WSJ: Crop prices soar, push food costs up globally

[GliderGuider]

http://www.sltrib.com/business/ci_5668846

Soaring prices for farm goods, driven in part by demand for crop-based fuels, are pushing up the price of food worldwide and unleashing a new source of inflationary pressure.

One of the chief causes of food price inflation is new demand for ethanol and biodiesel, which can be made from corn, palm oil, sugar and other crops. That demand has driven up the price of those commodities, leading to higher costs for producers of everything from beef to eggs to soft drinks. In some cases, producers are passing the costs along to consumers. Several years of global economic growth - led by China and India - is also raising food consumption, further fanning the inflationary pressures.

Global grain stocks are at their lowest level in 30 years, after several years of strong global economic growth, and could become even tighter if farmers divert more crops to make ethanol or other fuels. By some estimates, about 30 percent of the U.S. grain harvest probably will be devoted to ethanol production by 2008, up from 16 percent in 2006.

More on global food economics in the article.

[Javaman]

1. And here it comes the results of the "great" ethanol swindle. nt

[jpak]

2. Adjusted for inflation, corn prices have fallen dramatically since the oil shocks of the 70's

http://inflationdata.com/inflation/Articles/Corn_Inflation.asp

and the recent spikes in oil and gas prices have placed upward pressure on corn prices - ethanol or no ethanol production.

Only 3% of the world's grain production is used for biofuels - population pressure, land and water availability and trade agreements have had a far greater impact on food prices and security than the "dreaded ethanol scam".

from the OP...

<snip>

So far, higher prices haven't generated a huge rise in overall global inflation, which remains relatively low and stable by historical standards. Moreover, food prices are notoriously volatile, and some of the increases are because of short-term or local factors that could reverse in time.

But many economists believe the forces causing the current bout of food inflation will persist, or recur in years ahead. Many countries are facing shortages of land and water that didn't exist during past food price spikes, so they can't easily plant more to ease the strain.

Researchers at Swiss bank UBS AG note that average food prices in China have grown faster in the past five years than in the previous five, as more agricultural land is taken up for factories or high-rise condominiums. Changes in diets are also exacerbating the problem, as rising incomes allow the Chinese and consumers in many other places to eat more.

Some economists contend that China and India appear to be reaching a point at which nothing short of a bumper crop of key commodities will be enough to meet local needs and prevent further surges in food prices. In fact, China and India have achieved historically high production of some crops in recent years, only to see prices continue to climb.

<snip>

Millions of Mexican corn farmers and related agricultural workers were displaced by cheap US NAFTA corn imports - ethanol had nothing to do with this...

http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2006/07/31/MNGIVK8BHP1.DTL

Mexico's corn farmers see their livelihoods wither away

07-31) 04:00 PDT Atlacomulco, Mexico -- Tending his sun-drenched half-acre cornfield, Jose Davila represents a part of Mexico that may fade away as the pressures of free trade intensify.

"I'm an antique," said the hunched 90-year-old farmer. "Who wants to work all day in the sun and earn so little? All the younger people now look for jobs in factories or construction. Either that, or they go to the United States."

The growing dilemma that Mexico's 2 million corn farmers face as the tariffs that protect them shrink under the North American Free Trade Agreement was an issue in this month's presidential election. And as the United States wrestles with already high levels of illegal immigration, some experts say the demise of Mexico's peasantry deserves serious U.S. attention.

"The Bush administration has sought to control immigration at the border, but that's virtually impossible," said Harley Shaiken, director of UC Berkeley's Center for Latin American Studies. "The beginnings of immigration are in the displacement of farmers in Mexico."

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Again, ethanol had nothing to do with this - but higher corn prices are benefiting small marginal Mexican corn producers and local rural economies. The implications of this are obvious.

Finally, global warming - not ethanol production - is the REAL threat to global food security, and ethanol is part of the solution to that problem...something the biofuel haters want you to forget.

[AlecBGreen]

3. uh...

"global warming - not ethanol production - is the REAL threat to global food security"

Yes, we agree on this

"ethanol is part of the solution to that problem"

Not so sure about this one... What does it matter whether CO2 comes from oil, diesel or ethanol? They are all hydrocarbons and the chemistry is the same: hydrocarbon + heat + oxygen = CO2 + water vapor. CO2 --> Global warming. Except perhaps for lower levels of NOx and SOx, burning ethanol is just as bad as burning gasoline or diesel.

