Are We Ready For A Grain Growers' OAPEC Now That The OPEC Cartel Has Shown Us $80 Barrel Oil?

Prices for crude oil have rocketed near 800% in less than a decade, an almost unheard of leap for such a basic commodity. Many reasons and explanations for this massive increase in price have focused on the demand side (economic growth, China, India, and on). Yet it is on the supply side primarily, that has led to these incredibly vertiginous and manipulated prices. It is where the Organization of Petroleum Exporting Countries (OPEC) has played an especially nefarious role as the only player with meaningful and immediately available reserves and production capabilities able to meet world demand. Quite simply, over the last ten years OPEC has done all it could to control supply to squeeze every last penny out of the market.

In my book published in 2005, of which an updated and revised edition will be reaching bookstores this month (Over a Barrel: Breaking Oil's Stranglehold On Our Future), I postulated "Just imagine the firestorm of indignation that would erupt if the public found out that the world's big grain producers (say the United States, Canada, Brazil, Argentina and Australia) were conspiring to triple or quadruple the price of such basic commodities as soybeans, corn and wheat." Were it to come to pass the outcry would be deafening. Yet market and trading conditions are now ideal for such a cartel to take root. All things being equal it very well might. Yet what is clearly missing at this juncture is the political tolerance to allow it to happen. But that too may change.

Conditions for the formation of a cartel are always at their most fortuitous when there is an imbalance, or perceived imbalance of supply to meet market demand. Producers understand that in such a universe, if they can fine tune and control supply they have enormous impact on the price the market will pay for product which they, the producers, have withheld from the marketplace thereby making it progressively harder to access. In the oil or grain business, it is always that last cargo of supply that when not readily accessible, that sets the market tone and price, especially if price is the sole inducement to make that cargo available.

This year the grain markets are booming given increased demand worldwide for wheat and soybeans, strained inventories, difficult growing conditions and increased demand for corn because of ethanol off take. And yet, when compared to the evolution of oil prices the comparisons are stunning. The price of oil has increased near 800% within the past decade as mentioned above. Compare this to:

Close 09/28/07 | One Year Ago | Ten Years Ago
_____ ______ ____
Wheat $ 9.51/bu | $ 4.45/bu | $ 3.54/bu
Soybeans $10.17/bu | $ 5.52/bu | $ 6.21/bu
Corn $ 3.86 | $ 2.64/bu | $ 2.57/bu
____________

Oil | $82.60/bbl | $62.90/bbl | $10.86/bbl (12/'98)

Under circumstances of growing scarcity, given the primordial importance of grains to a consuming world, the formation of a grain cartel would be inevitable if maximizing return were
the primary consideration, and consuming nations would sit idly by permitting their pockets to be picked, as is the case with OPEC.

For an agricultural products cartel (let's call it the Organization of Agricultural Products Exporting Countries, or OAPEC) many of the key elements of supply restraint are already in place. As example, the Australian and Canadian government's Wheat Boards, are considered by our government to be monopolistic, lacking in transparency and a detriment to free and fair trade. Quite incredibly we pontificate and harangue our closest allies, but rarely do we or our benighted Administration or its Department of Energy call to account the mercantile thugs at OPEC. That said, it would be a relatively easy matter for our government to set up our own wheat and ancillary grain boards and join the Australian and Canadians, among others, and together act to control available grain supply to the world marketplace.

In some ways, much like OPEC, we are already restraining production, in order to curtail supply and to support grain prices. We, through the USDA, are setting aside some 36 million acres of land for which we are paying farmers not to plant crops. This land can only be replanted by leaving the USDA program with severe penalties. In spite of pleadings to release lands in order to enhance constrained supply, the appropriate government authorities denied extending waivers. OPEC is teaching us well.

And please, not the argument that it's alright for OPEC to constrain supply because their commodity is finite. Remember, as mentioned here before, our harvests are critically dependent on adequate supplies of fertilizer, comprising such elements as phosphates, sulfur, potash, nitrates all of which are as finite as oil and without which our harvest yields would diminish dangerously.

If we permitted a grain cartel to take root, domestic prices for our cost for food would skyrocket. Well, not necessarily. Here again we can learn from our kindly OPEC pushers. While we and the rest of the world are paying for gasoline and heating oil based on over $80 dollars barrel for crude oil, the Saudis are happily tanking up with gasoline priced at 45 riyals per liter or 46 cents per gallon or the equivalent of $15 per barrel of oil. Venezuelans' gasoline prices are significantly lower yet. Certainly similar programs could be crafted for grain prices in our home market.

