WaPo:
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.
bloomingpol
I would agree with you, except that I think water may even eclipse food as a scarce resource very soon. Not only drinking water, but water for agriculture and water for all the other processes of modern civilization that we are used to. I am afraid things are going to get very nasty.
Of course, no one could have foreseen…except the DFHs who have kept up their anti-business nattering over the years. So now a lot of people are going to die because of course no one could have seen it coming.
scarshapedstar
Re-laaaaaax. God Is In The White House. The Rapture can’t be too far away.
wvng
Hi Tim. Fine post. “I predicted years ago that food security will eclipse every other concern about climate warming,. . . 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.”
There is a natural tendency for people to think in terms of definitive tipping points, as in the discussion of a specific CO2 level in the atmosphere beyond which things will get really bad. However, as the almost weekly shocking news from scientists who study ice masses (“boy, that’s happening a lot faster than we expected”) demonstrates, we are treading on new territory here, and predictive models struggle to keep up. We might be at a tipping point on food production, and usable water in many regions, right now.
My wife’s major professor in grad school, way back in the 70s, studied paleoclimate. He discovered, contrary to the prevailing evidence at the time, that a full glacial developed in a few hundred years, not eons. Most striking, they began with a year when the snow in the valleys just didn’t melt. Talk about your tipping point. Ag in any region with snow would simply stop.
Dennis - SGMM
There’s always a silver lining. I’m in the process of negotiating a substantial advance for my new book, “25 Ways to Wok a Dog.”
D Greaney
Grain speculation and manipulation seem to possible factors. Biofuels have been around for a while; what’s new is the boom in commodities speculation. These grain shortages remind me of the so-called power shortages in California back in the Enron days.
chopper
its funny, all those farmers who switched to corn recently must be kicking themselves. america’s wheat harvest is pretty good so far this year from what i hear (in terms of individual farmers), and many were able to sell at a high price.
of course, everyone else’s harvest seems to be taking a dump. once wheat rust hits the US (and i don’t believe the few varieties american farmers grow are resistant to the current strain in the ME and africe, and don’t get me started on monocultures), it’s gonna fuck up our harvest somethin fierce. africa has already lost, what, 70% of its wheat harvest? and this particular strain isn’t something that kills off wheat in patches, it takes out whole fields. it aint pretty.
RSA
Indeed. Look on the bright side–it’s hard to have an obesity epidemic in the US if people can’t afford to buy food. . .
I’m kidding, of course. For some reason fat-based food products always seem to be really cheap, per calorie.
Brachiator
There are a number of problems with your argument here. Commodities supplies are not fixed. Demand is not inflexible. Some producers are clearly gaming the market, or making decisions that are narrowly focused on their own profits to the detriment of local or global consumers. For example, just today, the New York Times has a story about Argentine farmers shutting down food production because they are unhappy that national policy is focused on satisfying local markets and keeping prices low (In Argentina’s Grain Belt, Farmers Revolt Over Taxes).
In the US, a trifecta of rising fuel, labor and transportation costs have slammed consumers. One elephant in the room that has not been thoroughly discussed is the effect of immigration policies on food production. The Bush Administration has worked hard to guarantee cheap immigrant labor to agribusiness in the form of dubious guest worker programs and phony concern about immigrant families. But immigrants, legal and illegal, have shunned low cost and short term agricultural work for more reliable work in the construction and service industries. As a result, some marginal producers have left the market, while others have raised prices.
Fuel costs are also not inflexible. There is no shortage of fuel, and rising prices are all out of proportion to increased demand from China and India. Energy use has simply shifted from the West to Asia as Western manufacturing output declines and has been taken over by the Chinese. The West is seeing a benefit in the form of cheaper goods and less local pollution (even though global pollution has likely increased).
It is also not clear at all that price spikes now will either shift behavior or resolve the various economic issues related to food and fuel. For example, despite rising fuel costs, UK workers have shut down Scotland’s only oil refinery, which provides provides 30% of the UK’s daily oil output from the North Sea (Oil refinery strikers hold rally):
Climate issues are a valid concern, but are too abstract to the average person. On the other hand, wages and prices are real and tangible and affect the pocket book.
You are right on the money here. Last week, 60 Minutes featured an amazing program which showed how declining water supplies in the West was forcing avocado farmers to cut down trees and reduce production. In order to attempt to stay solvent, they had to fire workers and raise prices. Meanwhile, non-agricultural water use continued at the same level, leaving the average citizen unaware of the degree to which declining water supplies was impacting the local economy.
The Grand Panjandrum
I would agree that we it is far better we have this problem now. Solutions are many, but until forced upon us, we have little hope actually seeing it through nationally or as individuals. We are really just looking at the tip of the iceberg. While everyone bitches about biofuel (which is not a solution to our energy problems), very little of the corn grown today is edible by human beings. It can be used to feed cattle, chickens; make high-fructose corn syrup and ethanol, but is inedible. Most Midwestern farmers are so specialized they can no longer feed themselves. They cannot eat the corn they raise.
