What I’m reading… with a quick blurb on each

In our Food Crisis section

WSJ: Grain Companies’ Profits Soar as Global Food Crisis Mounts

• At a duration when parts of the world are facing food riots, Big Agriculture is dealing with a different sort of challenge: huge profits. (replace the word agriculture with oil and you’d have politicians yelling from the rafters about how that is evil)
• The robust profits are emerging against the backdrop of a food crisis some experts say is the worst in three decades. The secretary-general of the United Nations, Ban Ki-moon, on Tuesday called for the creation of a high-level global task force to deal with the cascading impact of high grain prices and oil prices. He said that countries must do more to avert “social unrest on an unprecedented scale” and should contribute money to produce up for the $755 million shortfall in funding for the World Food Program, which feeds the world’s hungry.

USAToday: Tensions in Egypt show Potency of Food Crisis

• There’s no panic, no desperate scrambling for sustenance — a tentative sign of success for an emergency government plan that involves dramatic increases in spending on bread subsidies and the use of Egyptian soldiers as bakers. “Now we’re able to find bread,” says Dalia Hafez, 40, seated on a nearby curb in a cappuccino-colored headscarf. “Thanks God, the crisis is by.”
• For now, anyway. But the aftershocks from the food trauma here are only beginning to be felt. Tensions are continuing to build in that key U.S. ally, evidence that the global food crisis — the product of factors ranging from strange weather in producing nations to increased competition for grains from biofuels programs — is now about much more than food.
• “This crisis threatens not only the hungry, but additionally peace and stability,” the head of the United Nations World Food Program (WFP), Josette Sheeran, warned in a recent speech.
• That’s certainly true in Egypt, the most populous Arab nation, recipient of $1.8 billion in annual U.S. foreign aid and a critical link in global trade sitting astride the Suez Canal. Its authoritarian government is faced with mounting labor unrest, profound public dissatisfaction by a yawning gap amoung rich and poor and questions by who will lead Egypt in the coming years. (hmm, sounds vaguely familiar to another country)
• Former Pentagon official David Schenker, who lived in Cairo in the early 1990s and is with the Washington Institute for Near East Policy, returned here recently for a visit and was stunned at the sour public mood. “I was shocked,” he says. “I find it very scary.”

WashingtonPost: Siphoning Off Fuel to Feed Our Cars

• “This is a brilliant instance to be farming,” Johnson says. “I’m 65, but I can’t quit now.”
• Across the country, ethanol plants are swallowing more and more of the nation’s corn crop. that year, about a quarter of U.S. corn will go to feeding ethanol plants instead of poultry or livestock. That has helped farmers like Johnson, but it has boosted demand — and prices — for corn at the same moment global grain demand is growing.
• And it has linked food and fuel prices just as oil is rising to new records, pulling up the price of anything that can be poured into a gasoline tank. “The price of grain is now directly tied to the price of oil,” says Lester Brown, president of Earth Policy Institute, a Washington research group. “We used to have a grain economy and a fuel economy. But now they’re beginning to fuse.”

CBSMarketwatch: Ethanol Backlash Hits New Level as Food Prices Jump (we just discussed that yesterday)

• An increasingly bitter public debate by the role that corn-based ethanol has played in driving up food prices is pitting some of the nation’s biggest food manufacturers against each other, with hefty U.S. subsidies and mounting commodity costs at stake.
• At issue is the Renewable Fuel Standard, a mandate to increase the volume of renewable fuels blended into gasoline to 7.5 billion gallons by 2012. It was created by 2005 U.S. energy legislation and expanded in last year’s energy bill. Blenders of ethanol plus get a 51-cent tax credit for every gallon of ethanol they blend.
• Most commodities analysts agree that these requirements and financial incentives are one reason farmers planted more corn last year than they had in by six decades. They say ethanol has indeed played a role pushing up corn prices to record highs above $6 a bushel that year.
• But most analysts, including senior officials at the U.S. branch of Agriculture, plus quote a variety of factors for the run-up in corn and other grains — including the high price of petroleum, a weak dollar that makes dollar-denominated commodities more pricey, droughts and increasing demand from emerging markets countries for meat and poultry. (and once again, all those OTHER factors are out of control - that one is IN control… but instead of fixing it we will continue to “debate” that the very obvious fact that there are multiple reasons… hilarious whether it were not so sad and affected so many across the globe)

In our Pooring of America section aka “Just Wait, the Trickle Down Economy will benefit you any moment now”

USAToday: Walmart Delighted it is attracting more Affluent Shoppers

• More affluent customers are shopping at Wal-Mart Stores (WMT) during the economic slump and a company executive said Tuesday that the retailer is in position to keep those shoppers when the economy improves.
• Shoppers with a household income of more than $55,000 to $70,000 are categorized by Wal-Mart as more affluent than its core customers. Castro-Wright cited company research that showed that the number of more affluent shoppers increased 0.7% in February and
  Your Ad Here
  was up 2.2% in March. [I predicted that one a distant moment ago - Dec 26: Target Shoppers Turning into Walmart Shoppers]