This is all conjecture of course, and being the leaders or party to an OAPEC would be an abomination. It would fly in the face of free market principles and fair trade. But, but, but, if it is so ignominious for us, why are we and continue to be so tolerant of OPEC? Theirs is a basic commodity of vital importance to the world economy. And yet we permit their extortion with barely a whimper, while an entire segment of our economy, the oil industry and those allied with oil interests from capital goods manufacturers to financial institutions cheer OPEC on, and render our representative government almost impotent on this issue. You want to hear screaming, just listen if our farmers and their Agricultural Co-ops and Growers Associations ever really try to form a cartel.

Comments

[Henry]

Back in the 70's there was a functioning NFO (national farmers organization) with OPEC like goals of price control by limitation. It did not work, however, because farmers cannot be controlled and their land and rain and fertility endowments cover too vast a range (so to speak).
OPEC is permitted their cartel pricing by "arrangements" with the supreme power (at that time) the USA. Big Oil is big business and the Bushwa family is front and center. However, the U.S. dollar denomination for OPEC is getting a bit costly and the whole crooked deal is coming under heat.
If oil is not denominated in U.S. dollars, the result for U.S. Americans is not going to be pretty. Ask yourself just why, the oil producing countries cannot sell in Yen, Euro, or Pound? It's been neat while it has lasted, but the money changers always seem to be flying through the doorways of time.

[Stevelagain]

It's time to stop using grain for fuel. A groups of scientists have proved that Ethanol made from corn is creates MORE global warming not less.

www.timesonline.co.uk/tol/news/uk/science/article2507851.ece

But Kerry, Kennedy, and others have passed a bill that will massively increase our use of corn for fuel and massively increase the cost of our foods.

I don't believe the energy bill has passed the house yet, hopefully in conference they will drop the ethanol standard.

It's time to STOP with KNEE-JERK, Feel-Good, Junk-Science, PANDERING by our politicans on global warming. They need to move slowly, deliberately and responsibly. Increasing mileage standards was great. Increasing use of corn for fuel...pandering stupidity that will hurt all of us, the entire world as it makes global warming worse and food for the poor more expense.

Already the UN is having to cut back on food to aid the worlds poor because of rising prices.

STOP THE USE OF CORN FOR FUEL. MAKE IT ILLEGAL. Food crops should not be converted to fuel. It's bad for everyone.

[mrcontinental]

More from the "defeated" russians:

The growth in Russia's proven reserves is mainly happening at existing fields in western Siberia, a supposedly "mature" region where production had been declining until recently. DeGolyer & MacNaughton predicts that western Siberia could boost its output to 10 million bbl. a day by 2012, up from less than 6 million at present, and keep production at that level for at least 10 years. The use of even newer technologies available by then means that western Siberian oil production may not decline for decades to come. Russia's reserve potential is vaster still when undeveloped regions, such as the Arctic, the Caspian, and in particular eastern Siberia, are factored in. And then there's Russia's plentiful supply of natural gas. It is already acknowledged as having the world's largest gas reserves, with 47 trillion cubic meters, or 26.7% of global reserves.

But tapping Russia's vast oil pool will require billions in investment, especially in export pipelines. Although on course for 8% growth this year, production gains could slow as export bottlenecks appear. But infrastructure investment is likely to go up in tandem with reserve estimates. If Russia finds a way to get all that lovely oil to needy international consumers, its days as a global energy powerhouse could be just beginning.


Notice the billions in investment mentioned above. With the current climate for oil and the uncertainty in the middle east where would you invest your funds?

[mrcontinental]

But as Russian oil companies adopt technologies, such as horizontal wells and computerized reservoir management systems, the estimated recovery rates are being revised. Thanks to new techniques, which make it possible to obtain oil even from apparently depleted fields, Russian oil companies already have managed to boost their output by 50% since 1998. "The biggest thing is the [new] technology being deployed in western Siberia. The results are beginning to show," says Martin Wiewiorowski, senior vice-president of DeGolyer & MacNaughton in Moscow.

[mrcontinental]

Genetically modified plants are also believed to be responsible for the disappearance of millions of bees:

Several scientists have come forward with the startling claim that genetically modified food ­ you know, that blessing from above that would solve famine and put food in the belly of every undernourished, Third World child ­ is destroying bees. How could something so wondrous as pest-resistant corn kill millions upon millions of bees? Simple ­ by producing so much natural pesticide that bees are either driven mad or away.

Most genetically-modified seeds have a transplanted segment of DNA that creates a well-known bacterium, bacillus thuringiensis (Bt), in its cells. Normally Bt is not a problem ­ it's a naturally-occurring pesticide that's been used as a spray for years by farmers looking to control crop damage from butterflies. And it's effective at helping beekeepers keep bees alive, too ­ Bt is sprayed under hive lids to keep those pesky wax moths from attacking.

