US drought might lead to food shortages and global unrest

Published: 25 July, 2012, 22:39

Rising food prices and global unrest might ensue from this month’s worst US drought since the 1934 Dust Bowl, with 64 per cent of the country desperately hoping for rain.

Predicted to last until October, the drought is foreseen to devastate US harvests, which would significantly affect global prices on corn, wheat and soybeans, of which America is the world’s largest exporter.

Worldprices for these foods have already reached record levels, and will continue to affect developing countries the most – especially those relying on agricultural imports.

A speculator amplified food price bubble might also contribute to the global catastrophe. When investors bet on food prices, the drought’s market signals are augmented, say researchers from the New England Complex Systems Institute (NECSI).

“The drought is clearly going to kick prices up. It already has,”said NECSI president Yaneer Bar-Yam.“We’ve created an unstable system. Globally, we are very vulnerable.”

In the late 1990s, food markets were deregulated, allowing hedge funds and investments banks to bet on prices, thereby making markets prone to sudden, massive fluctuations.

FULL STORY: http://rt.com/usa/news/us-drought-food-global-058/