Runaway inflation of foodstoff prices hits Russia hard

[K. A. Pital]

Well, have fun as Russia stops growing food

Suck my dick, MoO. Russia grew 105 tons of grain in 1991, being in isolated market. Russia grows 77-90 now and exports 12 millions of them in an open market. Wait... maybe growing food will not be stopped?

Your argument is that the exclusion of foreign demand will decrease production, but how do you know that it will decrease production to a level lower than that prior to the increase in demand?

He can't. The "excess" 12 million tons grain - even if they will not get grown - but partly they will, since domestic market still operates at a profit, just a lesser one than the one First World dickery has created - are either lost for hungry citizens. But with a ban, at least some of that - or even all, with a proper government subsidy - can be given to citizenry.

Perhaps in the very short term, but meanwhile suppliers are exiting the market at the margin because of the reduced price of food.

What suppliers "exit"? They are land-tied - and besides, they still operate at a profit. This is not a retail store or something. Most of the increase in world prices goes to large-scale exporters anyway. If that were cut off, the domestic producers would hardly feel a huge loss - a new equilibrium would be put, with a domestic market price.

Are you saying Russian domestic market cannot buy all the grain it produces, if there's nowhere to export? And if it can, why would that not operate at a profit? Sure, at a lesser one that exporters of grain collect now, but it will not mean agriculture will go bust or stop producing. So fuck you and your silly insinuations.

[K. A. Pital]

Let's see. 12 million tons exported. 65 tons, say, are remaining for internal consumption. Does that mean 77 tons will get produced without exports? Not unless a subsidy. But if, say, 70 tons get produced (for additional satisfaction of domestic market) the next year at similar prices, and eventually a subsidy from other sectors can be put in place, so that the entire 77 get produced and sold on the domestic market. Then you gradually remove the subsidy as incomes of the population grow, and so does the domestic market and a/c production.

Also, what is the point of exporting grain if you are later forced to re-import it at a higher price by a government subsidy back from the First World - "outbidding" it - which of course drives down the price and gives more available food, but the traders and profiteers already had their share of income on that. Which is a loss for the producer country.

[K. A. Pital]

Indian pulse export ban of 2006 occurred on June 28, 2006 when the finance minister of India declared a ban, with immediate effect, on exports of sugar, pulses and wheat until the next harvest, due to domestic shortages. It will be in force until December 2006.[1] The ban was later extended until March 31, 2007.[2] This has pushed prices up in countries such as Bangladesh and the United States of America.

Yep, that's right folks. If your home market can still develop, you can ban exports. This will drive prices in other countries up, but why the fuck should my country care about foreign consumers? They sure as hell don't care about the plight of the populace here.

Another example:

Neighbouring Vietnam, which is currently the world's second largest exporter of rice, last week put a temporary ban on all rice exports after contracted volumes hit a government cap set for this year.

Subsequently prices on the domestic market have been steadily falling, in line with plummeting market demand. Generally prices across the country are reported to have fallen by up to 10 per cent as leading suppliers race to off load stocks on domestic buyers.

"This is a question of supply and demand," said Jef Jordaens for international rice brokers Schepens. "Because there is no demand from importers rice prices are falling as domestic suppliers seek out better deals in the face of the falling competition. Obviously this will help to increase rise stocks in the country but it is not a good situation for the rice producers who will be losing out to markets such as Thailand."

...

"This is a very good situation for Thai exporters," said Jordaens. "Demand is constantly increasing for their exports, whilst prices are rising as the market feels the effects of the reduced supply. Meanwhile, until Vietnamese exporters can resume trading this is a very uncertain situation for them."

Oh my ass, "lose out"! I don't care if my grain producers have less profit than grain producers of another country which allows exports, but their population is in hunger. Pity pity poo.

And finally, the UK meat ban:

Prices paid to farmers fell from £2.57 per kg deadweight, before the outbreak of the disease in August, to between £1.80 and £2.20 per kg last week. To gain some profit after production costs, farmers need to receive £2.50 to £2.60 per kg.

