Prices for some crops — such as wheat — have already begun to descend off their highs. As farmers rush to plant more wheat now that profit prospects have climbed, analysts predict that prices may come down as much as 30 percent in the coming months. But that would still leave a year-over-year price hike of 45 percent. Few believe prices will go back to where they were in early 2006, suggesting that the world must cope with a new reality of more expensive food.[…] A big reason for higher wheat prices, for instance, is the multiyear drought in Australia, something that scientists say may become persistent because of global warming. But wheat prices are also rising because U.S. farmers have been planting less of it, or moving wheat to less fertile ground. That is partly because they are planting more corn to capitalize on the biofuel frenzy.
Regarding food prices, it’s nice to know that we can win some value back by phasing out food-based biofuel. It might ameliorate the price shock quite a bit. But as I said earlier the fundamentals haven’t changed. The price of refined fuel products has barely started to register the effect of the $100+ barrel of crude, and arable land lost to climate warming won’t come back.
I predicted years ago that food security will eclipse every other concern about climate warming, at least until sea levels start to threaten the billions in coastal cities. A good argument could be made, then, that we’re better off if price spike now while the system still has some flex in it. The situation would be much worse if the spike only hit later when pressure only comes from inflexibles like climate, fuel and population. Instead of rising, plateauing and sinking a little from elasticity food costs would do the crazy dance that commodities do when inflexible demand meets a fixed supply. Sometimes pain has the useful effect of making people take a problem seriously.