Minnesota Farmer

The new 500 pound gorilla
April 12, 2011, 12:04 pm
Filed under: cars, Corn, farm animals, fish, food, Politics, Soybeans | Tags: , , , , , , , , , ,

Well, perhaps not so new.

As prices for everything seem to be going up we hear many questions of why.  Why must I pay more each day at the pump?  Why is food getting more expensive?  Why are commodities (corn, soybeans, cotton, gold, silver) nearing record high levels?  The answer for all of them seems to be an old country that has become the new 500 pound gorilla in the room, China.

For many years, China has been a country with lots of poor people.  They seemed to be barely getting by, producing just enough, growing just enough to keep themselves fed.  Then they decided to join the world economy and put those people to work producing export goods.

Now flush with cash from nations around the world, China is buying.  Their people want to join the rest of the developed world now, and they are not willing to wait.  They have money from new jobs and they are spending it.  Cars and better food are top on their list.

China is rapidly catching up with the U.S. in the number  of cars on the road.  Those cars need fuel and China is buying gasoline to fuel those cars.  The extra demand means that we in the U.S. are having to pay more to get some of the excess exported by other countries.

The Chinese are eating better lately.  They want more than just more rice in the bowl.  They want protein, and they are buying up pork, poultry and fish to eat.  To feed those animals they are buying corn and soybeans from around the world.  They are also buying massive amounts of a co-product of the ethanol industry, Distillers Dried Grains with Solids (DDGS) as a source of protein and fat for their livestock.  This added world demand is causing food prices to rise.  It has also pushed commodity prices to higher levels.

China has now become the second largest economy in the world.  It has quite a ways to go to catch the U.S., but it is growing rapidly.  For many years we purchased consumer goods that could be made inexpensively in China, and China took our money.  Now China is buying goods from around the world to keep their people happy.  What China wants, China gets.

The added demand on the world economy means we’ll have to pay more for what we want in the future.  Get used to it.


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