U.S. Economic/Financial News

USDA Forecast Delights Speculators; Food Chain Threatened

March 31 (EIRNS)—Today's release of the first-of-the-season plantings report by the U.S. Department of Agriculture (USDA), forecasts an 18% increase in U.S. soybean acreage this year over that of 2007, and a drop of 8% in corn area. This occasioned a trading binge on the Chicago Board of Trade in which soybean futures (for May delivery) fell by the 70-cent maximum, or 5.5%, by midday. Corn futures jumped by their limit. But behind this cited explanation for today's trading drama, speculation in agro-commodities, along with gold, oil, and other commodities, is soaring out of control, as the financial system itself disintegrates. Index fund involvement in agro-futures trading is now running at $42 billion, up from $10 billion 18 months ago, according to estimates by AgResource Co., a Chicago research outfit.

Meantime, farmers are facing whip-saw conditions for deciding what—and whether—to plant, while consumers are facing extreme inflation of food prices. The total arable land base of the United States, as measured under technology now in use, stands at about 470 million acres. During the FDR years, the policy for use of this land, was to serve the national interest of providing a stable food supply, to keep family farming in operation, and to upgrade the resource base itself. Through a policy introduced by FDR called "parity pricing," farmers were induced to produce more or less of various commodities, and make land improvements accordingly. Huge increases in U.S. food output supplied the needs of World War II and Lend Lease.

But today, farmers are expected to make decisions based on "the markets"—the euphemism for the policy of increasing globalized control of economic activity by a select few financial and commodity interests, centered on London. Wild shifts in land use are the norm. For example, once the Gorey bio-fuels craze was made law in 2005 in the U.S. and other nations, U.S. corn acreage expanded to 93 million acres in 2007—the highest since 1944, when yield per acre was far lower. This year, about 25% of all the corn harvest will go for ethanol, and livestock feed prices are soaring. But, the corn area may shrink 8% in this year, down to 86 million acres, according to the USDA. Soybean acreage may hit 74.8 million acres, 18% above last year. The relatively high costs to produce corn compared with soy, is one factor. Other huge crop area swings are forecast, including a 13% reduction in cotton acreage and 6% increase in wheat. The USDA's forecasts can be far off the mark; they claim to survey 84,000 producers. But for certain, there is growing chaos in the food chain.

July 2007 Crash Drives Soaring Food Stamp Demand

March 31 (EIRNS)—The number of monthly food stamp users is expected to reach 28 million people by Oct. 1, the highest since the 1960s, when the program began. Average monthly use has been 26.5-27.8 million, since 2006. Food price inflation, job losses, and fuel price spikes are cited for the increase. More than 40 states, from December 2006 to December 2007, had an increase in case loads. Six states hit by the housing blowout—Arizona, Florida, Maryland, Nevada, North Dakota and Rhode Island—had a 10% increase in demand for food stamps in that one year time.

For example:

Michigan: One in eight residents receives food stamps. Officials there say the load has more than doubled since 2000 (the Bush years).

Rhode Island: Over the last two years, the demand has grown by 18%, to more that 84,000 recipients as of February 2007, encompassing 8.4% of the state's population.

New York: From July 2007 to January 2008, an additional 67,000 people were added to the program, bringing the total to 1.86 million or one in ten New Yorkers.

They Were Warned: Ohio Bank Near Failure for Lack of HBPA

April 2 (EIRNS)—One of America's biggest regional banks, National City Bank based in Columbus, Ohio, is facing bankruptcy, by the negligence and incompetence of a Federal government which was warned six months ago that this bank needed Federal protection, and which has just thrown away $30 billion instead trying to guarantee the mortgage securities of a non-bank, Wall Street's Bear Stearns. By its own stupidity, National City earned itself massive losses in the mortgage bubble, and requires Federal bankruptcy protection, a thorough "asset" clean-out, and Federal regulation to operate as a sound institution.

Already on Sept. 26, 2007, an article on the LaRouche PAC's website, "National City: Why Chartered Banks Also Need Protection in Mortgage Blow-out," presented the bank as "an exemplary case" of banks needing protection under Lyndon LaRouche's proposed Homeowners and Bank Protection Act (HBPA). The losses then from mortgages, mortgage securities, and derivatives were $750 million in 2007, $333 million in the fourth quarter alone. Again in January 2008, LPAC called for the HBPA to provide Federal protection for National City. Another $500 million in losses have been added in early 2008. The bank, tenth-largest based in the United States, with 1,300 branches, has shed 3,000 of its 11,000 employees.

Since then, 80 cities and three state legislatures have passed demands for the HBPA—but Congress and the White House have blocked it with "stimulus" and "bailout" measures instead.

"These idiots in Washington, D.C. were warned," LaRouche said today. "They were warned about this bank failing, simply for the lack of having enacted the Homeowners and Bank Protection Act. They learned nothing from reality. The HBPA is the only sane solution—and George Bush's insanity is no excuse."

Now, Cleveland press headlines are alternately reassuring nervous Ohioans about their bank accounts at National City, and warning them not to have more than the FDIC-insured $100,000 in those accounts. The radiating effects will also hit a dozen other midwestern states where National City has 1,300 branches. With its core capital "direly low," reduced by the losses right to the regulatory "minimum line" below which it cannot legally operate, National City has 19% troubled loans on its books. It is now trying to avoid failure by selling itself to the smaller Key Banking Corp. or to Wells Fargo, or to a Chinese or Japanese bank, or to the Dubai sovereign wealth fund.