Sowing The Seeds Of Starvation

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“One death is a tragedy; one million is a statistic.”
—Joseph Stalin

This summer’s searing heat has put a fire beneath grain prices. But worse than another round of inflation is the potential for widespread famine, particularly in the former Soviet Union, which has been beset by the worst heat wave in 130 years.

The Ukraine is no stranger to starvation. The Terror-Famine struck the Ukraine in 1932-33 when as many as 10 million starved. It should come as little surprise that Joseph Stalin was the architect of that tragedy.

In the 1920s, Lenin proved his political savvy and made concessions to the peasantry. This led to The New Economic Policy (NEP) and a rethinking by the Kremlin.

That all ended when Stalin suspended concessions and the NEP. He even unleashed his secret police (NKVD, which became the KGB) targeting capitalists and squeezing greater food production from the suffering peasants. In the 1930s, when quotas could not be met in the face of drought, the NKVD ruthlessly robbed Ukraine of its wheat and packed the grain back to Russia.

Eight decades later the drought has returned and so have Communist ideals. Again Ukraine is facing a devastating crisis which could send grain prices much higher and upset the peace in Eastern Europe.

Reuter’s reports that the ex-Soviet Union is likely to see grain production slashed this year with Ukraine’s production falling as much as 15 percent. With a prolonged heat wave sending temperatures above 100 degrees, 27 regions have declared a state of emergency due to drought which is estimated to have destroyed 11 million hectares of crops, an area equal in size to Hungary or about one fifth of the total sown area.

Meanwhile, hundreds of forest fires rage across Russia, choking residents of Moscow. There appears no end in sight for what is being called the worst heat wave to hit Russia in its recorded history. It is wreaking havoc on one of the world’s largest breadbaskets.

A Bitter Harvest
Russia’s agricultural analysts have predicted that the nation’s grain harvest may fall as low as 65 million tonnes this year, down from 97 million tonnes in 2009. The grain agency SovEcon has also estimated that the wheat crop may decline by a whopping 44 million tonnes this year from 61.7 million in 2009. That is 4 million tonnes less than was projected a few weeks ago and the final harvest may be even lower.

The Kremlin has taken steps to bolster the security of its 9.5 million tonnes of grain stockpiles. The government is also putting as much grain aside as it can while admitting that, “the Russian grain market is becoming an acute crisis because of wildfires and drought.”

Russia has even enacted a ban on grain and flour exports for the rest of the year and perhaps longer. The Kremlin is worried domestic consumption may surpass 75 million tonnes, or 10 million tonnes more than this fall’s harvest. Fortunately, the country has 21.5 million tonnes in reserves but this stockpile will be depleted quickly if crops continue to roast in the field.

Ukraine‘s Tortured History
But even as Moscow grows more nervous each day over the upcoming harvest, its puppet state, Ukraine, is embracing the Bear in the face of servitude and perhaps even starvation. The recently elected pro-Russian, pro-Communist government in Ukraine is even rewriting history with its recent proclamation that the Terror-Famine was a tragedy the Soviet Union attempted to stop.

One of Ukraine’s top bureaucrats—Valery Soldatenko—has boasted of being a “proud Communist.” Comrade Soldatenko is not only oblivious to the oxymoron but went so far as to tell Radio Free Europe’s Ukrainian Service that he never surrendered his Communist Party membership card. “I share the Communist ideas of social and national justice, social and national equality,” he said.

Soldatenko is even a Stalin apologist. As a new director of Ukraine’s National Memory Institute (which must have no memory at all), Soldatenko believes that Joseph Stalin did everything he could to lessen the effects of the famine. Soldatenko went so far as to say that the Terror-Famine was not initiated by Stalin, but was, “The result of difficult circumstances.”

It is shocking that with starvation blowing in the wind Ukraine’s new President Viktor Yanukovych and Russia’s Prime Minster Vladimir Putin are almost nostalgic for Communist rule.