Retail prices collated by the Meat and Livestock Commission showed that shoppers were currently paying more for lamb. The average cost of leg of lamb last week was £7.37 per kg, compared with £7.20 per kg before the summer.

Seems under a ban, there is a good amount of reserve which can be depleted - at the cost of greedy traders, not farmers. So the incentive to produce, is NOT immediately offset by a ban if enacted with correct regulation - like, a bit more toughness on the traders.

The immediate effect would be a domestic price slump since all grain prior given to the West will hit the domestic market, forcing prices down. The longer aftermath would be increased pressure on traders, possible bankrupcy of exporters (why the fuck should I care anyway), and the slow rise of domestic prices from the slump to a new eqilibrium.

Production of yearly crops will not fall more significantly than what has been grown for domestic market the previous year, and possibly more since domestic demand expands. You don't need the world market to expand your own agriculture, if your own market can consume all this grain, even at a lesser profit.

[Darth Wong]

Well, have fun as Russia stops growing food because people like you are too stupid to understand market forces. I suppose nothing's wrong with your idiocy. Except for the whole "killing people" thing.

Do you have situationally relevant empirical evidence to back up this mechanism that you seem to be describing as if it's as rock-solid as Newtonian mechanics?

[Kanastrous]

This is kind of a blue-sky wacky question, but given the contemptible things that US leadership does, to keep its citizens off-balance...

...Stas, do you think it at all reasonable to wonder if the Russian leadership is to some degree purposely contributing to this food-pressure, in order to maintain some degree of stress and desperation among Russians, to serve political ends?

[K. A. Pital]

...Stas, do you think it at all reasonable to wonder if the Russian leadership is to some degree purposely contributing to this food-pressure, in order to maintain some degree of stress and desperation among Russians, to serve political ends?

I don't really know if they do. There has been a huge cartel busted last week which drove prices up (legal proceedings on 15 large food traders started), but a cartel doesn't have relation to the government. Aside from that, what political structures could benefit from such a price hike? Left-wing politicians? Russia's government is decidedly right-wing.

And in another newsflash, there are governments more desperate to feed their people than us. "Democratic" Ukraine is one of them.

The export ban harmed profits of agro-corporations such as Cargill and ADM, which had invested in Ukrainian agricultural infrastructure but as a result of the law were unable to export product to international markets.

The Wednesday government announcement established limited export quotas, among them 600,000 tons of corn, 400,000 tons of barley, and 200,000 tons of feed wheat until the next growing season.

The limits represent between 25 and 35 per cent of Ukraine's entire export capacity for seed crops, whose annual volume averages between 4 and 5 million tons, according to the report.

The spring and summer export ban allowed the Ukrainian government to augment state-owned grain reserves of its own, as the government was able to purchase grain at reduced prices, said Anatoly Kinakh, Ukraine Economics Minister.

Ukrainian export ban - already in effect!

Wah - wah - wah, it violates freetrade principles! Wah - wah - wah, the government essentially requisited grain from Western supercorps - and a price downfall allowed to requisit enough grain for the citizenry. But this is so wrong, apparently, if the government instead of Cargill takes up investment into the country's agriculture and disallows exports to the West. Why? Because the government, even if a/c will develop at a slower rate, will NOT sell grain to the West? Well fuck you and your global market. You can enjoy rising prices. We can have our grain, even if there's a slight production fall it doesn't matter since the domestic+export produce quantity would gradually be restored by the growing domestic market demand. It's just that the First World will not see any of our grain in the process, and our farmers and traders will not become filthy rich while people starve. Well, I can live with that.

[Kanastrous]

Aside from that, what political structures could benefit from such a price hike?

Anyone looking to prime the public for adventurism, or national validation in the form of aggressive foreign manuevering, the kind of stuff that lets people forget their domestic misery by immersing themselves in nationalist sentiment. Which might be the Putin govenrment.

But, like I said, maybe that's just too paranoid-wacky.

[K. A. Pital]

From a paper simulating effects of a log export ban and it's lift several years later. Note that both the ban and lift are sudden as opposed to gradual, and the ban is short-term. The end result is increased domestic processing capacity - indeed the competition in an enclosed market will lead domestic producers trying to increase their processing of grain, cheapen it through economies of scale and whatnot. The price hike after export ban is lifted can be mitigated by gradual lift-off and subsidies to production of said good to ramp up a bit more produce before opening export quotas.

