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The Growing Threat Of Soybean-Inspired Social Unrest In China

Tyler Durden's picture





 

Two weeks ago we explained why the drought-inspired soaring price of Soybeans  - specifically from the US - would notably influence global central-planners' actions - and more specifically the Chinese (given its high impact on food price inflation). Food prices remain elevated and the PBoC is undertaking Reverse Repos - the exact opposite of an RRR-driven easing program so many expected. However, there is a further, deeper, and more troubling consequence than 'simple' inflationary arguments - that of social unrest. Confirming our insight, the LA Times points out,

Soybean oil is the most important edible oil in China with more than two-thirds of cooking oil consumed in China coming from soybeans - and most of those soybeans are supplied by the US (more than half of US exports are to China and the US is China's number 1 supplier). According to one official this "makes [China] vulnerable to the drought" and bound to the fortunes of farmers in the American heartland. The Chinese devote more than 20% of their income to food (three times more than Americans - according to the USDA).

This means the dramatic rise not just in grain prices, but in the up-stream prices of meat, eggs, and milk combined with the until-now newly affluent (un-dirt-poor) Chinese have grown transitorily-used to an "everything needs oil" attitude when spending and this price-jolt to newly entrenched tastes is why authorities are concerned about social stability; as IHS points out "Inflation has a long history of sparking discontent, so obviously it's on the forefront of the Chinese leadership's mind."

 


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Sun, 08/19/2012 - 21:37 | Link to Comment LawsofPhysics
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The Chinese have gold and we have soybeans, no problem.

Sun, 08/19/2012 - 21:51 | Link to Comment sitenine
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@LawsofPhysics - Except that there are many fewer soybeans due to the drought, problem.

Sun, 08/19/2012 - 22:10 | Link to Comment Precious
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"Let them eat tofu."

Mon, 08/20/2012 - 00:12 | Link to Comment A Nanny Moose
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Edemame

....bytchez!

 

Mon, 08/20/2012 - 04:27 | Link to Comment malikai
malikai's picture

 

This article presumes two things which I think are inaccurate:

  1. Soybean oil is unreplaceable.
  2. That Chinese people have no ability to deal with shortage.

These are in the grand scheme of things, not a big deal. First of all I've never seen my mother-in-law (Chinese) cook with soybean oil.

Second, I'm pretty sure that during the great leap/cultural revolution, people had shortages too. They dealt with shortages on a scale that would make the current crop failures stateside look like nothing.

Mon, 08/20/2012 - 04:56 | Link to Comment Banjo
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Yes I belive 55-60 million people starved. They dealt with it alright.

Mon, 08/20/2012 - 04:41 | Link to Comment AldousHuxley
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china's strength is that they have lots of people for labor.

china's weakness is that they have lots of hungry people to feed.

 

control food, control China.

Wed, 08/22/2012 - 10:04 | Link to Comment sessinpo
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Liberals/socialist/communist from both the left and right dispose of people when it suits their needs. Food isn't necessary.

Sun, 08/19/2012 - 21:48 | Link to Comment RestoreOurFuture
RestoreOurFuture's picture

 

 

It's a shame that our current president allows China to treat him like a "doormat," to quote Paul Ryan.  "They steal our intellectual property rights. They block access to their markets. They manipulate their currency."  

And yet our president does nothing! Even the liberal hub of the universe, Saturday Night Live, mocks China's treatment of Obama.  

http://www.nbc.com/saturday-night-live/video/china-cold-open/1178451/

With millions of Chinese starving and totally dependent on American companies like Cargill and ADM, don't you think we might have a little leverage?  Haven't you had enough, already?

Romney/Ryan 2012  

Sun, 08/19/2012 - 21:51 | Link to Comment FieldingMellish
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Its not nice to talk about your creditors like that.

Sun, 08/19/2012 - 22:00 | Link to Comment RestoreOurFuture
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If you knew that China was allowed to bypass our primary dealers on Wall Street when buying our debt, you might switch your sympathies to our REAL creditors.  Just another example of Obama kissing China's ass, and getting nothing in return. 

Romney/Ryan 2012

Sun, 08/19/2012 - 22:03 | Link to Comment fonzannoon
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I am aware that China IS allowed to bypass our primary dealers and that tells me a lot about our real creditors.

Sun, 08/19/2012 - 22:12 | Link to Comment RestoreOurFuture
RestoreOurFuture's picture

 

 

Don't be fooled.  China needs us just as much as we supposedly need them.  If you knew that our Federal Reserve can purchase over half our issuance and our rates still trend toward zero, it might influence your opinion on who our real creditors are.  When did we start kissing China's ass? You think Reagan would have allowed this mockery of our nation?  Was the cold war so long forgotten that we've been slowly and methodically turned into a nation of subservient fools?

