By Dave Anderson:
Most governments are breathing a sigh of relief over the past two weeks because two drivers of populist unrest, higher food prices and higher energy prices, have stalled.
crude oil prices started their three-day fall, which brought them to $99.80 on May 5 from $113.52 on May 2, the daily average gasoline price has made less-than-a-penny gains and losses that have interrupted what had been a steady climb toward the record high of $4.11 set July 17, 2008.
Business Week on corn reserves:
U.S. corn surpluses are expected to increase higher than anticipated this summer and grow even more next year, a trend that could help ease rising food and grain prices this year.
The Agriculture Department reports that corn reserves are projected to increase to 730 million bushels in late August, when the harvest begins. That's up from last month's estimate of 675 million bushels. The government estimates the large corn crop being planted now will help drive the corn surplus back up to 900 million bushels by late 2012.
Food and fuel are not major expenses in the United States for the politically potent classes yet $112 barrels of crude oil were inflicting significant political and economic pain. Food and fuel are significant expense categories for the rising poor and working classes in the developing world. Historically, it is not uncommon for these two categories to consume half the income of the median worker in a poor society.
One of the first responses to the revolts in Tunisia and Egypt by nations that had solid credit and cash reserves was to increase fuel and food subsidies. These policies were successful attempts to defuse public anger at declining living standards. The combination of short term subsidies and cresting prices means quite a few governments are getting additional breathing room from potentially restive publics.
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