The [url=http://pws.prserv.net/RGDudley/PDF/DudLXB04.pdf]same paper[/url[ examines effects of a long-term ban:

A long term log export ban would limit harvest as long as the ban is in effect, but the decrease in harvest will be less than the amount of banned exports because of expansion of domestic processing.

It means that the decrease in domestic production will be less than what the country lost as exports. In other words, you're full of shit when you say production decline will surpass exports, MoO.

[Stuart Mackey]

Doesn´t the west actually burn their overproduction to keep the prices stable and to justify the massive subventions for farmers?

In the United States, generally speaking, what is instead done is that farmers are paid to not grow crops.

They are also subsidized to sell at very low prices and farmer incomes are subsidized to cover the shortfall.

[brianeyci]

Man maybe I'm in a bad mood today but now I know how RI felt when I dissed "stupid" people who work hard or LT when I implied people were stupid for living in farms and not in apartment buildings in cities. MoO's viewpoint isn't just that of an economist. It's of a guy who spends an insignificant amount on his food (as he claimed himself in some thread a long while back) and get this: a guy who claims he can rebuild everything and anything with a ten thousand dollar loan after losing everything (I don't remember the context of this). I did not search for this, I only remembered because I was going what the fuck back then but I finally get it now.

MoO thinks that it's certain people's fault that they can't afford food. You have a few hundred dollars? Of course you can afford food, says he. Full recovery is only one ten thousand dollar bank loan away, for the worthy who know how to invest and play the market.

Maybe one day MoO when the American dollar has gone to utter shit and the world does not need your services anymore as the financial sector and its carefully built house of cards of fiat currencies and economic theories is destroyed and you're sitting in front of a soup kitchen watching the news of fat lazy fucks who are living like kings while American purchasing power is near worthless will you finally get it. But then again, maybe not.

And what is with you and SUV? Every time anybody brings up SUV it's not to allude that the person even has an SUV. It's to allude to the incredible waste of the first world and how it is spoiled. But it seems to be a sore spot with you. Do you own an SUV?

[K. A. Pital]

Records show Irish lands exported food, even during the worst years of the Famine. When Ireland experienced a famine in 1782-83, ports were closed to keep Irish-grown food in Ireland to feed the Irish. Local food prices promptly dropped. Merchants lobbied against the export ban, but government in the 1780s overrode their protests; that export ban did not happen in the 1840s.

So historical practice shows that export bans and agriculture isolation can save people from famine, despite what MoO insinuates - a hundred years after export ban as famine alleviation, Ireland experiences a new famine - which is not alleviated. Britain's "market policy" in Ireland led to massive death which could have been avoided in the first place - by IGNORING British demand and creating a diverse agricultural industry for your own consumer at first. But that's anti-market! Even during the famine itself, which was several years of blight, it could have been alleviated by flat-out banning exports. Production is not as elastic, so it would not lead to an immediate drop in production; more than that, when domestic demand would have picked up, production would recuperate. Even a lesser amount of produce re-distributed among the needy is BETTER than a greater amount of product, shipped off to another country that is well-off, while you starve.

So if export bans give a drop in production which is less than 100% of said food exports, we can conclude that the ban has been effective as expansion of domestic agriculture market and hunger alleviation.

[Darth Wong]

MoO's viewpoint isn't just that of an economist. It's of a guy who spends an insignificant amount on his food (as he claimed himself in some thread a long while back) and get this: a guy who claims he can rebuild everything and anything with a ten thousand dollar loan after losing everything (I don't remember the context of this). I did not search for this, I only remembered because I was going what the fuck back then but I finally get it now.

He once said that he and his wife were comparing notes and decided that they were incredibly lucky to be so well-paid for doing so little work. I suspect that this is all out-of-context problem material for him; he has no grasp of what it's like to be in real trouble and perhaps he has little interest in finding out. I was somewhat flabbergasted to see that he responded to my last question by simply declaring that yes, a starving peasant in Tanzania can simply tighten his budget belt in order to pay for food.