[GliderGuider]

4. Well, it actually does make a difference, at least in theory.

The carbon in the ethanol comes from CO2 the air, which is cracked into C and O2 by plants during photosynthesis. So from that point of view burning ethanol is carbon neutral - the CO2 that came from the air winds up back in the air within months. On the other hand, the carbon in petroleum was taken from the air millions of years ago and has been underground ever since. The carbon balance has readjusted in the interim to accommodate the loss of this sequestered carbon. When oil is burned, that hundred million year old carbon is put back in the air. This changes the carbon balance, unlike burning ethanol.

The nuance comes in the production of ethanol which requires significant energy inputs to grow the feedstock, transport it, prepare it, distill the ethanol from its dilute beer-like solution, and dispose of any waste matter or byproducts. This additional energy can amount to 90% of the energy contained in the ethanol itself. If it comes from fossil fuel sources, you are barely any further ahead than if you'd just used that fossil fuel directly. This is the hidden gotcha with ethanol the the researchers are working so hard to overcome, all so we can keep driving to McD's.

[jpak]

6. The "waste product" is high quality cattle feed - that's how they "dispose" of it...

n/t

[GliderGuider]

7. No, that's the byproduct I mentioned. Wastes are different.

When considering the issue of carbon in the air, the DDG byproduct need not be counted. DDG makes little difference to the carbon balance of the process, as most of the feedstock carbon should be going into the ethanol. For an overall net energy analysis it does matter, of course.

[jpak]

5. Not so

Environmental, economic, and energetic costs and benefits of biodiesel and ethanol biofuels

Jason Hill, Erik Nelson, David Tilman, Stephen Polasky, and Douglas Tiffany

Negative environmental consequences of fossil fuels and concerns about petroleum supplies have spurred the search for renewable transportation biofuels. To be a viable alternative, a biofuel should provide a net energy gain, have environmental benefits, be economically competitive, and be producible in large quantities without reducing food supplies. We use these criteria to evaluate, through life-cycle accounting, ethanol from corn grain and biodiesel from soybeans. Ethanol yields 25% more energy than the energy invested in its production, whereas biodiesel yields 93% more. Compared with ethanol, biodiesel releases just 1.0%, 8.3%, and 13% of the agricultural nitrogen, phosphorus, and pesticide pollutants, respectively, per net energy gain. Relative to the fossil fuels they displace, greenhouse gas emissions are reduced 12% by the production and combustion of ethanol and 41% by biodiesel. Biodiesel also releases less air pollutants per net energy gain than ethanol. These advantages of biodiesel over ethanol come from lower agricultural inputs and more efficient conversion of feedstocks to fuel. Neither biofuel can replace much petroleum without impacting food supplies. Even dedicating all U.S. corn and soybean production to biofuels would meet only 12% of gasoline demand and 6% of diesel demand. Until recent increases in petroleum prices, high production costs made biofuels unprofitable without subsidies. Biodiesel provides sufficient environmental advantages to merit subsidy. Transportation biofuels such as synfuel hydrocarbons or cellulosic ethanol, if produced from low-input biomass grown on agriculturally marginal land or from waste biomass, could provide much greater supplies and environmental benefits than food-based biofuels.

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also...

Ethanol Can Contribute to Energy and Environmental Goals

Alexander E. Farrell, Richard J. Plevin, Brian T. Turner, Andrew D. Jones, Michael O'Hare, Daniel M. Kammen

27 JANUARY 2006 VOL 311 SCIENCE www.sciencemag.org

http://rael.berkeley.edu/EBAMM/summary.html

[4dsc]

9. Did you read the bottom line??

it states from the above article: Notes: Current agricultural production creates soil erosion, nutrient runoff, and other environmental impacts that cannot be accurately represented in energy units. Progress toward attaining energy and environmental goals will require new technologies and practices, such as sustainable agriculture and cellulosic ethanol production. In addition, the conversion of land to agriculture for ethanol production also has environmental consequences.

[4dsc]

8. Inflation??

Too bad that if you count inflation into the mix you have to mention most people wages have not kept up with inflation. thus it doesn't matter what corn prices are comparatively..

I just hate people that use this sad method to try and make a useless point..


Only 3% of the world's grain production is used for biofuels

To bad over 61% of the corn grown in this country goes to livestock feed.. I guess raising the price of corn won't effect our food prices(sarcasm off)..