We need to remember who we are, and we're NOT a nation that bows to China, as your rhetoric suggests. 

ROMNEY/RYAN 2012

Sun, 08/19/2012 - 22:26 | Link to Comment sitenine
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"Was the cold war so long forgotten that we've been slowly and methodically turned into a nation of subservient fools?"

Are you suggesting otherwise?

Sun, 08/19/2012 - 22:33 | Link to Comment fonzannoon
fonzannoon's picture

They can pull the plug on us in 2 seconds flat. What can we do, stop buying their shit? So what...how much worse can it get over there for those foxconn workers? You think they would give more of a shit than we would if our credit line got pulled? Are you for real?

 

Mon, 08/20/2012 - 01:10 | Link to Comment Solarman
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Re-read the article on who has the rug to pull.  China is so screwed; No Navy, not enough raw resources not enough food, and not enough energy.  They stop buying or start selling Treasuries in a manner that threatens us, we declare jubilee on the bonds.  Then they have jack squat.

Mon, 08/20/2012 - 04:47 | Link to Comment AldousHuxley
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russia has plenty of natural resources.

Mongolia got shit tons too and not many living there.

 

US is the one screwed. heavily in debt.....forced to go to war against debt holders like some desparate fuckers of Nazi Germany.

 

 

Sun, 08/19/2012 - 22:37 | Link to Comment chump666
chump666's picture

You fools.

China right now is buying up USD's and messing with short term UST yields (driving them up).  Nothing to do with risk on, economic improvement or any of that garbage.  Point is, China, due to America being a debt laden Fed/Bernanke controlled inflation machine with sprinkles of Keynesian psychosis, is about to show the world who controls global wealth and excess.  Our debt binge is about to end, brutally.

Time to take the pain. 

The West has turned into a f*cking laughing stock

 

Sun, 08/19/2012 - 22:42 | Link to Comment fonzannoon
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Chump I repect your outlook a lot, but let me ask you this (and let's leave this Romney putz out of it)...you don't think that the minute this market starts to correct, if it ever does...yields won't come right back down?

Sun, 08/19/2012 - 22:59 | Link to Comment chump666
chump666's picture

This is something we gotta watch.  See, the USD is bid whist markets have been rising, kinda usual (in a money printing environment). Usually, USD is bid, market stays capped or starts to sell.  To me, that is a warning sign that 1.  The market is very overbought, 2.  A major correction is building.  As for yields rising, again, the risk on environment has NOT been that inundated with volumes and risk buying (note USD buying, which is a proxy hedge against risk).  I would say that yes, yields will come back down when we correct/crash.  But, the worry is Asia, creditors starting to look bearish is...well very bearish for the world. 

In summary, if Asia leaks massive outflows into USD's, it may start to lift rates.  It's all about China.  Ignore their problems at ones peril.

"...this Romney putz"

I love it.

Sun, 08/19/2012 - 23:02 | Link to Comment chump666
chump666's picture

and I would be checking the volatilities in options, more so with FX EUR etc, to see the hedging that may start to kick in, we will probably see that in the VIX too as it starts to rise.  There is a ton of event risks forming, with Asia in the mix.

Volatility will start to pick up.

Mon, 08/20/2012 - 16:04 | Link to Comment bankruptcylawyer
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there is some truth to this, but if history teaches you anything it's that the insiders will take advantage of the situation to make sure that whoever loses, they win.

 

insiders = private families and groups that live in the u.s. and europe, and have been responsible for expanding the western control over the world for the last 150 years.

excluding russia, the u.s. presumably possess more nuclear ballistic missiles than the rest of the world combines. in the REAL end, all financial international trade cycles, and the creditor status of nations, is derived from the results of war, not from the results of banking.of course, to complicate matters, war costs money and must be financed---so the fractal nature of history is mired in all sorts of feedback loops.

 

all i'm saying is that germany was way less  militarily powerful relative to the rest of the world than the u.s. is now-----and that mutually assured destruction assures that we will be able to push our debtors around for far longer than one would ever think possible.

Sun, 08/19/2012 - 22:41 | Link to Comment OpenThePodBayDoorHAL
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OK a few points:

1. The Fed doesn't "purchase" over half our issuance...it pretends it has the money by printing and expanding its balance sheet, now leveraged 66:1.

