Comments on: Glutting Kazakhstan’s Wheat Industry

By: oldschool boy

oldschool boy — Wed, 27 Jan 2010 16:10:05 +0000

I guess it will depend on the outcome of the current election in Ukraine. Although, even if pro-russian Yanukovitch is elected it still will not automatically mean that Ukraine will sacrifice their European direction for closer ties with Russia.

By: Dafydd

Dafydd — Wed, 27 Jan 2010 09:29:15 +0000

If they pull in the Ukraine, that would be quite a powerful grouping…..

By: AJK

AJK — Wed, 27 Jan 2010 02:20:46 +0000

“the U.S. and EU would both be accused (possibly even legitimately) by the Third World as deliberately hoarding food to drive up prices.”
…and do what about it, besides foment anti-Western anger? If anything, it gives the US/EU another bargaining chip to get hungry countries to do what they want –> “We’ll give you food if you do _____”

It’s incredibly cynical, yeah, but I only mention it because I’m surprised there was never a movement to create an OPEC sort of thing for grain, corn, or rice. It would be an incredible soft power coup for Kazakhstan if they could centralize it enough (which I’m skeptical about). Think about Kazakhs shipping tons of wheat into Uzbekistan in exchange for some political concession…

Oh, and it’d be interesting to see how this goes forward with California falling into permanent drought, too.

By: oldschool boy

oldschool boy — Tue, 26 Jan 2010 18:13:23 +0000

I remember reading that the Kazakh government have already decided to increase subsidies in 2010 to match Russian and Belorussian levels, since the three countries are in Custom Union (or whatever). Another strategic vision is to further consolidate agricultural lands in large ownerships to give Kazakhstan products more competitive advantage. I also have read that the government moves to encourage rotating crops, alternating where possible wheat with canola and soy (I hate soy).

By: Dafydd

Dafydd — Tue, 26 Jan 2010 17:05:08 +0000

It is pretty like the strategic reserve (you could actually call it a strategic food reserve).

Have to say, I am willing to to take those accusations. It isn’t like they think our current polciy is that wonderful.

Driving up prices actually might help some third world farmers.

Also, as we would have to cycle through, selling off the older stuff there is potential to help with short term crises like in Haiti.

Worth noting that once you have your reserve in place (should it be called a granary??) the price effects should be neutral.

By: Joshua Foust

Joshua Foust — Tue, 26 Jan 2010 16:59:22 +0000

That sounds like the same logic behind strategic oil reserves. The challenge is, most western countries aren’t used to viewing food as a strategic issue, even if farmers routinely make the national security argument for import and price protections. You also run into the problems that come from hoarding – the U.S. and EU would both be accused (possibly even legitimately) by the Third World as deliberately hoarding food to drive up prices.

Like I said, I don’t know of any relatively simple solutions. This issue has vexed people for a long time.

By: Dafydd

Dafydd — Tue, 26 Jan 2010 16:55:19 +0000

I understand your objection to US farm studies, I have similar feelings about the EU CAP (Common Agrigcultural Policy), with its “wine lake” and “butter mountain”. (Yes, you read that right, we pay taxes to subsidise famers to grow grapes & make wine. I feel like I need to go for a swim….)

Perhaps we should pursue a policy of staple stockpiling. That is build a massive stockpile (a year’s supply) of Grain/cheese/potatoes/meat whatever, cycling through it (i.e. selling the older stuff off to make sure we don’t get caught with a load of mouldy food).

I think that would push prices up rather than down (most of the time). When prices spike, release some of the stockpile to bring prices down to a long term average. When prices fall back, rebuild the stockpile.

Best I can do. It avoids any direct subsidy to farmers, which is probably a good thing.

By: Joshua Foust

Joshua Foust — Tue, 26 Jan 2010 16:25:50 +0000

Those are all fair points. I don’t have a simple solution; I think if someone did it would have come out by now. But I’m also speaking as an ardent opponent to American farm subsidies – even within the U.S. (if it could be isolated from the rest of the planet) these subsidies artificially drive down prices and create severe excesses of random crops (like corn) while forcing the producers of other crops to literally burn their surpluses. It’s bizarre.

Not that there will ever be an end to agricultural regulation, but I think when we discuss the topic there needs to be much more deliberation about the long term social, economic, and even health consequences of what we regulate and how.

By: Dafydd

Dafydd — Tue, 26 Jan 2010 16:20:52 +0000

Sure, in an ideal world. But the cahnces of th US Congress or EU Council of Ministers reducing farm subsidies is zero.

So the question that needs to be addressed is: – what is the best policy for Kazakhstan to pursue in the light of massive first world food subsidies?

Their choices are

1) Nothing
2) Import controls and subsidies of their own.

Take a look at this map. As you can see hunger is not far away from the Kazakhs.

If they are not suicidal, they go for option 2).

By the way, varying harvests and the wild price swings that accompany them are a fact of the earth’s climate. Political intervention in the market to ameliorate the effects goes back as far as Joseph and Pharoah, at least. If you have a better idea to help people avoid starvation, please, let the world know!