But he's defending the dogmas of his profession. This reminds me of the time that I was arguing that salary compensation does not really correlate to one's productivity or value to society, and he said that I was flat wrong and didn't know anything about economics. When I challenged him to explain, he said that productivity always tracks compensation perfectly, because productivity is defined by how much the free market will pay you. In other words, salary always tracks productivity because productivity is determined by salary: a perfectly circular argument. It seems to me that many economists' arguments are like this: at some point they simply rely on an a priori declaration of truth.

[Sturmfalke]

From a paper simulating effects of a log export ban and it's lift several years later. Note that both the ban and lift are sudden as opposed to gradual, and the ban is short-term. The end result is increased domestic processing capacity - indeed the competition in an enclosed market will lead domestic producers trying to increase their processing of grain, cheapen it through economies of scale and whatnot. The price hike after export ban is lifted can be mitigated by gradual lift-off and subsidies to production of said good to ramp up a bit more produce before opening export quotas.

The price hike at the end of the ban can most certainly be mitigated, but the graphic shows that prices rebound rather quickly to pre-ban level after the log ban is introduced. If there is a comparable effect after the introduction of a ban on food exports, the problem of unaffordable prices would remain... or did I overlook something?

[K. A. Pital]

If there is a comparable effect after the introduction of a ban on food exports, the problem of unaffordable prices would remain... or did I overlook something?

The goal is to halt prices. A ban first drops them, then halts them.

If further want to drop prices to below-ban levels, you need:
a) price regulations in immediate terms
b) government subsidies to grain producers
c) investment in domestic agricutlure processing as powers shift from exports to domestic consumption - actually, this will happen naturally through the market under a ban, but the government can speed it up so that production is recuperated

This is what will happen:

A long term log export ban would limit harvest as long as the ban is in effect, but the decrease in harvest will be less than the amount of banned exports because of expansion of domestic processing.

[Sturmfalke]

If there is a comparable effect after the introduction of a ban on food exports, the problem of unaffordable prices would remain... or did I overlook something?

The goal is to halt prices. A ban first drops them, then halts them.

If further want to drop prices to below-ban levels, you need:
a) price regulations in immediate terms
b) government subsidies to grain producers
c) investment in domestic agricutlure processing as powers shift from exports to domestic consumption - actually, this will happen naturally through the market under a ban, but the government can speed it up so that production is recuperated

This is what will happen:

A long term log export ban would limit harvest as long as the ban is in effect, but the decrease in harvest will be less than the amount of banned exports because of expansion of domestic processing.

Is halting prices enough to make sure that noone has to starve?

If I understand you correctly, your suggestion was that the ban should not be temporary (e.g. over a period of five years like in the log example) but longer as to allow the domestic food industry to (1) produce enough food to supply the population at a price lower than the current price and (2) to regain international competitiveness before the ban is to be lifted again.

[K. A. Pital]

If I understand you correctly, your suggestion was that the ban should not be temporary (e.g. over a period of five years like in the log example) but longer as to allow the domestic food industry to (1) produce enough food to supply the population at a price lower than the current price and (2) to regain international competitiveness before the ban is to be lifted again.

The food production industry will supply 100% of what formerly was exported at the very start of the ban, which will lead to a price slump. As production of goods for export plummets, it will be 100-X%, so technically the price should not be rising up as high as it was, since more is available for domestic markets.

Price controls are immediate measure to alleviate a possible price spike due to speculation in the fallout from the ban. The agriculture will still produce more food for locals than it did beforehand. All that is produced will be consumed, the Say's law - producers will be forced by the market to lower prices and eventually everything will be eaten, thus alleviating possible hunger.

Is halting prices enough to make sure that noone has to starve?

In the log ban example, the government had a full year of slumped prices before they started recuperating. Just as with the Ukrainian slump, it allows the government to aquire resources at low-prices - which then can be carefully rationed to avoid severe repercursions to the low-income citizens.

So technically, you might not even need to halt prices - just act smartly in the immediate after-ban period, aquisite grain and invest in dom.processing, foister domestic competition for cost-cutting.