Misguided energy and farm policy (which is still evident in the current Farm Bill) are the biggest culprits. Our propensity fast and convenient food (MacDonalds, and pre-packaged junk) give rise to obesity and a market driven health crisis that we are only now beginning to come to grips with. Unfortunately, many farm state legislators (Senate and House) are now senior members with extensive power to push through farm welfare. Farm welfare is one of the largest corporate handouts in the budget and the threat of putting small farmers out of business is the cudgel used to pass these crazy bills.
empty
Subsidized agriculture in the US and Europe have long had a negative impact on farmers in the third world. Could increases in the prices of food crops in the US turn out to be beneficial for the third world farmers?
jake
My only concern is people who benefit from high oil prices will use this as “proof” any type of bio-fuel just won’t work (so shut up and fork over $5.00 a gallon). If any company has done R&D on bio-diesel at an industrial level, I haven’t heard about it.
TenguPhule
The words, they scream in agony over being forced into that complete rewrite of reality.
TenguPhule
No. SATSQ.
Don
If you’d like to experience some complete screaming terror, read the first two sections of The Omnivore’s Dilemma with all its details about how crucial petroleum is to every phase of our food production. In particular, the fact that we mostly grow corn variants that simply cannot grow without NPK fertilizer… which we make with oil.
It was bad enough to contemplate an economy that turned so completely on cheap oil, but the thought that our food production did as well?
Cain
thread jack: how did our boy (I know, I’m a racist) do against Chris Wallace? Successful as Daniel in the lion’s den? I don’t have fox news/cnn or any of those others. Hopefully he kicked ass.
cain
TenguPhule
I have never understood why farmers couldn’t go back to the old fertilizers, like dung.
Dennis - SGMM
In the course of researching details of the late Middle Ages for a book I’m writing I found that feudal lords devoted a great deal of attention to specifying how and when the peasants would drive their own cattle across the lord’s fields to ensure that the majority of the manure was deposited thereon. In those days they wanted the bullshit, now they bullshit us.
The Other Steve
Sure, but this gain is offset by the fact that everybody is paying more for food.
Farmers don’t want to take subsidies. However, they can’t afford to sell their product for less than it cost to grow it. That’s why the subsidies exist.
dbrown
Really? A source or proof using production/usage must be supplied or this statement is a lot of BS in a post that is rather good.
Not even close to the real wellfare queens – our military contractors/companies; we have a military way too big for our needs – really, a two and half ocean navy!!! An air forced filled with heavy bombers and super sonic fighters to fight a war with a military power that dosen’t exists anymore. Vast number of heavy tanks and moble artillary for what? Subs (@ a few billion each!) that can only be used to attack other subs but the russian sub fleet never leaves port! and china just dosen’t have more than a handful. What a joke! No wonder our two million strong military can’t keep 150 K in the field and over two billion a year!
dbrown
correction: read that as two hundred billion a year
rapier
I think, and let me say I won’t swear to this, but I think the consensus about warming and ag production is that global production will not decline for quite awhile. Some place will benefit, others will take a hit but the effect should be a wash.
Maybe that isn’t the consensus and maybe the consensus is wrong but it’s best to look into this before one goes too far off into speculation. Speaking of which, it is speculative driven price, and related hoarding of physical supplies, more than absolute shortage which is threatening millions with starvation.
Spreading fear of immanent shortages due to climate change serves the purposes of speculators. It’s certainly bad science. Climate change even if it accelerates will take years to effect global, and I have to repeat global, food production. In the meantime ag prices are driven by each years crop and guesses about the next. Dragging climate change into supply and price discussions is only fuel to drive the markets up to the detriment of millions now trying to feed themselves.
Bruce in Norte California
Remember the movie “Soylent Green?”
I used to think it was an apocalyptic vision of constant food shortages and deteriorating infrastructure in the future.
dbrown
World production of rice is down due to climate conditions – whether that is due to AGW is impossible to say (or deny, either.) Lower wheat production has more to due with the increase bio-fuel combined with increased consumption by China/India rather than climate and while speculation has not directly caused the price increases in most food gains it is fueling these costs. Fuel costs are mostly after the fact (currently) but aren’t helping but will play a bigger role in the future.
