Explosive Food Inflation -- The Big Presidential Issue?

Could the price and availability of food become one of the 2008 campaign's biggest issues? Or maybe, we should be asking, why the explosive inflation in food prices is not already THE issue.

Associated Press reports, Food Costs Rising Fastest in 17 Years ". Eggs cost 25 percent more in February than they did a year ago, according to the USDA. Milk and other dairy products jumped 13 percent, chicken and other poultry nearly 7 percent."

Bad policies, supported at a bi-partisan level, have dramatically aggravated an already serious problem. In the US, wheat suppliers are talking about rationing wheat to bakeries.

The New York Times, in an article which discusses the emergency nature of the need for solutions to the growing shortages of affordable food, says,

"Wheat prices have risen by 130 percent since March of last year, and soy prices have risen 87 percent, the United Nations said, with food now representing 60 percent to 80 percent of consumer spending in developing countries. In general, the World Bank has said that food prices have climbed about 83 percent worldwide over the past three years.

The Times article reports that this has "set off violent protests in Haiti, Egypt, Uzbekistan, Yemen, the Philippines, Thailand, Indonesia and even Italy."

A perfect storm of bad policies in several arenas has produced this disaster that is already well under way. These are generally policies that continue to be supported by both Democrats and Republicans in congress. That situation is going to have to change, and fast, because the perfect storm is still building in size, power and threat. If it was a hurricane, like Katrina, it would still be out at sea, but threatening to soon hit land.

In the US, where food costs represent the lowest percentage of income than anywhere else, the "bite" has not been nearly as bad, at 4% increase overall, in the costs of food. But that could and will change as the confluence of factors causing it worsen.

The NY Times article says,

"Major agricultural countries must urgently change their policies to avoid a social explosion from rising food prices, a panel of United Nations experts warned Tuesday, adding their voices to new concerns about the proper balance between saving the environment and feeding the poor.

"Modern agriculture will have to change radically if the international community wants to cope with growing populations and climate change, while avoiding social fragmentation and irreversible deterioration of the environment," said Salvatore Arico, a biodiversity specialist with the United Nations Educational, Scientific and Cultural Organization, or Unesco, summarizing the report by about 400 experts.

The report tries to provide a comprehensive view on how to produce food that is less dependent on fossil fuels; favors locally available resources, natural fertilizers and traditional seeds; and tries to preserve the soil and water supply.

Decreasing the Dollar's Value; good for exports and balance of trade, bad for Food Prices in the US and Worldwide.
In the US, as is the case for any countries whose currencies ride with the dollar, food prices are rising as the value of the dollar continues to plummet. There are two reasons this impacts the US. The biggest one is that the price of US food looks cheaper and cheaper as the Euro and other currencies rise in value in proportion to the dollar, making US Wheat and other food exports more attractive to foreign nations. That raises the prices in the US and makes less food available.

For foreign nations whose currencies are tied to the dollar, they are competing with other currencies now worth more, and that is driving up their costs for food, and potentially could motivate them to abandon the dollar. That will surely accelerate the dollar's decline and food prices in the US.

Cellulosic Ethanol, mostly from Corn-- a rotten idea
Then we have ethanol from corn. This failed idea is still being subsidized and encouraged as a good solution to the energy crisis. It will go down in history as one of the monumental bad ideas. What seems like a good idea has turned out to be a disastrous one that has raised corn and corn product prices, like that ubiquitous sweetener, corn syrup, massively. And farmers, to take advantage of the higher prices that corn brings, are converting wheat and other crop fields to corn fields, thus decreasing availability and raising prices for other foods. Lester Brown, president of the Earth Policy Institute, reported, in 2006, that the ethanol to fill one SUV's gas tank requires enough corn to feed a person for a full year, saying,

" it is a battle between the world's 800 million automobile owners, who want to maintain their mobility, and the world's 2 billion poorest people, who simply want to survive.

Whenever the food value of a crop drops below its fuel value, the market will convert it into fuel. Ultimately, this dynamic risks driving up world food prices, destabilizing governments in low-income nations and disrupting global economic growth."