2. Yes, debtors are subservient to creditors, always have been. The thing to do now is to figure out how we went from the biggest creditor to the biggest debtor in less than a generation. I'd suggest it could be because politicians (like Paul Ryan) voted for things like Medicare Part B unfunded entitlements for $1.6 trillion. And because other people (like Mitt) and corporations dodged taxes on something like $32 trillion. The top 20 corporations in the US paid their CEOs more money than they paid in US taxes last year.

3. Just to be clear, I think Obomba and the Dems suck too.

Mon, 08/20/2012 - 05:38 | Link to Comment AldousHuxley
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Guess who was the president when US turned from creditor to debtor nation?

Wed, 08/22/2012 - 10:13 | Link to Comment sessinpo
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I'm only giving you half credit. Here is my reason.

 

The bugdet is controlled by Congress, more specifically the House but that has been altered and manipulated over the last few decades.

During Reagan's Presidency, DEMOCRATS controlled the House. In fact DEMOCRATS have controlled the House the majority of time from 1955 to 1993. They also controlled the Senate the majority in that same time period.

 

I give your half credit because laws still require the President's signature. How about presenting the full truth.

 

Sun, 08/19/2012 - 22:49 | Link to Comment Vet4RonPaul
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Dear RestoreOurFuture, What is it with you neocon chickenhawk always war-mongering?  Neither Romney or Ryan ever served in the military but they're gung to send other people's kids to war and to use other people's money to do it.  Romney and Ryan are the same neocon chickenhawk crap we get with Obama and Biden; except that the latter will win cuz they are slightly more socialist.

Mon, 08/20/2012 - 05:40 | Link to Comment AldousHuxley
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because neocons represent interest in 2 industries: oil and military industrial complex.

 

they lie about cutting deficit and get in debt to fight wars in middle east for oil while cutting taxes!

 

remember it was under Reagon and his republicans which turned US into debtor nation.....

Wed, 08/22/2012 - 10:02 | Link to Comment sessinpo
sessinpo's picture

"because neocons represent interest in 2 industries: oil and military industrial complex."

"remember it was under Reagon and his republicans which turned US into debtor nation....."

 

And on the other side of the spectrum, it is the liberal facists that have their interests in not only the military industrial complex, but the domestical social programs. Even without wars, the liberal social programs would bankrupt society as they are pyramid schemes. And just to show you my unbiase, BOTH parties are guilty of this as this is another means of taxationa and control over the population.  To blame neocons is not correct as both parties engage in this.

Sun, 08/19/2012 - 23:01 | Link to Comment Flakmeister
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They couldn't pay me enough to type the crap that you do....

 

Sun, 08/19/2012 - 23:36 | Link to Comment Schmuck Raker
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Given the choice of kissing China's ass, or "Our Real Creditors(The Federal Reserve Banks)' " asses, I will choose Chinese ass.

Now then, ask me where I'd prefer to stick my Koch.

Mon, 08/20/2012 - 01:58 | Link to Comment Canaduh
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ALL HAIL THE NEW TROLL KING!!!

Mon, 08/20/2012 - 07:04 | Link to Comment Inthemix96
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Restoreourfuture,

While having been part of this community myself for a while, and having been a long time lurker before hand, I think you need to aquaint your good self with the types of folk who inhabit these pages.

You and your partisan bullshit wont work here son, you can say whatever you like about the ZH lot, but fuck me sideways if there are not some damn clued up folk in here.

Fuck off, and the horse you rode in on

Mon, 08/20/2012 - 07:43 | Link to Comment Disenchanted
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"we're NOT a nation that bows to China"

 

No, we are a nation that bows to Israel.

 

Yes, because U.S. interests are clearly advanced around the world by reinforcing the perception that there is no meaningful difference between the United States and Israel on any issue. In other words, U.S. interests will take second place to the need to promote a phony common front to the world. Romney certainly knows something about putting forward a phony front. It’s useful to know that Romney’s priorities are still as confused as ever.

 

from: http://www.theamericanconservative.com/larison/romney-promises-the-oppos...

Mon, 08/20/2012 - 00:14 | Link to Comment A Nanny Moose
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This is a symptom, not a cause.

Mon, 08/20/2012 - 00:39 | Link to Comment Abitdodgie
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To Restorourfuture ,  Romney/Ryan 2012    All I can say to that is "You carnt fix stupid"

Sun, 08/19/2012 - 21:54 | Link to Comment reefermadness
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Please don't quote Paul Ryan, I'm against big gubmint but I still vote for it everytime. 

