From Volume 7, Issue 19 of EIR Online, Published May 6, 2008

Global Economic News

Philippines Faces Another Failed Rice Tender

May 2 (EIRNS)—The last two efforts by the Philippines to buy rice on the world market failed, with far less rice available than the 500,000 tons requested, and at prices far beyond its means. The next tender is planned for May 5, for 675,000 tons, but already Vietnam and Thailand, the two largest rice exporters, have announced they are not likely to participate. "It's very likely that we won't go," said the general secretary of the Vietnam Food Association, noting that there is a hold on all exports due to the internal rice panic and price spike—although the immediate panic has subsided.

Thailand's Commerce Ministry said that the Philippines government will not guarantee the contracts, so Thailand will not participate.

The Philippines government has doubled the number of food distribution sites run by the National Food Administration, but sources on the ground tell EIR that people line up before dawn, and the rice is gone by 8:00 A.M. The subsidized rice at the outlets is half the market price, but of poorer quality.

A Ray of Light in Philippines Food Crisis

May 2 (EIRNS)—After months, if not years, of paralysis over the burgeoning food crisis, which may escalate into food riots, Manila has now signed an agreement with the International Rice Research Institute (IRRI) to get help to grow enough rice to feed its own people within three years. IRRI president Robert Ziegler said the institute would "join forces" with the Department of Agriculture and the Philippine Rice Research Institute to ramp up Philippine rice production.

The Philippines is one of the world's largest rice importers. The agreement encompasses irrigation, high-yield hybrid varieties, credit support, technical advice for farmers, and construction of storage facilities to address the country's 5%-plus yield losses through spoilage, according to Agence France Presse.

Ziegler said the agreement would help steer Manila "towards self-sufficiency." Manila says it now imports about 10% of its domestic rice requirement. Philippines Agriculture Secretary Arthur Yap said collaboration with IRRI would cover all 4 million hectares (9.88 million acres) of farmland planted with rice.

Meanwhile, the Asian Development Bank, reeling from a global food crisis that has led to stinging criticism of its international governors for failing to see it coming, was scheduled to hold its annual meeting this weekend.

Inflation Slashes Income Growth in China

April 29 (EIRNS)—Inflation is cutting deeply into income growth in both city and countryside in China. Keeping the real economy growing, and improving the overall living standard of the population, is the biggest challenge that China's leaders face, especially because of the poverty of the 900 million rural population. While rural incomes rose 9%—with inflation discounted—in the first quarter of 2008, as the National Bureau of Statistics (NBS) reported March 24, this amounted to an overall per-capita average income of less than 1,500 yuan, about $215 in this period. The NBS report, based on 68,000 rural households all over China, said that while, overall, farmers' cash incomes rose 18.5%, deducting rising price factors cut the increase in half, to 9.1%. This increase is 3% lower than a year ago. Farmers' income from wages working in local small industries, from money sent back from family members who have joined the mass exodus to the cities, is also up close to 17%, but per capita is only 608 yuan, less than $87.

Chinese urban residents are better off, but inflation took an even bigger bite than in the countryside. Disposable income per capita was up 11.5% in the first quarter—until inflation is taken into account. Inflation slashed the rise to just 3.4%, the lowest since 1997. This 3.4% income increase was 13.2% lower than the rate of increase a year ago, the NBS reported. Per-capita average urban income was 4,386 yuan (about $625). In 1997, high inflation had forced urban income growth down to just 1.2%.

A senior NBS official said that China's 4.8% inflation target is going to be "very hard to hit" this year. Speaking at a seminar in Shanghai, Peng Zhilong, director general of the department of national accounts at the NBS, said that the 4.8% figure "is an aspiration, and the figures for the first quarter suggest this target will be very hard to hit," the official Shanghai Securities News reported today. China will have big trouble containing inflation due to five factors, Peng said: the rapid economic growth; financial inflows, including "hot money"; rising wages; central interest rate increases, which had raised companies' costs; and rising asset prices. All this, along with the world situation, would make an economic slowdown inevitable in China this year, Peng said.

Costs of oil and other imports are in hyperinflation, a Bangkok Post analyst reported today. China had to pay 90% more for oil imports in the first quarter, although the volume of imports was just up 14.9%. For iron ore, costs were almost 50% higher, but volume was just 10.5% more.

German Farmers Dump Food Crops into Biofuels for Cash

April 28 (EIRNS)—An EIR source in Germany reported that not only rapeseed, but increasingly also wheat and other grains, are being turned into biofuels. Many farmers no longer make the effort of harvesting, and delivering the grain to the mills, where they would then get paid a ridiculously small sum of 10 euros for each 200 pounds delivered. Instead, they keep the grain and dump it, along with other stuffs, into biofuel production, where they are paid more. The same goes for apples, which "earn" farmers 25 cents per tray—a price so low, it doesn't pay to produce, not even to make juice from the apples. Therefore, apples are dumped into biofuels, as well.

All of this is going on without anyone gathering statistics about it, but it is an increasing pattern. The farmer source said that the policy that is forcing farmers to act against their own interests in producing food, is so evil that it cannot just be incompetence of the bureaucrats, but that there must be a purpose behind it, and that is the destruction of agriculture in Europe.

Former Jamaican PM Warns of Worldwide Food Riots

May 2 (EIRNS)—Addressing the Group of 77 countries in Antigua, former Jamaican Prime Minister P.J. Patterson issued a grim warning to the world leaders about the violence that has begun due to food shortages. Patterson warned of the potential for further upheavals if a solution is not found. "It poses some very real and immediate consequences. If you think we are immune from riots, which could escalate into revolutions, please think again," he told the meeting.

"Even in the developed world, we are seeing a financial and monetary crisis of unprecedented proportions which is sending more than ripples—indeed shockwaves through the entire international community."

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