Yet Obama and Hillary still support funding more ethanol production, according to their website policy pages. While the McCain website does not even include Energy as an issue, David Brooks, in the NY Times, reported, in February,

"In 2000, McCain ran for president and reiterated his longstanding opposition to ethanol subsidies. Though it crippled his chances in Iowa, he argued that ethanol was a wasteful giveaway. A recent study in the journal Science has shown that when you take all impacts into consideration, ethanol consumption increases greenhouse gas emissions compared with regular gasoline. Unlike, say, Barack Obama, McCain still opposes ethanol subsidies."

The R-Sqared Energy blog discusses how the Iowa caucuses influence presidential candidate ethanol policy;

The prominence of the Iowa presidential caucuses also plays a major role. The Iowa caucuses are held prior to the elections in most other states, and presidential candidates hope to do well there and gain momentum going into the rest of the campaign season. Since Iowa is the heart of ethanol production country in the U.S., candidates pander to the voters there who have greatly benefited from U.S. ethanol policies. In order to win Iowa, you must support ethanol policy. Presidential hopefuls Hillary Clinton and John McCain provide perfect examples of the Iowa influence. Longtime critics of U.S. ethanol policy - both changed their positions during the most recent presidential campaign. In 2003, McCain had come out strongly against U.S. ethanol policy:

"Ethanol is a product that would not exist if Congress didn't create an artificial market for it. No one would be willing to buy it. Yet thanks to agricultural subsidies and ethanol producer subsidies, it is now a very big business - tens of billions of dollars that have enriched a handful of corporate interests - primarily one big corporation, ADM. Ethanol does nothing to reduce fuel consumption, nothing to increase our energy independence, nothing to improve air quality."

Contrast that with his statements in 2006 as he prepared for a presidential run:

"I support ethanol and I think it is a vital, a vital alternative energy source not only because of our dependency on foreign oil but its greenhouse gas reduction effects."

Thus, while the world wakes up to the overall social and environmental ramifications of a broad expansion of ethanol policy, the U.S. is unlikely to deviate from the current policy. If there was a major Midwestern drought that caused the corn crop to fail, it might cause a reevaluation of the policy as corn supplies disappeared. But barring some sort of catastrophe that impacts ordinary Americans, the policy of turning food into fuel will continue unabated in the U.S."

The NY Times article on the UN Report also states,

" The European Union has been rethinking its emphasis on the use of biofuels, even as the European Commission on Monday rejected an appeal from an advisory panel to suspend its goal of having 10 percent of its transportation fuel made from biofuel by 2020. That goal is seen as an integral part of the European Union's pledge to reduce carbon dioxide emissions by 20 percent by that year, as part of the effort to reduce global warming.

The United Nations special rapporteur for the right to food, Jean Ziegler, has said biofuels are "a crime against humanity" because they raise global food prices. But Barbara Helfferich, spokeswoman for the European Union environment commissioner, Stavros Dimas, said, "You can't change a political objective without risking a debate on all the other objectives" of climate change and energy reform."

The Iowa caucuses are over. Will any candidate have the courage to risk Iowa's ire in November? People in Africa will starve if they don't. This is not hyperbole. Bush won Iowa in 2004, 50% to 49%. That makes it a tossup state. Courage and integrity WILL prevail, but, unless both parties give up this bad policy, Iowa may win and the world will lose.

Other challenges facing the food supply and prices include
Natural seeds vs "Killer field" patented seeds that won't grow a second crop, as this OpEdNews.com article on the Killing Fields reports:

America's silent killers are deadly, and do not discriminate. They target babies, the elderly, teenagers, young adults, middle-age housewives, and businessmen alike. They poison livestock, pets, and wildlife, and the people behind them deny complicity in the carnage. Who or what are these silent, deadly killers? They are the beautiful, green, uniform, and seemingly beneficial, killing fields of genetically modified (GMO) crops. The people behind them are the U.S. government, the Rockefellers, Monsanto, Dow, DuPont, and Syngenta.

They make GMO corn, by the way-- the brewing of another perfect storm?