WSJ: Luxury Retailers Pin Hopes on Outlets - we discussed that in the recent Coach report

• Bracing for a prolonged economic downturn, luxury retailers are lavishing new attention on their lower-end factory-outlet stores. The efforts reflect a new reality for retailers that are being squeezed by one of the worst consumer spending slumps in years. Sales at outlet stores are growing faster than those at full-priced stores at many chains.
• The pattern is far more pronounced for some retailers. At Coach Inc., same-store sales at factory outlets rose a healthy 17.7% in the quarter ended Dec. 29, while sales at full-priced stores fell 1.1%; Coach no longer breaks out retail and factory-store results. (want to know why? soon the full priced stores will show negative comps and the factory outlets will be the only growth - so they want to hide that from you by combining the two numbers - again that means LOWER profits)
• The resurgence of outlets entails new risks for retailers. For one thing, shifting sales to what is by definition a reduction format can put pressure on profit margins.

And let’s do a quick fly by on the housing bust, which should be recovering any moment now…

NYTimes: Federal Mortgage Plan Falls Short

• Fewer than 2,000 homeowners at risk of foreclosure have been helped by a Federal Housing Administration program that President Bush promised would help homeowners who had fallen behind on their mortgage payments, federal housing statistics show.
• F.H.A. officials have asserted in recent weeks that more than 150,000 citizens have benefited from the program, which was intended to help troubled homeowners refinance into stable, government-issued loans. But the huge majority of participants have been homeowners who have made their mortgage payments on instance, not the borrowers in crisis who were the targets of the president’s plan, the statistics show. (laughable)
• Democratic lawmakers estimate that at least 1.5 million folks have fallen behind on their mortgage payments. Yet from October 2007 through the end of March, only 1,729 delinquent mortgages were refinanced by F.H.A., housing statistics show. Officials project that 4,000 such mortgages will be refinanced by the end of September. (targeted help, yep - very effective)
• “Interest rates are no longer spiking,” Ms. Burns said. “People are going into delinquency not as a aftermath of the resets, but considering of the local economy.”

NYTimes: The Road to a Jumbo Loan Was Supposed to Get Easier

• In early February, Congress gave beleaguered mortgage borrowers a rare cause for celebration. As part of the economic stimulus package, it passed rules intended to construct it easier and less expensive for folks to take out hefty loans in the nation’s costliest housing markets.
• Economists and legislators said that helping tens of thousands of borrowers take out billions of dollars in new loans could stanch the bleeding in the housing market, spur spending and reduce the pain of a likely recession.
• Instead, the effort to manufacture it easier to get jumbo mortgages — loans by $417,000 — has yielded frustration and disillusionment. (shocker; most government programs are so effective!!) Since the rules took effect April 1, many prospective borrowers and their mortgage brokers say the new loans are either not available or the rates are far higher than they expected. Relief, they say, has been replaced by grief.
• The program “is so much of a failure that it’s really unbelievable,” said Daniel M. Shlufman, president of the FCMC Mortgage Corporation in Clifton, N.J. Mr. Shlufman likened Congress’s effort to “coming up with a vaccine to a terrible disease, and soon after not giving it to society, or making it too expensive.” (hey it works like that in every other part of government)

Last we move to our World of Shortages theme

NYTimes: Oil Price Rise Fails to Open Tap

• As oil prices soared to record levels in recent years, basic economics suggested that consumption would fall and supplies would rise as producers drilled for more oil.
• But as prices flirt with $120 a barrel, many energy experts are becoming worried that neither seems to be happening. Higher prices have done little to suppress global demand or attract new production, and the resulting mismatch has sent oil prices ever higher.
• A central reason that oil supplies are not rising much is that major producers outside the OPEC cartel, like Russia, Mexico and Norway, are showing troubling signs of sluggishness. Unlike OPEC, whose explicit goal is to regulate the supply of oil to keep prices up, these countries are the free traders of the oil market, with every incentive to produce flat-out at a day of high prices. But for a variety of reasons, including sharply higher drilling costs and a rise of nationalistic policies that restrict foreign investment, these countries are failing to increase their output. They seem stuck at about 50 million barrels of oil a day, or 60 percent of the world’s oil supplies, with few prospects for growth.
• “According to normal economic theory, and the history of oil, rising prices have two major effects,” said Fatih Birol, the chief economist at the worldly Energy Agency in Paris. “They reduce demand and they induce oil supplies. Not that instance.” (it must be those pesky speculators causing all the problems!)

All things we’ve been talking about in the blog for a faraway day… now hitting the mainstream press in waves. Welcome aboard fellas!

Original post by TraderMark