Starve-thy-neighbor policy and commodity prices

The commodity markets are in a global breakdown not from speculators but from government policies in the trade market. When countries follow policies of restricting the movement of grains in order to horde supply for their own people, there will be a supply disruptions. These disruptions will cause markets reactions which will increase the desire to horde and the lead to higher prices. Behavior which is intended to help the collective good of a country will create incentives for individuals to be driven by self-interest and for other countries to react in a similar fashion.

The restrictions on exports from grain producing countries may make sense from self-interest of one country but this will have am impact on the prices for grains globally. The flow of commodities form those who have to to those who need it is disrupted. The trade concept is simple goods should flow between supplier and demander at a price which is acceptable for both parties.

Should grain producing countries horde? The concept of holding back grain is a form of commodity mercantilism though some have called these policies starve-thy-neighbor trade behavior. The hording is not the form of restricting all exports to feed the starving mass in producing countries but export tariff. For example, Argentina has added a new export tariff of 44% on every tonne while Russia has added new tariffs on all wheat exports for 2007. http://www.ft.com/indepth/commoditiesboom

These export restrictions have been coupled with price controls internally to reduce the price inflation internally. Prices are not able to adjust to the global shortage. Local prices are kept artificially low while countries that are grain importers are left with higher prices from shortages.

No wonder the futures markets have seen increases in volatility and have hit new highs this year. The US is a major suppliers who have not added any restrictions. Hence exports have increased and supplies have become tighter in a market that is facing massive flooding in the Midwest.

So where are the international organizations now to help this process?