But "instead of the bacterial solution being sprayed on the plant, where it is eaten by the target insect, the genes that contain the insecticidal traits are incorporated into the genome of the farm crop," writes biologist and beekeeper John McDonald. "As the transformed plant grows, these Bt genes are replicated along with the plant genes so that each cell contains its own poison pill that kills the target insect.

Wonder what effect it's having on us humans since it cannot be washed of like traditional pesticides? This is serious yet you never hear about it in the MSM.

[mrcontinental]

IMPACT: With control of seeds and agricultural research held in fewer hands, the world's food supply is increasingly vulnerable to the whims of market maneuvers. Corporations make decisions to support the bottom line and increase shareholder returns - not to insure food security. Ultimately, seed industry oligopoly also means fewer choices for farmers. A new study by the US Department of Agriculture examines the impact of seed industry concentration on agbiotech research. The study concludes that reduced competition is associated with reduced R&D. Despite seed industry claims to the contrary, concentration in the seed industry is resulting in less innovation - not more.
PLAYERS: A fistful of transnational firms, the Gene Giants, dominates global seed sales. Monsanto, Dupont, Syngenta - all among the world's top-ranking pesticide firms - lead the pack.
POLICY: Seed industry concentration is already high on the agenda of civil society and farmers' organizations that are working to support and maintain peasant and farmer-controlled seed systems and against policies and technologies that seek to further privatize seeds.

I don't know about the rest of you but I don't think a handful of private corporations controling the food supply is a good thing for anyone. Do some homework on them and see for yourself.

[mrcontinental]

According to ETC Group, the top 10 multinational seed firms control half of the world's commercial seed sales. With a total worldwide market of approximately US$21,000 million per annum, the commercial seed industry is relatively small compared to the global pesticide market ($35,400 million), and it's puny compared to pharmaceutical sales ($466,000 million). But corporate control and ownership of seeds - the first link in the food chain - has far-reaching implications for global food security. A single firm, Monsanto, now controls 41% of the global market share in commercial maize seed, and one-fourth of the world market in soybean seeds. The same company's seeds and biotech traits accounted for 88% of the total area planted in genetically modified seeds worldwide in 2004.

And they buy up more everyday.

[banjomike]

Remember all those Farm Aid concerts?
Well, the guys they were put on for raised wheat. At one time, a lot of it.
Wheat prices remained far too low for far too long. Ten years ago, that $3.50 wheat wasn't enough to pay the taxes on the land, replace that $150,000 worn-out combine used to cut it, pay off the operating loans, and feed and keep a roof over the families that grew it. All those small farmers loved the land and their job, but love don't feed the bulldog. They either wore out or were forced out.

The price should have been around $6.00 back then for small and medium sized farmers to make enough to keep their farms. Over the past 20 years, agriculture based corporations gradually took over most of the small farms forced out of business from over 10 years of rotten prices. These corporations now control all the storage, ag port capabilities, and the fleets of ships needed for transport.

The only check on these big outfits' vertically integrated control of the wheat production was the small farmers, who, by selling when they needed to sell annually, kept a damper on the big boys. Now that they are mostly gone, don't expect anything to change for a very long time to come.

The USDA programs only partially helped the situation. Some states benefitted more than others, but the biggest benefactors of all were the agricultural corporations. The program is so restrictive that, when the market outlook was good, farmers couldn't plant the land even if they wanted, and let market forces prevail.
Now, with a persistant drought that has lasted almost 10 years in many of the largest wheat producing states, much of this ground couldn't grow a crop anyway.

The corporate monopoly has been here for a long time. I'm surprised you are just waking up to it. That it is going international should be no surprise.

[Stevelagain]

There is no need for the family farmer if it means we have to pay double or triple for our food to keep them. They can go get a job like the rest of us. The market system works just as well in the farm system as any other system.

What doesn't work, what fails time and time again is big government socialists who cannot manage the economy as well as the laws of supply and demand.

If the little guy can't give us food as cheaply as the big guy...then we don't need the little guy. They should grow something that they can get paid for, or sell the farm and move to another job. That's how the market place efficiently uses resources to meet the demands of society.

[twgbonehead]

Wheat $ 9.51/bu | $ 4.45/bu | $ 3.54/bu

Etc. Yeah, those Big Guys are sure using their "economies of scale" to provide cheap food.

Another jerk who loves the "Free Marketplace" - But only with enough government intervention to drive out all the small guys so the corporate whores can prosper "efficiently".