Good Old Fashioned Farmer Welfare-- Farm Subsidies Paying Farmers NOT to Grow Crops
This is another bipartisan bit of foolish cowardice that panders to farmers and the huge farm conglomerates. Those subsidies have to go. It's no old wives tale, now, to say that people are starving. Farm subsidies are part of the perfect storm and they are leading to global instability and will surely contribute to more food riots and worse. It's unlikely that Obama or Hillary will take this issue on in the primaries, but after they are over, the ending of farm subsidies should be a part of the Democratic party's platform. Fat chance. The way to make it happen is to start rewarding farmers for growing food that they sell to domestic markets. As food prices rise, there will be a need to subsidize food for the poor in the US. Perhaps the way to do it is to subsidize farmers who GROW food and sell it to bakers and food processors and packagers at reduced prices for US citizens who cannot afford the rising prices. That would retain the idea of farm subsidization, but encourage more food production, not less.

Another Bad Idea; Subsidizing Food Prices for Export
The Times article also reports,

"Other critics, however, have pointed to the way the European Union subsidizes its agricultural exports, which is to get rid of European surpluses to keep European farmers happy, while selling at a price well below the cost of production -- thus undermining the ordinary market for local food production in Africa."

This issue of food can only get bigger and bigger as the cornucopia of factors contributing to the food crisis perfect storm continue to worsen and increase in complexity. Since the US has evolved to be the "breadbasket of the world," the problems that develop will often be blamed on the USA. That makes the food crisis a diplomatic crisis as well.

I've long said that the conflict in the Middle East is the most difficult problem in the world. This incredibly complex, multidimensional food crisis could, eventually, surpass it. There will be no easy choices for the presidential candidates to make. Any decision to take responsible action to address the food crisis will extract a political price at the ballot box and in debates. As always, in 20th century America, megacorporations will play a heavy role, forcing candidates to decide between cutting profits or preventing human suffering. The human factor often loses in these contests.

The future is on the line. Let us hope that the candidates' courage to do the right thing will rise to play a pivotal role as well.

Comments

[squeakyf]

The ways of my grandparents (life long farmers of Northern Missouri) are gone...just like my grandparents and their farm. They married during The Great Depression and ran their farm the same way ever since that horrible time. They grew corn and soy enmass. They also raised cattle. On a smaller scale (but yet big enough for their family and any other family hit on "hard times") grew potatos, beans, tomatoes, berries, four apple trees and also raised hogs and chickens. They knew that they had too much and was never wanted for a thing. They were also more than happy to share with everyone the bounty of their labours, asking nothing in return.
As far as subsidies?? My grandfather said to me "only weak men with weak backs and weak morals would expect money for nothing".
These days are gone and so are the morals and values that made farming an honourable trade. I am not against a farmer getting a fair price for his labours, but it has gotten to the point where it is no longer such. The coporate farmer thinks nothing of the environment or the plight of the world customer that is a "slave" to its product. What the world needs is more farmers with the moral values and the strong back in which my grandfather had. If this were the case, we, like them during the Depression, would want for nothing. Support your local FAMILY owned farm.

[francoise]

The fact that more and more human beings want to eat more and more meat increase the pressure of food prices.

The Chinese used to eat rice, now they eat steaks.

Steaks need a lot of corn to be produced.

Either we become more reasonable and eat less meat, all of us, or the free market will win and only the poorest of us will become vegetarians.

[Henry]

Farmers have been going the way of the Edsel for decades. Capitalized farming with trnsgenic seeds and chemical additions have developed a way of life into the touch of midas (large scale driving small farms out).
Government programs address, try to address, the larger supply demand issues to no avail. And the farmer is looked at as a government dolee and the government is looked at as stooges(not that they are not)
Then more demand(in form of ethanol) and farmers now have revenue that makes a smaller scale profitable and the hangers-on are rewared with triplings of price. Wheat from $4 to $12 per bushel.
The Common Agriculture Policy of Europe has provided its small scale farmers with a higher price excluding American product by tarriff. It's an ugly complicated mess out there. And... people are starving. Well... they have always been starving. I've seen mountains of grain in the open left to rot because there was no "demand" for it. Yet people were starving.(1970s) What's new? Ethanol. Well if oil can go from $16 per barrel to $117 per barrel (with Bushwa manipulation) why shouldn't wheat go from $4 to $12? Where's that vaunted invisible hand to deliver the "right" price for us?

