U.S. Economic/Financial News

Farm Belt Faces Below-Breakeven Crop Prices

Oct. 6 (EIRNS)—Index prices have fallen over 40% since July, for a combined group of commodities, including grains (e.g., corn, wheat, soybeans), industrial metals (e.g., copper, zinc, nickel), precious metals (gold, silver), as well as oil, according to all data composites. The global price value of 19 commodities in the Reuters-Jefferies CRB Index has fallen $280.6 billion, or 43%, from its July 3 peak, a loss larger than their total worth two years ago, according to Bloomberg. Last week alone, the CRB index fell 10.4%, the largest weekly drop in over 50 years.

The deflation reflects a mass exodus from the Chicago, New York, London, and other major exchanges by hedge funds and other players in commodities speculation, now lacking credit for their gambling habit, and seeking to cover losses or just fleeing to find "safer bets."

Among the dramatic price declines from July to October:

* Wheat: $13 a bushel, down to $6 a bushel

* Tin: $25,000 a metric ton, down to $17,600

* Nickel: $33,000 (March) down to $15,900

But far from signifying a "break" for end-users, which would spur actual physical activity in agro-industry and construction, the dynamic is chaos, given the lack of international collaboration for a new credit system to stabilize and expand national economic functioning. The case of the U.S. corn belt makes the point.

Corn prices were run up as of July to the level of $8 a bushel in futures speculation, which occurred in the context of the Mississippi/Missouri Basin flooding, which hit the heart of the U.S. corn belt, which accounts for nearly 35% of the world's annual corn output. However, the corn futures price went down by September to $6 a bushel, then last week, the price dropped 16% to $4.55 per bushel (futures price for December delivery), on the Chicago Board of Trade (CBOT). At some grain elevator buying stations, the price to the farmer is still lower. The Iowa state cash average is only $4.12 right now. This is a barely breakeven price for the farmer, given the costs of fuel, fertilizer, and other inputs.

The same process is affecting soybeans, wheat, and other farm commodities. Soybean futures have dropped from $16 a bushel in Summer, down to $10 for November futures on the CBOT. Below this, and the farmer gets no profit at all, and losses set in.

Wheat has dropped from the $13 a bushel high, down to $6 a bushel. "With average yields, current prices and higher input costs, you are back down to breakeven levels for winter wheat," summed up Dr. Mark Welch, an agriculture extension economist in Randall County, Texas recently.

In this context, farmers have no basis at all for planning ahead. One longtime Iowa corn and bean farmer reports that mass mailings are showing up in his county, asking him and neighbors to quit operations, and just rent out their land to roving teams of young workers, geared up to farm 10,000 acres or more as "investments" for absentee money funds. A page from the book of feudalism.

Peterson Foundation Peddles IOUSA Genocide

Oct. 5 (EIRNS)—The Peter G. Peterson Foundation, producers of the "IOUSA" film demanding an end to Social Security, Medicaid, and Medicare, took out a two-page ad in the New York Times Oct. 5, headlined: "Think the current financial crisis is bad? You ain't seen nothing yet." Signed by Peterson and his sidekick David Walker, the former U.S. Comptroller General, the ad lists several supposedly "inconvenient truths": a $53 trillion federal financial hole (public debt and benefits, plus Medicare and Social Security), with double tax rates in the near future, while insisting that "We cannot grow our way out of these programs."

They demand that the Presidential candidates tell the American people that these "tough choices and shared sacrifices will be required."

U.S. Diplomat Warns: End of Free Market Capitalism

Oct. 8 (EIRNS)—Former ambassador J. Stapleton Roy told a conference in Washington today that the current financial crisis was "catastrophic," that 2009 will be a defining moment in history, that the idea of free-market capitalism and even free societies is being severely challenged internationally, and that this will actually be good for the United States!

Roy, a senior diplomat and former ambassador to China, is now head of the Kissinger Institute on China at the Woodrow Wilson Center.

He began his presentation at the Georgetown Center for Strategic and International Studies (CSIS)/Peterson Institute forum to launch a new CSIS book, China's Rise: Challenges and Opportunities, by saying that the coming Presidential transition will be the first since 1932, to come in the midst of a catastrophic crisis, the "worst financial crisis since 1929, two unresolved and festering wars, and the worst relations with Russia since the Cold War." He noted that neither candidate is discussing any of these issues.

"This financial crisis will end the American hubris," he said, ending the false belief that the U.S. had the power to assert its will to control the world as it wished. "There will be at least one benefit from this," he said, in that the country will be more open to other ideas.

"The idea that free market capitalism is the best system is now under suspicion," said Roy. In the 1920s, there was a "failure of capitalism," he said, which resulted in the rise of fascism and communism. "That's what is happening now."