtail its food exports, and step back from its role as a significant feeder of the world in order to help control domestic food prices?

Should the United States curtail its food exports, and step back from its role as a significant feeder of the world in order to help control domestic food prices? 

F3 isn't advocating this. We believe it would be socially, economically and strategically irresponsible of the U.S. to stanch its flow of food to countries and people who need and demand it. 

But recent Congressional testimony by Federal Reserve chairman Ben Bernanke prompts questions of what our nation's position on food and commodity exports should be going forward, and how they should be managed, given the intense price pressures that are beginning to hit American families hard in 2011. 

Bernanke specifically pegged "increases in commodity prices in recent months [to]...rising global demand for raw materials...coupled with constraints on global supply in some cases," the Christian Science Monitor reported. 

That could serve as a call for the U.S. government, food industry and farmers to assess export and energy (ethanol) policies. Major grain-importing nations such as Egypt, Saudi Arabia, and North Korea are already setting up more storage silos and expanding strategic stocks, having seen "the role played by record food prices in political upheaval in the Middle East and North Africa," according to Reuters. 

The effect of this strategy: major exporting nations are expected to hold 30.6% of the global total of grain (104.5 million tons) at the end of the 2010-2011 season, down from 40.5% a year ago, the International Grains Council estimated, said Reuters. And China is expected to hold 114.6 million tons, added the intergovernmental body. 

Is the U.S. so distant from the possibility of social unrest if food prices were to pass a breaking point for millions of households? Are our worldly ambitions crowding out a need to be as economically benign to our own population as possible? Don't we need food security too? 

The global food price index set a new record of 236 in February, announced the Food and Agricultural Organization. This is well above the average of 200 during 2008 "when soaring prices sparked rioting and food-export bans in some developing nations," said The New York Times. The index reflects sugar, cereals, oils, meat and dairy product prices, and it has risen for eight successive months, it added. 

One bright spot is that bullish times for commodities exports are good for America's heartland economy. Bloomberg reported in late-2010 that the North Dakota unemployment rate was a mere 3.7%, a fraction of the overall U.S. rate. It also quoted the U.S. Department of Agriculture's chief economist that demand by China and Russia could drive U.S. farm shipments in 2011 to surpass the record $115.3 billion level of 2008. 

Yet by pinning higher U.S. food prices to global demand, Bernanke is 'throwing up his hands' and saying his office has no sway—even though he knows a weaker dollar does affect export prices, and he may suspect we could export more strategically too.