[libertron]

I actually saw wheat go from $3 and change to over $20 in months. And you are right about oil, but have you looked at other commodities like precious metals and non-precious metals and anything else that can be traded? The invisible hand is showing us that there is a financial crisis going on, the dollar is falling and you better convert your dollars (worthless paper, except for the word of the U.S.G.) into something more real. There is economic data available about current inventories of these commodities, going back many years and the current stocks are NOT low enough to justify these crazy prices. It's investors throwing money at them. But financial crisis' end, and things will come back to sort of normal. If I were a farmer, I wouldn't be buying shiny new tractors on a 7 year payment plan; wheat will probably be $2 three years from now.

[JonnyVerdorben]

America's corn crop = cattle feed
Approximately 90% of the corn grown in the USA is fed to cattle, pigs and chickens.
The fact that farm animals raised for meat consume most of the U.S. corn production doesn't bother the oil and nuclear shills in the least. They want unlimited access to their Big Macs and Kentucky Fried Chicken. Those and other meat products account for the overwhelming majority of the U.S. corn crop, a far larger percentage than is used to make ethanol.
* * * * * * * * * * * * * *
U.S. Corn Production:
~10% used for direct human consumption
~90% used for livestock feed
"We grow animal feed, not human food in the United States," [Dr Bruce] Dale said. "We could feed the country's population with 25 million acres of crop land, and we currently have 500 million acres. Most of our agricultural land is being used to grow animal feed."
"Ethanol production has been linked to a rise in the price of everything from tortillas to gummi bears. Unfortunately, this argument is very nearly ridiculous. The fact is that very little U.S. corn (about 10 percent) is fed directly to people; most of it is fed to animals." -- Dr Bruce Dale, Professor of Chemical Engineering, Michigan State University
http://www.physorg.com/news94224070.html
http://www.nj.com/opinion/times/editorials/index.ssf?/base/news-
0/120737075044810.xml&coll=5
CV and Contact Page for Dr Dale:
http://www.chems.msu.edu/php/faculty.php?user=bdale
* * * * * * * * * * * * * *

[francoise]

Thanks, Jonny, for the exact figures.

The fact that more and more human beings want to eat more and more meat increase the pressure of food prices.

The Chinese used to eat rice, now they eat steaks.

Steaks need a lot of corn to be produced.

Either we become more reasonable and eat less meat, all of us, or the free market will win and only the poorest of us will become vegetarians.

[JonnyVerdorben]

You're quite welcome, my pleasure. Here are a couple more:

* * * * * * * *

In China, [meat consumption] is up by 150 per cent since 1980.....

Because cattle and chickens are fed on corn -- it takes 8kg of grain to produce 1kg of beef -- the price has risen.

http://www.independent.co.uk/news/world/politics/the-other-global-crisis-rush-to-biofuels-is-driving-up-price-of-food-808138.html

* * * * * * * *

Startup Says It Can Make Ethanol for $1 a Gallon, and Without Corn

By Chuck Squatriglia

24 January 2008

A biofuel startup in Illinois can make ethanol from just about anything organic for less than $1 per gallon, and it wouldn't interfere with food supplies, company officials said.

....It also generates 7.7 times more energy than is required to produce it. Corn ethanol typically generates 1.3 times more energy than is used producing it.

http://www.wired.com/cars/energy/news/2008/01/ethanol23

* * * * * * * *

New Method Rapidly Produces Low-Cost Biofuels from Wood, Grass

Wed 09 Apr 2008

George Huber of the University of Massachusetts Amherst .....is making biofuels from cellulose, the non-edible portion of plant biomass..... The U.S. could potentially produce 1.3 billion dry tons of cellulosic biomass per year, which has the energy content of four billion barrels of crude oil. That's more than half of the seven billion barrels of crude oil consumed in our country each year.

http://www.newswise.com/articles/view/539563/?sc=rssn

* * * * * * * *

[ImmanuelGoldstein]

Ethanol doesn't save single drop of fossil fuels because it requires so much fertilizer and petrochemical pesticides to grow. It doesn't save a bit on greenhouse emissions either. It barely makes back the energy taken to grow it and maybe not even that.

