To make some sense of the current economic recession, observers of history look back to similar situations in the past. The last few recessions, 2001, 1990-1991 and 1981-1982 don't seem to be anything quite like this one. Recent recessions featured a drop in the stock market or a drop in real estate but not a drop in both at the same time. The last time there was a decline in the value of both housing and the stock market was in the 1973-1975 recession. This recession appears to have the weight and depth of the 1970s recession, which is a lot better than repeating the 1930s but much more serious than the last three.
In looking at similarities between the 1970s and the current recession, one striking resemblance stands out, the Great Grain Robbery of 1972 and the Great Grain Robbery of 2008. It is been said that history repeats itself, first as a tragedy and second as a farce. The Great Grain Robbery of 1972 was a tragedy and the Great Grain Robbery of 2008 was a farce.
'Great Grain Robbery' of 1970
One year prior to the 1973-1975 recession, the former Soviet Union managed to outsmart the U.S. in the celebrated "Great Grain Robbery of 1972." Soviet agents secretly bought up 30% of the U.S. wheat harvest at a low price (chart). Immediately following discovery of the sales, the domestic prices of feed and foodgrains all turned upward. The price of wheat eventually tripled and the prices of corn and soybeans more than doubled.
The victory was particularly sweet for the Soviet Union and bitter for the U.S. when it came to light that the American government not only knew about the sales, and did not disclose the dimensions until it was too late, but also subsidized the sale with an export credit of $750 million. As a result of the grain robbery and other factors such as the Arab Oil embargo, a tragically long recession took place.
Similar in 2008
In an eerily similar scenario, ethanol agents purchased exactly 30% of the 2008 corn crop in the Great Grain Robbery of 2008. Wheat and corn prices once again doubled and tripled, helping push the world into another long recession. The ethanol corn robbery is a multi-year confiscation of feedstuffs that continues to this day but 2008 stood out as particularly senseless. Last year was notable because the corn lobby, with reckless disregard for international consequences, insisted on increasing ethanol production at a break-neck speed despite a dangerous worldwide shortage of feed and food.
Once again the grain robbery was paid for by U.S. taxpayers, $4 billion this time. Instead of being carried out secretly, the robbery was sanctioned and encouraged by the U.S. government. As a result of the latest grain robbery and other factors like out-of-control toxic sub-prime loans, another long recession has taken hold.
Meat consumption suffers
Unfortunately for the animal industries, recessions have a depressing effect on the consumption of meat. The first grain robbery helped put the U.S. into a period without any growth in domestic meat production from 1972 to 1975. If this recession is similar, there will be another episode without growth in total U.S. meat production from 2008 to 2011.
Chicken production almost never falls in the U.S. Since 1960 the only drop in total U.S. chicken production was during the 1973-1975 recession. At that time, production dropped from 8.9 billion pounds to 8.6 billion pounds.
If the current recession follows the path of the 1970s recession, chicken production in 2010 will be a billion pounds less than 2008 (chart). Chicken production had an amazing 33-year run of uninterrupted increases in production from 1975 to 2008 that saw production increase fourfold.