Climate as per AGW is an unknown because climate models do not directly address this issue but since most marginal producers (read third world farmers) are highly dependent on weather, and more than likely will be big losers in AGW they have a big stake but no influence. As always, ignorance of conditions only works in favor of the over feed, safe rich whites living in the west who dismiss AGW effects on third world agriculture since they know jack shit on/about the conditions these farmers face and since climate modelers have to fight asshole deniers just on issues that are easy to prove (climate realative to world average based models), they aren’t fucking going out on the limb for brown/black skin dirt farmers and model their (exact and local) chances to survive AGW due to local weather. Truth – these farmers are probably fucked but only time will tell but our lives aren’t hanging in the balance like they are. Its easy to make pronouncements when you are fucking safe with vast safety nets and endless food, unlike the dirt poor fuckers that live hand to mouth and any climate change, just for a single season, means some of their children die – think of that when you talk about AGW in the real world and think such a crap shoot is just an academic form of mental masturbation for yourself. This is life and death for millions and will mostly mean death.
TenguPhule
Australia: 10 year drought
US Wheatbelt: Getting Fucked.
Get a clue. It’s happening now.
TenguPhule
Fuel makes the food go round.
Combine higher fuel prices with droughts and large populations improving their diet and you have a problem.
It doesn’t matter where it’s grown if it doesn’t reach the people who want to eat it.
MNPundit
Don’t be silly Tim, we’ll kill each over water long before we kill each other over food.
4jkb4ia
I was unreasonably excited at being able to put BUTTER in the skillet. Thank you for the sobering post. (There was no kosher for Passover butter in the store, and barely any margarine)
4jkb4ia
That Argentina story was truly important
Brachiator
The story about Argentine farmers easily contradicts your glib response. Farmers there don’t care at all about strong local demand because they can make more money in international markets. Farmers there have unilaterally and arbitrarily halted the supply of commodities. There is obviously no fixed amount of supplies here, nor is there any natural tension between supply and demand.
Also, right now, despite any issues related to the climate, Angola and Zimbabwe could be the breadbasket of Africa were it not for political and economic instability which has stifled the development of local markets.
In the US, by contrast, consumer purchasing power has been so strong that there was no reason for any farmer to withhold any products from the US market. The following puts things into perspective (California Farm Bureau Statistics):
A decline in personal income along with steep rises in the cost of food, transportation and housing are blowing this previous rosy picture out of the water, but Americans and people in the West in general have more of a cushion before the price of food becomes a critical issue. People in less developed countries don’t have it as easy.
The industrialized world moved beyond local dung by the 19th century. Consider, for example, the international tussles over guano islands, e.g., The Guano Islands Act of 1856, “which enables citizens of the U.S. to take possession of islands containing guano deposits.”
Well, there is this item from the April 20 NY Times (The Big Thirst):
In considering the various factors affecting oil prices, the author of the piece, Jad Mouawad, notes the following,
By the way, diesel costs less to refine than gasoline, and yet diesel prices have been rising as dramatically as other fuel costs.
The Times article includes some very good graphics that detail the various factors affecting fuel prices, and also includes some useful links to other Times articles on the topic of oil and gasoline.
LiberalTarian
So I live near a cute little nursery called Morningsun Nursery in Vacaville, CA, and I went to the nursery last Saturday to pick up my peppers, tomatoes and some seeds and stuff. Anyway, they didn’t have much to choose from. When I asked them about it, they said, “This is the fist year we have been running out of tomatoes. When the goes gets tough, the tough get gardening.”
But I have to put all my plants in pots on top of the soil. I just found out the new quaint old house I moved to is in a older, used-to-be industrial park. Hm. Soil testing has shown easily detectable lead. Bummer. Oh wel, this is a good time to grow your own.
TenguPhule
And that has absolutely nothing to do with the essential point.
Which is that there is a limit to supply. You can only grow and transport so much, so fast with the resources available.
At the same time, there is an inflexible level of demand for food. People have to eat.
Farmers in Argentina may choose to not farm. Africa can choose to be fucking insane. They’re accelerating the problem, but they’re not the root cause of it.
LiberalTarian
Also, people in this country are already hoarding. Rice, beans, etc. Now, maybe we are just buying this stuff in bulk before it is too expensive to buy, or maybe people really do get how serious this can be. While most people who suffered through the great depression are not around anymore, plenty are who can remember the stories of their parents going hungry.
We are definitely in some interesting times. Definitely interesting.
Evinfuilt
Sudan… Its the first modern war due to water.
Its a sign of the future, when a giant resource becomes a muddy puddle, people get sick. When the people are starving and sick, war comes. Excuses will appear on why they should fight on this side, or that, but in the end someone must be blamed, and so war gets that out of the system.
For now I’m staying near the coast, where we can grow rice easily, and farm tilapia. But the problem is how many millions live here right now, eating food brought in from South America.
Thursday
Quickies:
1) There are more people in a single refugee camp in the Darfur region right now than were in Darfur and Khordofan in 1930;
2) Lake Chad (the largest in Africa) is now one tenth its size compared to just 30 years ago;
3) There are over 100 golf courses in Palm Springs – a town surrounded by desert;
4) The Catholic Church is the fastest growing religion in Africa, and forbids birth control.
Hm.