[Broomstick]

That's what makes it so bad: there are really good arguments against biofuels from their tree-hugging perspective, but 'oh the land was forests once thus it sucks' is just retarded. Instead of emotive bullshit they could just throw up crop area/biofuel yield statistics, but noooo they have to come across like idiots instead. Damn populists.

Nevermind that most of the land in the US Midwest that is used to grow biofuel plants was originally prairie and not forest... but then there's a reason they call them tree-huggers and not grass-huggers. Conservation efforts around here that call for tree planting sort of ignore the original ecology except in very limited areas with very limited species.

[Broomstick]

It's also perfectly viable to use oil superprofits to compensate food production losses, if the food production operates at a loss.

However, I do not see Russia's grain producers operating at loss - they still have not met real domestic demand, but they voluntarily choose to export since outer bidders outbid the citizens of the country. Therefore, it's an issue of choosing higher profit which directly harms citizens, not "oh doom and gloom, they'll go bust if they don't export the grain but sell it at home".

So what? The point is that you correct the long-term imbalance by paying them for their product. Well, why do you want to keep people from outbidding the foreigners?

Um... because your citizens don't have the money to do so?

Why do you fail to understand that part of the problem here is a lack of money with which to buy the higher-priced food? It really is possible to starve not from a lack of food but from the means to obtain such food.

Or do you think someone in, say, Cost Rica or yes, Russia, can actually outbid the typical American or European when buying resources?

[Broomstick]

Sorry, but no. I'm sure they have other essentials that they're still paying for, like housing, fuel, etc. As I said, before, their options suck, but that's not a sufficient reason to take away their sucky choices by capping prices. Even having sucky choices to make is better than having one sucky option forced upon you by someone else.

Geez, I can tell you're from California with a relatively mild climate.

Are you suggesting that people in Russia cut back on, say, winter fuel consumption? My God - you're telling people to choose between starving and freezing. That's callous. Not to mention the average Russia lives in a fraction of the space of lower-middle-class Americans.

You just don't get it that there are HUGE numbers of people who really are at the limit of their resources.

You don't like price caps? Fine - come up with another way to enable people stretched to the limit to buy food.

[K. A. Pital]

Or do you think someone in, say, Cost Rica or yes, Russia, can actually outbid the typical American or European when buying resources?

Great Irish Famine says no, you can't outbid. Exporters can even expand their exports when you are literally dying, which will signify your total inability to compete with the rich importers, even if the marginal utility of food for you is absolute and probably a 1000 times more than for a rich fuck in the importing country. That happens daily in the world, people for whom utility of food is the greatest lose out to people who buy food for their pets, livestock or, in the latest century, the most atriocious of all - cars.

I wish he was put down before a "sucky option" - to die when famine strikes, but neighboring potato farmers get filthy rich by exporting their goods to England still... and even expanding their exports! Of course those businessman are not guilty of starving MoO, but MoO is now guilty of starving himself since he can't "outbid" Englishmen! In the free market, no one is ever guilty of anything - except the government!

Of course, the hungry people will eventually attempt a violation of property, which is against the Holy Market. In this case, the rich exporters will use armed guards to guard against the people who desperately try to get the food, and continue to profit amongst death and suffering, which is precisely what happened historically in my example.

And that is MoO's splendid vision - people must be sacrificed for economic growth tempos - because of course, a high economic cost for other sectors is MORE important than saving human lives! Any intrusion in the form of quotas, bans, price controls per his idea lead to immediate collapse of agricultural sector, when in fact history does not corroborate that in the slightest.

[Broomstick]

FOM poll from October shows even worse results:

Two thirds (64%) report that they are forced to abandon buying everyday foods. The products which are rejected are meat (40%), meat products (36%), milk and milk products (37%), fruit (27%), fish (22%), fish products (19%).

Right. That's not surprising since those are the high-quality calories that people give up first during famines.

They are also the "high quality calories" that maintain optimum health. Or don't you think people should eat diary and fruit? And, despite what the vegetarians claim, people really do require occasional animal flesh such as meat and fish, or at least some dairy.