The Resurrection Of Stalin         
Last May there was a rally in opposition to Prime Minister Putin with protestors shouting slogans comparing the Prime Minister to Joseph Stalin.

"Putin is Stalin! Putin is Brezhnev! Russia without Putin," chanted the crowd. One activist held a big caricature picture of Putin kissing Soviet leader Leonid Brezhnev. Police quickly ripped it down. In another demonstration hundreds unfurled a giant Russian flag and waved signs demanding fair elections as lines of riot police watched.

Opponents such as these say Putin has censored freedom of the press and eliminated democratic rights when he was President. Now that he has permanently installed himself as Prime Minister they fear that the nation is on the road to ruin and repression.

According to renowned Russian chess grand master Garry Kasparov, “The economy is sinking, the politicians do not allow any opposition into parliament; Putin’s state control is all encompassing.”

But the opposition is the minority to Putin and his iron fist. During the last May Day celebrations Reuter’s reported that thousands of Communists, trade union activists, nationalists and black-clad anti-fascists came out in support of Putin.

Russia’s Communist Party is Russia’s second biggest political party. In the past year thousands have marched under bright red banners that hold portraits of Stalin. Late last year Stalin was voted Russia’s third most popular historical figure ever. Meanwhile, a Moscow train station has restored a phrase on a billboard praising Stalin.

Putin himself has even gone so far as to praise Stalin. “It is impossible to make a general judgment. It is evident that, from 1924 to 1953, the country that Stalin ruled changed from an agrarian to an industrial society,” said the Russian Prime Minster last December. Putin went on to praise Stalin’s leadership in winning World War II.

The question: Will Putin emulate Stalin? The test of that may come this fall as sweltering heat burns the crops in Russia, Ukraine and Kazakhstan. The Big Three are among the largest exporters of wheat in the world. They provide essential food stuffs to the Middle East and North Africa and to millions of their own citizens; people who could face mass starvation if Russia staggers back to the Dark Ages that was Stalin.

Outlook
Wheat prices hit $7.24 per bushel last week, a 70 percent increase since the June lows. That is the biggest one-month jump in three decades; bigger than the food crisis of 2008 when wheat prices reached $13 per bushel.

The result of that crisis was rioting in Bangladesh, Egypt and elsewhere. This crisis could be potentially worse. And we all know that higher grain prices mean more inflation and a weaker U.S. dollar.

Wheat Prices Soar

Potash Corporation of Saskatchewan Inc., (NYSE:POT, $109) sells fertilizers and related industrial and feed products worldwide. The company also produces nitrogen fertilizers plus nitrogen feed and industrial products, including ammonia and urea.

PotashCorp also has the mineral rights to more than 800,000 acres in Canada. Prices of this stock are up strongly as investors assume that drought will lead to greater planting and rising demand for fertilizers.

PotashCorp’s stock price has rallied strongly since the deflationary panic in the summer of 2008. I believe the continued bailout process ongoing in Washington as well as soaring demand for grains worldwide will continue to push up the stock price of PotashCorp.

Action To Take
Call your stock broker and buy Potash Corporation of Saskatchewan (NYSE:POT, $140) at market.

Yours for wealth and health,

John Myers
Myers Energy and Gold Report

John Myers

is editor of Myers’ Energy and Gold Report. The son of C.V. Myers, the original publisher of Oilweek Magazine, John has worked with two of the world’s largest investment publishers, Phillips and Agora. He was the original editor for Outstanding Investments and has more than 20 years experience as an investment writer. John is a graduate of the University of Calgary. He has worked for Prudential Securities in Spokane, Wash., as a registered investment advisor. His office location in Calgary, Alberta, is just minutes away from the headquarters of some of the biggest players in today’s energy markets. This gives him personal access to everyone from oil CEOs to roughnecks, where he learns secrets from oil insiders he passes on to his subscribers. Plus, during his years in Spokane he cultivated a network of relationships with mining insiders in Idaho, Oregon and Washington.