Ethanol is a FRAUD all around. We could convert every grain of corn grown in America to ethanol and it would only replace a small fraction of the oil we burn and food prices would go through the ROOF! Ethanol can contribute little or nothing to energy independence.

The answer for America lies it knocking the automobile off it's pedastel not pouring our food into them!

[robinhood1]

Both Democrats and Republicans voted for the energy bills that boosted the use of ethanol. It's as if the politicians declared war on consumers. Why should the millionaire senators and house members care about the average consumer? I haven't heard Clinton, Obama or McCain criticize the use of ethanol. Do any of these politicians even shop for their own groceries? Ethanol = starving the poor. Right on. The Chinese 1 child per family policy is making more and more sense. At least the Clintons got that one right.

[ImmanuelGoldstein]

Hey do you want to go fishing for votes in the Iowa caucus telling people ethanol is a fraud?

[drkazmd65]

Good post overall Mr. Kall - one problem that I see overall though.

http://www.harvestcleanenergy.org/enews/enews_0505/enews_0505_Cellulosic_Ethanol.htm

Most corn now being converted into Ethanol is not done using the cellulose part of the corn (stalks, leaves & such). currently the grain is being fermented (starch & various sugars), not the cellulose. The sugars from sugar cane (similarly) are what is being used in Brazil.

If they could work out the kinks (and progress is being made) with using the cellulose then some of the competition for feed corn / fuel corn would drop.

Otherwise spot on. Why isn't this an issue for '08?

[Montanamotor]

In Germany, bacteria able to crack cellulose into low sugars suitable for fermentation to Ethanol are being intensively researched at a laboratory scale, already.

http://www.springerlink.com/content/785bm9d7uugugrdn/

It WORKS!

[drkazmd65]

No arguement Montanamotor - and this group has started to get a handle on it to starting from wood / wood fiber.

http://venturebeat.com/2008/01/25/zeachems-cellulosic-ethanol-process-ready-to-leave-the-lab-enter-pilot-testing/

If these get off the ground after pilot testing - there may be some hope for cellulosic ethanol as at least part of an energy solution.

[suekzoo]

Food prices? Non-issue. We need to get to the bottom of the (Made in China) flag pin scandal. Pay attention. Sheesh.

[Erdgeist]

Low interests rates (5% and below) lead to speculation in commodities. Oil is a commodity. To make money one needs to accumulate and store the commodity, then sell it high. Want cheap food again? Raise interests rates to about 6.5%. You will hear a giant gurgling sound as oil (fertilizer) is dumped and money rushes to good interest rates.

[Montanamotor]

Correctly analyzed. But who will listen?

[ImmanuelGoldstein]

Ethanol=Starving the poor

Pass it on.

[insanityfollows]

You are right, but it won't be just the poor that are starving. Oh well, just think how svelte we will all be!

[UnbiasView]

Is that you Ted Turner? Still promoting your canabalism idea?

[libertron]

The opinion part about Killer Fields shows a total lack of understanding. GMO corn has been around for years, and it's practically the only thing planted in the US now. Of course patented seeds can grow a second crop, how do you think they get them? Sit there and gene-splice every single seed they are going to sell? Trillions of them? They get one or a few with the trait wanted and then multiply them over many generations of growing them until they have enough to sell. The thing is, it's illegal by patent law, for now, to save and reuse your own seeds. I think that sucks, but hopefully their patents will end sometime, or be struck down in court.

[libertron]

This is a perfect example of "blame America first" coming from all corners of the Earth, and you, Rob. Here's why: As recently as two years ago, American farm policy was blamed (correctly) for driving down ag commodity prices with our subsidies. (Also Europe and Japan) This hurt farmers in other countries, and the poorest people of the world tend to be rural folks who raise and sell something.


But not a word was EVER said about about the other effect that had; lowering food prices for all people around the world, the poor included.

Now that our biofuel policies are driving up the price of those commodities, there is all this blame without a thought given that this is helping poor rural farmers all around.

Any reasonable person should see that the cup is half full either way, but it is always like "why are you American jerks making our cup half empty?" Libertron