Or don't you realize that famine diets can lead to poor health and shortened lifespans?

1) Why do you need to increase the quantity of food as opposed to produce the same amount and sell at the same affordable price? The hunger you speak of is not due to lack of foods, but due to lack of their availability to people.

It's the SAME PROBLEM. You cannot maintain the quantity of food produced while lowering the price unless there is an exogenous shock in demand. And this is FOOD, so there is essentially no elasticity in terms of demand.

Perhaps not in what are now normal first-world conditions.

It seems you do not understand famine - not enough food can be obtained. Demand DOES become elastic at a certain point, the point at which not enough calories can be obtained to continue previous energy use. The human body can reduce demand somewhat by lowering the metabolism, becoming lethargic, and in more extreme cases even reducing the energy supplied to the brain, but that's NOT good for those affected. For such people, increasing the availability of obtainable food WILL drive up demand because they're NOT GETTING ENOUGH TO EAT.

WHY do you not understand that?

You do understand that it possible to starve to death, yes? That is, die because you don't get enough to eat?

And why is that? If they are not operating at a loss, then the agriculture does not have an incentive to reduce production.

Because it gets shipped elsewhere, you retard. Are you deliberately ignoring the whole point of this thread, or are you simply incapable of synthesizing various statements that you yourself have made?

No, I think he's a middle-class American who has never gone to bed hungry and with only an armchair understanding to economics (regardless of what formal education he may have). I don't think he understands that food is NOT a luxury item that can be skipped - that a person really can die from lack of sufficient calories.

Nor is housing and fuel a luxury in a Russia winter that people can forgo without potentially lethal consequences.

In other words, he just doesn't get it and just doesn't empathize.

Do you seriously not understand that raising the price increases quantity on the supply curve and decreasing the price lowers quantity on the supply curve? Or are you just too stupid to recognize that price and quantity are functions of each other?

You are assuming that there a sufficient minimum to provide for essential needs. If there is not enough of a food to sustain life or meet demand then increased supply will NOT drive the price down - the seller will simply sell more stuff. During famines situations can arise where food is not available at any price. It's GONE. Prior to that state, food is available but exceeds the resources of many people to buy even if they liquidated every other asset (which also leaves the problem of how they'll manage to eat the next day). Why can't you wrap your head around that?

Please don't tell me that a price raise which causes 50-60% of the population to consume less food is at the same time causing more food to be available in the country.

It is! Raising the price is precisely what has allowed the quantity of food and the price of food to equilibrate even at this level.

What makes you think there is an equilibrium at this point?

Otherwise, it's pointless since the majority cannot afford it anyway. So who is "outbidding" then?

The First World nations that imported the Russian exports. Are you honestly this stupid? I'm just repeating the factual information that you yourself have posted in this thread, but I'm drawing the correct inferences from it.

MoO - do you truly not understand that first worlders outbidding others for a basic essential such as food can lead to people dying? Do you not realize that starving to death is painful and prolonged? Do you not realize that inadequate nutrition - not only lack vitamins and such but lack of adequate calories - can impact long term health? Does the suffering of millions mean nothing to you?

If only 20 million can say, afford cheese, will the other 120 million see an increase in cheese supply for them? Surely not. Whoops.

Ugh. This is a horribly false analogy. If the 20 million who can afford cheese buy cheese then the prices of other foodstuffs will decrease since those people will gorge themselves on cheese.

ONLY if there is sufficient cheese to meet demand! You are assuming that somehow enough food will be produced to meet any demand - but food is not a factory-made widget in the sense of, say, pencils. Farmland can only produce so much food and productivity varies from year to year due to things such as weather which we can't control. If 1,000,000 people want a 100 gram block of cheese and you only have 20,000 such blocks there isn't enough cheese to go around, don't you get it? Producing another 20,000 blocks of cheese still would NOT decrease demand because 60,000 people want cheese and still can't get it

Meanwhile, there's not enough apples to go around, not enough onions, not enough of anything. It's not just the quality of food that suffers in a famine, it's the quantity.