Sun, 08/19/2012 - 21:56 | Link to Comment Imminent Collapse
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Hey Romney Troll, there isn't ten cents worth of difference between Romney and Obama. Both are bought and paid for. Neither will honestly deal with our deficit issues. Get real and stop with the political plugs. We saw what the Republicans did to Ron Paul.

Sun, 08/19/2012 - 22:19 | Link to Comment Precious
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Don't fall for spoofing trolls.  Probably paid $12.50 an hour by Soros to post stereotypical rants.

Mon, 08/20/2012 - 03:27 | Link to Comment r00t61
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That's certainly more than the Chinese "fifty-centers."

http://news.bbc.co.uk/2/hi/7783640.stm

Sun, 08/19/2012 - 22:14 | Link to Comment mammoth mo
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But you know he's paid and paid well to shill.  Surely no one believes two friends of Wall Street actually have some difference.

Sun, 08/19/2012 - 21:57 | Link to Comment Tinky
Tinky's picture

Yeah, right. A reckless Romney foreign policy is just what the U.S. needs at the moment.

Take a hike.

Mon, 08/20/2012 - 12:12 | Link to Comment shovelhead
shovelhead's picture

What?

You can't tell me that real Murican boots-on-the-ground murder isn't lots more fun than Obama's girly-boy drone video game attacks.

Drones don't make Generals and the career opportunities that come with rank.

Get with the program please.

We need good jobs for good wages, dammit.

Mon, 08/20/2012 - 09:06 | Link to Comment hangemhigh
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TO: ROF

"It's a shame that our current president allows China to treat him like a "doormat," to quote Paul Ryan. "They steal our intellectual property rights. They block access to their markets. They manipulate their currency."

yo, mdb.....i see that you read the memo and got with the program.........nothing quite as satisfying as a quick costume change and a couple of sassy new takes.

don't let all of the whining and sniveling here by the marginalized psychotropes mess with your chip-set, dogg........don't worry.....there's  lots of us here at ZH that think you got a big future as a gop ken doll.....just remember...all of us neogoys,.....we got your flack side.................

 

Sun, 08/19/2012 - 23:06 | Link to Comment holdbuysell
Sun, 08/19/2012 - 23:32 | Link to Comment Overfed
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No matter what, Romney is a douchebag. So is O'bomb-a.

Mon, 08/20/2012 - 02:29 | Link to Comment Ineverslice
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RestorOurFuture- (haahaa)

 You are wasting away existence with this dumb job of yours. Come clean, otherwise....

Go pump yourself.

Mon, 08/20/2012 - 10:58 | Link to Comment DaveyJones
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is their gold genetically modified?

Sun, 08/19/2012 - 21:40 | Link to Comment FieldingMellish
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Sorry Tyler, Brazil supplies more soybean to China than the US does: http://brownfieldagnews.com/2011/12/28/brazil-surpasses-us-in-soy-export...

Sun, 08/19/2012 - 21:48 | Link to Comment DoChenRollingBearing
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Yes, but, a QE3 might push soybean prices higher as well as other ag commodities.

So says a Barron's columnist this weekend.  Review of "Barron's -- Dated 20 August":

http://tinyurl.com/9qq6k4e

Sun, 08/19/2012 - 21:49 | Link to Comment FieldingMellish
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Naturally, the overall premise of the article is sound. Its just that glaring detail that is wrong.

Sun, 08/19/2012 - 22:17 | Link to Comment Precious
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And Brazil is covering corn, not just soybeans.

Sun, 08/19/2012 - 22:28 | Link to Comment duo
duo's picture

but they are still Monsanto GM soybeans which will make the Chinese sterile.  Well played....

Sun, 08/19/2012 - 22:59 | Link to Comment tmosley
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That's great, but a severe draught in your number two food supplier can and in this case is still quite disastrous in terms of food prices.

Imagine if Saudi Arabia, the number two supplier of US petroleum (after Canada) suddenly only pulled out 1/4th as much as usual.  We'd have $200 oil overnight.

Sun, 08/19/2012 - 21:45 | Link to Comment TrainWreck1
TrainWreck1's picture

China will buy (more) US farms.

Best way to secure their food supply.

Hell, they could buy ADM and everybody and not bat an eye.

Sun, 08/19/2012 - 22:06 | Link to Comment yogibear
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China can buy all the farms and redirect  the food to China. Americans will have to pay multiple times more and have to bid for food on the open market.

If the Chinese work it right they can starve Americans when crops are growing right next to them. Chinese lobbyist can shuffle the right bribes to congressmen and senators  and it will be a done deal.

 

The US is the best government China can buy.

 

Mon, 08/20/2012 - 01:14 | Link to Comment Solarman
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And how long would that work?  Some of you live in a fantasy world.