[mrcontinental]

More info on the leeches seeking to control your food:
The advent of commercial GMO seeds in the early 1990"s allowed companies like Monsanto, DuPont or Dow Chemicals to go from supplying agriculture chemical herbicides like Roundup, to patenting genetically altered seeds for basic farm crops like corn, rice, soybeans or wheat. For almost a quarter century, since 1983, the US Government has quietly been working to perfect a genetically engineered technique whereby farmers would be forced to turn to their seed supplier each harvest to get new seeds. The seeds would only produce one harvest. After that the seeds from that harvest would commit "suicide" and be unusable.
There has been much hue and cry, correctly so, that this process, patented "suicide" seeds, officially termed GURTs (Genetic Use Restriction Technologies), is a threat to poor farmers in developing countries like India or Brazil, who traditionally save their own seeds for the next planting. In fact, GURTs, more popularly referred to as Terminator seeds for the brutal manner in which they kill off plant reproduction possibilities, is a threat to the food security as well of North America, Western Europe, Japan and anywhere Monsanto and its elite cartel of GMO agribusiness partners enters a market.

Scare stuff huh? Trust me it gets worse.

[banjomike]

All of those crops you mentioned have not been able to re-generate themselves after a year since they have been domesticated. Those 'suicide' seeds you mentioned aren't necessary.
Unharvested wheat, rice and soybeans will volunteer- will regenerate- for a year, but that's it. Corn won't even do that; if left unharvested, none will grow the following year.

Seed stock taken from the crop needs to be replentished yearly. Farmers can save their own stocks, but consistanly need to refresh their stocks with grain grown from off their farms.

It wouldn't surprise me if such 'suicide' seed stocks were developed, but they would be for only a few of the seed grains. Rye, for example, will volunteer year after year, but it is one of the rare exceptions.

[twgbonehead]

You're talking about 2 different things here. Whether unharvested crops will re-grow (on current cultivated land) for multiple seasons is an entirely different issue from whether seeds from one year's crop can be successfully used to grow the next year's crop, ad infinitum.

[mrcontinental]

And sorry Raymond they already HAVE their monopoly.

[mrcontinental]

This has been out for a while, heres a sample:
The Agreement on Agriculture

The heart of the WTO machinery is the WTO Agreement on Agriculture (AoA), which under the sheep"s wool of "free trade," hides the wolf of private agri-business GMO monopoly power. Under AoA rules, since 1995 poorer developing countries have been forced to eliminate quotas and slash protective tariffs, at the same time the Bush Administration voted to increase its subsidies to US agribusiness farming by $80 billions.

The net effect has been to allow the powerful monopoly of five grain trading giants"Cargill, ADM, Bunge, Andre (formerly) and Louis Dreyfus"to dramatically increase the dumping of food commodities globally, ruining millions of family farmers worldwide in the process, while maximizing their private corporate profits.

The AoA of WTO ignores the reality of agriculture markets which are qualitatively different from, say, the market for cars or CD"s. Agriculture and national food safety and security are at the heart of a nation"s sovereignty, and its obligation to its own citizens to support the basics of life. Agriculture is unique in this respect, along with water rights.

The AoA was written by the US-dominated agribusiness giants such as Cargill, ADM, Monsanto and DuPont, to serve the agenda of these global supranational private companies, whose sole aim is to maximize profits and market monopoly, regardless of human consequences. Their focus is the domination of the $1 trillion global agriculture trade. The actual author of the AoA of WTO was Daniel Amstutz, a former Vice President of Cargill Grain, who was at the time in the Washington US Trade Representative"s Office, before going back to the grain trade.(3).

[mrcontinental]

That pesky WTO that so many have forgotten about, quietly going along their merry way ruining lives.

[wiseferret]

Comparing a renewable resource (grains) to a non-renewable resource (oil) is a faulty premise. Apples and oranges.
A better comparison for oil would be other non-renewables like metals and gemstones. Both require laborous extraction and are traded widely. You might still get the same answer because I don't hear much whining over *unreasonable* rates of increase on copper, gold, diamonds, etc. And your numbers will mean something.

[avergejoe]

Opec? Not big oil. (Record profits every year)

Who is paying for this distortion?

[realitytrumpsbull]

If you've got an acre or two, you can grow your own...small farmer co-ops can keep things going too...you can make ethanol out of anything that
makes sugar...

[FunTravelAdventure]

I thought about this 30 years ago after the first oil shock. They want $80 for a barrel of oil, we want $80 for a bushel of wheat. As far as I'm concerned, let them eat sand.

And Tim, "Grain is a PLANT can be grown in only one season!!!
Petroleum is a FOSSIL FUEL we have less and less every single day!!!
I know these facts are difficult to understand."

That's not hard to understand at all. Try looking it up.