During the Great Irish Famine there were reports of people stuffing themselves with grass to fill their bellies because they could not afford to buy food to replace their failed crops. They died not because there was NO food in the country but because they didn't have the resources to buy it. THAT's what sort of conditions we're discussing here, not a shortage of, for example, strawberries because there was a crop failure and people can switch to lower-priced oranges to eat - the problem they're talking about is there aren't lower priced alternatives. There's not alternative because there's not enough to go around to meet essential needs.

[brianeyci]

He once said that he and his wife were comparing notes and decided that they were incredibly lucky to be so well-paid for doing so little work.

Fine well, to me it seems almost insane that a person cannot understand if his own property is being taken, and he stops it from being taken, he keeps what little he has. His rebuttal "this only happens in the short-term" is wholy inadequate and disgusting, considering the repercussions of no food no heat no shelter occur almost immediately. But you know him better than I do.

He actually thinks that goods will cease to exist if they aren't allowed to free flow across borders. In other words, resources which are land tied such as food or oil increase or decrease solely due to human greed and not because they merely exist there to be exploited by whoever happens to be at hand.

[Darth Wong]

He actually thinks that goods will cease to exist if they aren't allowed to free flow across borders. In other words, resources which are land tied such as food or oil increase or decrease solely due to human greed and not because they merely exist there to be exploited by whoever happens to be at hand.

To be more precise, he is looking at the economic "big picture" and ignoring localized variations, in a debate which is all about localized variations. Generally speaking, if you decrease the purchase price for an item, there is less incentive to produce it, so producers cut back on production. That's the basis of his argument that increased prices actually lead to more availability of food. The problem is that he's completely ignoring the fact that the locals in an impoverished region are not the ones offering these increased purchase prices, so they obviously will not benefit from the increased production. Therefore, 100% of production increase in food due to foreign price increases will naturally go to the foreigners, along with a significant fraction of the food that was being produced before, thus reducing the amount of food that can be purchased by the locals. We've seen this in example after example after example.

[Gerald Tarrant]

If there is a comparable effect after the introduction of a ban on food exports, the problem of unaffordable prices would remain... or did I overlook something?

The goal is to halt prices. A ban first drops them, then halts them.

If further want to drop prices to below-ban levels, you need:
a) price regulations in immediate terms
b) government subsidies to grain producers
c) investment in domestic agricutlure processing as powers shift from exports to domestic consumption - actually, this will happen naturally through the market under a ban, but the government can speed it up so that production is recuperated

I disagree with the bolded. The goal is not to halt prices. The goal is to make food available to your country. You actually partly hit on another method in

b) government subsidies to grain producers

I don't understand why you don't explore that suggestion. The classical Trade approach that would be least disruptive is a subsidy to either the populace (to offset increases in cost, this has an advantage of the government being able to apply means tests) or the producers to provide them incentives to sell domestically at the lower price. MoO is correct that the ban's lower price will not (ceteris paribus) cause the grain growers to alter their behavior significantly. Techniques which increase their profits (subsidies for selling domestically in this case) provide incentives to bring more land under cultivation, try more expensive and more productive methods, buy more elaborate equipment.

If your only goal is to maintain the pre-"Ethanol Craze" prices, it's unlikely that a long term solution will be found. Absent quick legislative* action on the Part of the US congress to correct the higher demand on food markets I don't see the higher foreign price changing. To reiterate, I do not think that this is a short term problem. I think it's going to persist until Russian supplies increase to offset the export demand, or external suppliers increase the amount grown, or until Ethanol demands are legislatively terminated.

.
This is what will happen:

A long term log export ban would limit harvest as long as the ban is in effect, but the decrease in harvest will be less than the amount of banned exports because of expansion of domestic processing.

I'm a little suspicious of the assumption that the log and the grain market will behave the same way. My objections to that analysis are

1) Log Harvesting is not as seasonally dependent as Agriculture

2) Log harvesting doesn't require the initial inputs that Agriculture does. Harvesting Logs requires: Labor, tools, and a forest (which is already present). Agricultural harvesting requires fields be prepared almost half a year in advance, depending on climate.

