Green Meme Killers: Ethanol Is Causing The Food Crisis
June 12, 2008 · Print This Article
I’m sure you’ve heard it, just as we have, from self-righteous sounding friends and family. You know the sort: they think that global warming is a Marxist conspiracy to take over the world, and that environmentalists must be stopped. “The reason food prices are so out of control is because we’re sinking so much into ethanol and biofuels.” Wrong, wrong, wrong.
The meme generally goes like this:
Last year, food-to-fuel policies led to ¼ of U.S. corn being turned into ethanol. That number will rise to over 30% this year. By 2012 as much as 40% of our corn and 30% of our vegetable oils could be be diverted to fuel production.
This diversion of food crops is reducing the supply of food and feed and contributing to food price inflation. Today, food prices in the US are rising at twice the rate of inflation. Globally, food prices rose 83% in the last 3 years.
Compelling evidence, right? Not quite. The reality is that while the U.S. is embracing ethanol on a growing scale, that’s not what is driving food prices through the roof. First, we have to consider that–and we don’t say this lightly, being a resident of a state the neither the midwest nor the south seems ready to claim–the weather in the farm belt has been batshit crazy lately. Why does that matter? It means that the 25% of corn that went to ethanol in 2007 isn’t the same 25% of corn that was cheaply available in, say, 2000. Last year it was the drought that almost killed Atlanta. In 2006? Another drought. 2005? A third goddamn drought. And of course, to make up for all of this in 2008, we so far have been having rains that would make Noah blush–if you think food prices are high now, wait until the next harvest–there’s 4 million acres of corn that didn’t get planted this year because the weather was too bad. The farmers have insurance and soybeans to fall back on. What do we have? Stocking up.
Which segues nicely to the second point: despite all of these shortages, food would still be cheap if it weren’t for futures trading. This is America, man! We make money off of everything, including corn crops that aren’t even in the ground yet. Shares of corn futures–bushels, just like a barrel of crude oil– are sold like stocks in a company, and the more crazy the weather acts, the more intense the demand is going to be for those shares. In 2004, futures closed at $2.4175. In 2008? $4.28. This isn’t about ethanol sucking up all the available corn–it’s about that corn being bought for, and in turn having to be sold for, way more money. Because the weather in the places that grow corn (see also: flyover country) has been biblically bad.
It’s not just corn, either–wheat is up, and so are soybeans, a reflection that this is a problem that’s striking in systemic fashion, not merely a symptom of the evil environmentalists convincing everybody that oil is bad. Not that we’re not trying to do that, too. But biofuels are innocent, and anybody that says otherwise has tunnel vision.
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Oil prices might have something to do with it to, no? The price of inputs is getting higher and higher.
Thank you for this
Also, don’t forget all the plows and transportation of the crops that are skyrocketing in price due to high gas prices and also don’t forget foreign investors snapping up grain because of the weak dollar.
Also, corn ethanol (which is indeed the most inefficient kind) is not only unedible corn by humans but it’s being given a massive subsidy. Sugar-based ethanol from Brazil has a huge tariff on it.
For environmental concerns, we just need to let the new algae-based way take effect and remove the massive subsidy and tariff. Corn industry has taken off to due the previously mentioned reasons, we don’t need either anymore. And it’ll help the environment.
(Oil companies don’t need their massive subsidies either).
Nice site!
Couldn’t it be that because there is a demand for corn, more farmers are planting corn instead of other crops, thus leading to a lower supply of said other crops? With the lower supply of the other crops, there would be higher food prices. This point hasn’t been brought up, so I figured I’d throw that out there.
I’m not saying higher oil prices wouldn’t contribute at all, of course they would, but higher input prices would match the price of inflation and not necessarily affect this trend as much of the higher demand for corn.
Corn Ethanol takes up farm land, and is very inefficient. Now switchgrass is very efficient in making ethanol. Five times more efficient and can be harvested in places that don’t take up farm land.
You argue that weather events, which you claim are now all miraculously caused by oil companies, are what’s driving up the price of food. And yet, if you took the time to do some research, you would find that there are detrimental weather events to crop production all the time and futures and insurance are quite capable of evening out the market.
Your second point about futures belays a lack of knowledge about what futures are. I’m not going to take the time right now to fully explain what they are, suffice to say that you should seriously find out for yourself. It may pass with the ignorant to say such a thing, but people who know how the market works will mock you. Futures are extremely beneficial and important.
No, government subsidies are partly responsible for the current jump in food prices. Government subsidies distort the market and drive the allocation of crop resources away from the mouths of the poorest and into biofuel production. I will grant you that it is only partly responsible, the other huge factor being the weakness of the dollar.
Look, even the World Bank agrees with me:
http://www.guardian.co.uk/environment/2008/jul/03/biofuels.renewableenergy
Here, I wrote this three months ago:
“I recently read somewhere that in response to rising food prices worldwide, some people are asking for regulation on speculation which they blame for the higher prices. I’ve decided to take the time to explain why this is seriously dumb.
What is speculation? It is the attempt to predict the market in the future. I foresee a reason that there might be a shortage of supply in commodity X, so I buy futures now at a lower cost than I anticipate the price will be when it is delivered in the future. There is a possibility that I may be wrong of course, and the market will determine a price for futures based on what people as an aggregate think is going to happen to commodity X’s market in the future. If the futures market gives a high anticipation of rising prices, its price will be high. The added bonus of the futures market is that a producer can sell his goods on it at the start of the season and rest assured that he will receive a predetermined price for it at the end, no matter what events may turn between, thus securing his investment in production.
The producers will see this speculation and respond in two ways:
1) they will try to defer sales today as much as possible and reallocate them further in the future where the market anticipates it will be needed most by selling futures, ie conservation.
2) they will prepare themselves to increase output in the future to take advantage of the higher prices, and thus profit.
Prices are signals. They are essential for the producers to know how and when to apply resources to best serve the consumers. The result of trying to suppress speculation is that we will have MUCH more serious food shortages in the future.”
This article is actually bullshit, I couldn’t tell if it was trying to be seriose or not. Just think about this: As biofuels push up the value of soybeans , people in places like say Brazil, will cut down rainforest to plant more soy.
More limited cropland shifted from food production to fuel production could would drive up food prices. That’s just basic economics. The biggest joke is that there rally is not a food shortage on earth just a distribution problem, but that brings us closer to a critique of capitalism, yikes!
I honestly can’t believe so called earth first!ers are taking a position to defend car fuel production, in any form. More cheap fuel in a capitalist context will just cause people to drive more, more roads more roadkills more shitty car culture.
Alternative energies are really a miseducation as a solution on there own. They will allow us to avoid learning how to curb consumption- the real disease that is killing the planet.
I say fuck biofuels