Handicapping an Escalation in the Arab Spring

With drought conditions in the U.S. and other farming regions pushing up agricultural commodities, we wonder if a flare up in the Arab Spring revolts will result. If you remember, what ultimately ended up being a political movement that toppled regimes in the Middle East, such as Egypt and Libya, began as protests in Tunisia and Morocco due to the rising food prices.

Of course, drought conditions will only be a short-term phenomenon and the parabolic moves in agricultural commodities that have been a result will also be short-lived. However, much of the Middle East and the developing World lives near, at, or below the poverty level, and any significant rise in food prices exacerbates the problem. Added to this volatile mix is the political tension created by high unemployment rates, demographics that skew toward young males, and a general belief in the illegitimacy of the respective governments. In addition, we should not completely discount the possibility of QE3, which would act to push down the value of the dollar and ultimately lead to higher prices of all dollar-priced commodities.

What say you?

The three-year charts for corn, wheat, and soybeans.