Wednesday, June 04, 2008

Burning food in a world of food riots and skyrocketing grain prices

Golden Hour
Here in the Corn Belt, times are good for farmers. But the world is absent-minded. Every once in a while, it forgets to feed many of its people -- at least at a price they can afford. Usually this is a systemic crisis in which pockets of plenty coexist with pockets of deprivation. The system breaks down, and food doesn't get to the people who need it at a price they can pay. This happened in the Great Depression, when crops were burned in an effort to curb surpluses that were depressing prices -- at the very time that there were people going hungry.

This was long seen as a regrettable failure of a broken system. It was fixed through a combination of ag subsidies and surplus programs. Since the Great Depression, we have not needed to resort to burning crops. Until now. But it's less dramatic today. It happens every time people gas up with biofuels, especially the widespread gasoline/ethanol mixture. Mountains of corn are being burned in the engines of the nation's cars -- while elsewhere people are overburdened by high food prices or forced to do without.

Ethanol production is not the only cause of the world's food crisis. But it adds to the strains of an already overburdened system. Fields are converted to corm production, creating shortages that drive up other grain prices, and with today's high oil prices, ethanol producers can easily bid up the price of corn. The result is a snapshot of a system in crisis. Leo Lewis wrote about this recently in the Times Online.
When it comes to the food crisis, it is not difficult to cast biofuels as the villain of the piece: biofuels are new, the food crisis is new and the two seem connected intimately.

Even villains can serve a purpose. In this case, biofuels have been a barium meal for the globalised economy, exposing the astonishing fragility of food and energy supply so that the correct treatment can be applied.

By giving food a starring role in the energy debate, biofuels have revealed the lengths to which we will go to drive our cars cheaply. If food riots are the grim outcome of that new role, biofuels have rung an important alarm over the sustainability of the internal combustion engine.
Looking back at the old, faded Depression-era photographs of crops being burned, we can't help but wonder, what was wrong with those people? Today's automotive crop combustion is less dramatic, but something is still wrong with the picture.


Dr Bud "Soy fritter" Diablo said...

Yes, Steinbeck's image of growers destroying the orange crop while hungry Okies watch from beyond the fence is unforgettable. Whenever I get too smitten with the "free market," I recall that gripping narrative. Cowboy star Roy Rogers, an authentic Okie, marvelled at the accuracy of Steinbeck's depiction.

Often, of course, the culprits are the Big Boys. In the case of the oranges, the large growers purchased their own processing plants, then paying a pittance for the fruit whilst keeping prices high by charging a fortune for processing. The farmers unwillingly destroyed fruit because they could not pay the exorbitant costs.

Don't despair though, MadGuy. We are far from a Second Depression. It appears that other commodities than oil--including grains--have been priced upward not just by soaring demand from hungry Chinese mouths and thirsty American vehicles; hungry hedge funds and other institutions have participated in these runups.

It's all been nuts. The markets for heretofore boring goods like potash have become frenzied. However, one senses a sea change. Oil, as I predicted, is drifting down. Look for the entire commodities sector to correct.

The corn thing will pass too. While corn prices are indeed high, fertilizer prices have climbed even more. Farmers are starting to switch out of corn rather than into it, planting crops like soybeans that need fewer nutrients. While this will push corn prices higher in the near term, the high prices will cause consumption patterns to change and corn will return to earth.

Meanwhile, we'll enjoy the cheap beans. The Sun Prairie Soy Festival may have trouble attracting Dane County's gluttonous, but the corn will be back.

miriam said...

Thank you for posting about this. I've had growing concerns about biofuel, mainly because of the way that, like olestra, it allows folks to continue to consume at the same rates but with less least, one seems to think that is the case. Also, because any production that edges in on the food market seems it might cause new and bigger, more dangerous trouble.

I will read up a lot more about this after reading your post. So many questions, so many factors, but certainly one answer won't cover the whole gamut...

Compassionate Badger said...

keep posting about this topic! you have a good grasp on it.