Reverse Corn Law: Prepare for massive price hikes

This evening the FT has flagged up a story that I hope gets the prominance that it deserves, but some how I doubt it.

China will tax grain exporters
China is to introduce taxes on grain exports in the latest attempt to rein in food-driven inflation that reached an 11-year high in November.

Exporters of 57 types of grain, including wheat, rice, corn and soya beans, will have to pay temporary taxes of between 5 and 25 per cent, the country’s Ministry of Finance said on Sunday.

Now I don't want to panic anybody but that is quite an extraordinary act. Think about it for a moment, we in the European Union are currently subsidising the Common Agricultural Policy to the tune of dozens of billions a year, meanwhile China is introducing export taxes on grain... of up to 25%. Now the Chinese don't do things by accident, and I suspect that though they claim this move to be temporary, so was the income tax, in 1799.

With grain prices in the UK doubling in the last 12 months, and their being a global shortage of food, expect that food inflation over the next year to leap. Of course this won't just affect the price of bread and risotto. The largest cost in chicken, pig and cattle is fodder. Beer will go up even more.

As the Telegraph points out today,

This will be a global trend... but higher food costs too. In 2007, wheat prices doubled - with the price of other crops like cocoa and coffee also jumping.

Next year, the growing - and increasingly wealthy populations of the developing world will keep global food demand rising. Global supplies - hit by more droughts, floods and the increased use of land for bio-fuel production - will struggle to keep up.

That's why, in 2008, high food prices will replace expensive oil as the bogeyman of Western consumers and central bankers. Because food accounts for a large portion of disposable incomes, escalating food prices will seriously dent consumer confidence next year, while preventing deep base rate cuts.

What does the the EU do? As Chris Booker states today, many of these problems are either caused or exacerbated by the European Union; a schlorotic conception which has an elderly system designed to deal with the like of Pharoh's dream of seven fat years, but utterly unprepared for his nightmare of seven years of fallow.

People often tell me that the European Union is irrelevant to their lives. If t is in part responsible for a doubling of basic fod prices and the consumer crisis that this will bring about then maybe, just maybe peoiple might begin to notice how big an issue it is.

Imagine a single mother living on an estate on benefits. With just one child she is spending upwards of 30% of her weekly income on food. If that price doubles in the next twelve month what on earth will she do? Is the country at all prepared for the hike in taxes required to deal with this situation. All those on low incomes, pensioners, the unemployed, school leavers, the disbled, imigrants, those living on the minimum wage.

The thought is terrifying. Funily enough Gordo failed to mention this in his New Year message.

Odd that.