Sun, 08/19/2012 - 21:47 | Link to Comment zilverreiger
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isn't that cattle food? corn and soy are terrible staples for huumaans, GMO varieties even worse

Sun, 08/19/2012 - 21:48 | Link to Comment FieldingMellish
FieldingMellish's picture

Tofu, cooking oil, soy sauce, paint, plastics...

Mon, 08/20/2012 - 12:16 | Link to Comment shovelhead
shovelhead's picture

Cheetos,

Don't forget Cheetos as a staple.

Sun, 08/19/2012 - 21:47 | Link to Comment Whoa Dammit
Whoa Dammit's picture

Our corporate leaders will make sure that we pay 20% of our income for food too.

Sun, 08/19/2012 - 21:47 | Link to Comment chump666
chump666's picture

VIX flat-lining, equities running on air, inflation slamming into the East like a freight-rain (note USD massive buy ups as an offset), ECB's insane Italian 'ex Goldman' nut-case about to be shut down (metaphorically) by a Finnish/German threat of leaving the EU

 =

Stocks will be slaughtered.

Sun, 08/19/2012 - 22:37 | Link to Comment stocktivity
stocktivity's picture

None of that real world stuff matters. All that matters is the hopium of QE3, 4, 5, ..... As long as Benny can keep printing, It's all Bullshit!

Sun, 08/19/2012 - 21:53 | Link to Comment Ignorance is bliss
Ignorance is bliss's picture

Wouldn't it be funny if the Chinese took some of their reserves and bought all of the grain they required from the U.S. Thereby, leaving us with too little food to feed our own country. That scenario couldn't play out here. Only in places like Argentina where farmers refuse to sell food to their own, because they make more in exports.

Sun, 08/19/2012 - 21:58 | Link to Comment Mentaliusanything
Mentaliusanything's picture

Well you can't print food and hungry people are unhappy people.

Couldn't they just eat Cake ?

<sarc>

as a side note they are buying any and all productive land they can. Problem is too many people and not enough water. Water is what Wars will be fought over in the near future.

Mon, 08/20/2012 - 09:01 | Link to Comment sdmjake
sdmjake's picture

But we have iPads and the price is falling so we'll be fine...

Sun, 08/19/2012 - 22:00 | Link to Comment CheapBastard
Sun, 08/19/2012 - 22:07 | Link to Comment gwar5
gwar5's picture

Soybeans are the minivan of food.

Sun, 08/19/2012 - 22:24 | Link to Comment eddiebe
eddiebe's picture

So maybe they could switch to Palm oil?

Sun, 08/19/2012 - 22:50 | Link to Comment holdbuysell
holdbuysell's picture

If this just-released documentary is right, then Monsanto may be celebrating.

http://www.youtube.com/watch?v=mEfJO0-cTis&feature=player_embedded

Mon, 08/20/2012 - 00:12 | Link to Comment ironmace
ironmace's picture

So, when does it all come crashing down around our ears?

Mon, 08/20/2012 - 00:16 | Link to Comment SaveTheBales
SaveTheBales's picture

The great thing about China is where there is demand that would yield insane profit, there will be fake watered-down 40-weight cooking oil to create a temporary artificial supply.  Price inflation problem solved.

Mon, 08/20/2012 - 02:38 | Link to Comment laomei
laomei's picture

China's not having a drought problem at all this year, with all the rain we're looking at bumper crops.  Hell, food prices have been FALLING recently if you happen to live here and notice things like that.  Laughable idiots.

Mon, 08/20/2012 - 05:22 | Link to Comment roger714
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Mon, 08/20/2012 - 06:45 | Link to Comment ecoguitar
ecoguitar's picture

palms oil is making inroad to China. 

Mon, 08/20/2012 - 08:52 | Link to Comment Cranios
Cranios's picture

Soybean unrest - does anyone know what they're doing about it?

And under BO, is the USA really that much different than China?

see: http://youtu.be/bBgQIy3clBg

Mon, 08/20/2012 - 09:04 | Link to Comment Shizzmoney
Shizzmoney's picture

The number is 40%.  Anytime the population spends 40% or more on their food = revolution. 

It was at around 37% in 1790's France, and 45% in Soviet Russia (although that was more of a coup). 

China has the biggest Army in the world......unfortunately for the Communist Chinese Govt, the only thing bigger than the Chinese army is the Chinese population.

Mon, 08/20/2012 - 16:10 | Link to Comment bankruptcylawyer
bankruptcylawyer's picture

there's 800 million people living in africa, why dont the chinese just eat them?

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