3) Lastly looking at the decreasing price of logs worries me. That graphic you posted (a snip of which i took, shows that the price fall may last for a year)



I'm concerned that the price decrease in question may overlap growing/planting season, which is when farmers make their decisions on planting.


To summarize my position, feeding your population trumps any free trade concerns. but understanding the effects on price is equally important. The lower price your graphic suggests is concerning, as the effects it causes may exacerbate the current problem. It's my understanding that the higher price and the incentives it creates will increase Russian Domestic supply. Therefore my preferred solution is either a subsidy to producers-to offset the price difference between the domestic and international markets, or a subsidy to citizens to allow them to pay the higher prices. From an administrative stand point the first option is easier. The second option allows a little more selectivity, the first option gives the price support to everyone, whereas in the second option you can means test who gets the subsidy-you wouldn't give the CFO of GAZProm a food voucher for instance; the disadvantage is the administrative overhead for the second option is much higher, giving payments to millions of citizens is more difficult than payments to thousands of growers. I think that the export ban must be accompanied by price supports of some sort.

[K. A. Pital]

The goal is not to halt prices. The goal is to make food available to your country.

What if incomes don't grow at the same pace as prices? The very immediate step is to stop the prices, I guess. Either forcibly, or by throwing out cheap and massive grain reserves into the markets. Any other measure will have a delayed effect or, at the worst, can be offset by speculation which can lead to an inflatory vicious cycle and, eventually, famine. Such things happened in Africa, if you've read some UNCTAD papers on it's hunger development, the government there always has to have to enact regulation, or use up a grain reserve to break inflatory cycles, or else.

I don't understand why you don't explore that suggestion. The classical Trade approach that would be least disruptive is a subsidy to either the populace (to offset increases in cost, this has an advantage of the government being able to apply means tests) or the producers to provide them incentives to sell domestically at the lower price.

A subsidy to the populace will exacerbate the inflation problem. A subsidy to producers will mean that the government is compensating the profits lost by farmers from higher world grain prices, which is allright. So the first measure doesn't sound good, but the second is also my suggestion too from the very start, up to using up superprofits from other industrial sectors to support agriculture. In fact, many FW countries intensely support lossy agriculture for the causes of national security, and it doesn't crash their economies so far.

I think it's going to persist until Russian supplies increase to offset the export demand

Agriculture cannot just "increase" supplies that fast. It will need years - if it can do so at all, since peak production even with massive cultivation was something like 105 million tons, and it was when Russia's combine park was far greater. And nothing is really saving us from a catastrophic demand growth for ethanol that will cause further worsening on the world food markets (do you really think Ukraine, India, Vietnam food export bans are not a sign of a worsening situation?). We need some protective measures to at least halt the food inflation rates at a level which will not increase malnutrition of the population. Subsidies from other sectors can last long enough, so can export quotas, etc.

If we do not want to trade with the First World for a long time, of course it will cause their food prices skyrocketing, just as even (so far) short Ukraine, India, Vietnam bans have impacted the price growth there, but why would I really care about them?

I'm concerned that the price decrease in question may overlap growing/planting season, which is when farmers make their decisions on planting.

If you know stuff about Russian agriculture, it's that it's rather hard to shift to some other cultures. Grain is export-capable culture, but shifting to something else? There are no other cultures which will yield higher profits, I fear, neither can they be easily massively expanded, since Russia's enterprises are large farms which are oriented towards producing some type of agricultures with all their machinery and field disposition (for example, colder lands cannot be used up for grain production, just as it's unlikely to use chernozem for potato production, since the potato market is satisfied and doing rather ok).

But I agree with your position on subsidies - to make the slump effects easier on farmers, they should be subsidized.

The second option allows a little more selectivity, the first option gives the price support to everyone

If you saw the stats, only a very little percent of people spends less than a quarter of income on foods, the rest spend from 50% to 100%. So I guess unilateral support here has a meaning - if 63% are reducing nutrition, that can't be right to support only the poorest of them - besides, the government already does it with food talons and point-subsidies in some places.

In short, your position is reasonable. As Ukraine is running a ban very similar to the one we're discussing, I guess post-analysis of that would be useful to determine a possible course of action should the situation worsen.