Food Prices and Global Hunger Equal Riots, Civil Wars and Revolution

For those who think there’s a real world beyond their video-game trading terminals and bubble-induced “Fed’s got my back” commodities speculations comes yet another instance of what will be a long chain reaction of riots and supply disruptions. At this stage, you could probably just spin the globe and point. In the Ivory Coast, violence has erupted and continues to escalate. These disruptions are cumulative. In Ivory Coast’s case, disruptions include rubber, cocoa and oil.

Next up may be Nigeria, which is holding an election this month. Nigerian elections are notorious for creating disorder, and now we have magnitude-9 food inflation and hunger on the stage. Ten percent of U.S. oil imports come from Nigeria, and it’s the sweet oil variety that can’t be substituted.

This chaos isn’t about “tear down these walls” and democracy. A basic understanding of hunger and human behavior is in order. The Food and Agriculture Organization (FAO) at the United Nations puts out a global hunger index (pdf). The most recent was from 2010, well before this year’s 45 percent price spike in foodstuffs. According to the IMF, each 10 percent increase in food prices doubles the likelihood of civil disorder, riots or worse by 100 percent [The Food Riot and Revolution Index]. By my math, we are at a four or five-fold increase and still ramping up. In the FAO’s scoring, a hunger score above 30 is considered extremely alarming, 20-29 is alarming, and 10-19 is serious. With the massive food inflation, I submit that it’s reasonable to add about 10 to the old, quickly outdated (by the day) 2010 number. If you care to argue this point, fine; but add something substantial. Nigeria was 18 in 2010, so this would be in the high 20s today, and at the upper end of the alarming score. Potential hotbed Pakistan was 19 in 2010.

Another oil producer, Angola, had a 27 hunger index in 2010 and would now be in the extremely alarming category. Cameroon, a small African oil producer, has a 2010 score of 18. That country was severely impacted by food riots during the 2008 commodity bubble. Both Bangladesh, and emerging market darling India, were ranked 24 in 2010. With the spike, it would be well over 30 today. Don’t be surprised if ethnic and religious turmoil breaks out in what are considered democracies. That will be hard for the U.S. to spin. I don’t think the U.S. has enough aircraft carriers to cover these contingencies. This will render US foreign policy impotent. Yemen, which is in open disorder and is a completely failed state, had a 27 hunger index in 2010. Little wonder 120,000 barrels a day of oil is now offline there. Any money manager or investor should not be the least bit surprised if many if not most of the countries ranked high on the hunger index flare up in direct correlation to the rising CRB foodstuffs index.

While the Federal Reserve and Bank of Japan fiddle, foodstuffs are breaking out once again. The CRB foodstuff index + FAO Hunger Index = Riots, Civil Wars and Revolutions.

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I wear many hats but history, economics and political observance have always been a passion. I am a graduate of the University of Cincinnati College of Business with a degree in Information Systems and Digital Business with a minor in European History. I work for a small mom-and-pop IT consulting and software design company. We deal in servicing mostly government funded non-profit mental and behavioral health care agencies in the state of Ohio. In this I deal with Medicaid and Medicare funds and have a little insight on the boondoggles of government there. Thankfully the undemanding nature of my daily profession gives me ample time to read and stay aware of our current state of affairs which I find stranger than fiction in many instances. In addition to being in the IT field, I have also been self employed with a small contracting company so I might know a thing or two about the plight of small business that employs 71% of the American workforce. I however don't draw my knowledge from my day jobs, which I have had a few; I draw it from an intense obsession with facts and observation about the world in which I live. I do have formal education in things such as history, economics and finance particularly as it pertains to global issues, but I have come to find much of what I thought I knew from the formalities of a state university I had to unlearn through much time and independent research. I hope you enjoy what I bring you which is not often heard in the mainstream news outlets. I would like to think my own personal editorializing is not only edifying but thought provoking while not at all obnoxious. That last one may be a hard to achieve.

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