Food not fuel

[banquo's_bumble_puppy]

Has anyone else noticed the skyrocketing cost of food as of late? Bread/milk/eggs....all pretty basic things. The price of wheat has doubled due to increased demand in developing countries and the fact that farmers are growing less wheat in favour of corn or other crops that can be turned into bio-fuels. Also, the rising cost fuel is affecting the cost of transporting these very basic things....the things that we need to eat, to feed our families. It all goes back to energy/fuel/ and greed. Can anyone tell me what is wrong with this picture?

[geonuc]

Even worse, the price of hops and malted barley has increased dramatically!

[banquo's_bumble_puppy]

true

[Ara Pacis]

Well, we could go back to not sending food to the starving in the developing world, go back to living on farmettes and milking our own cow and raising our own yardbirds, but then we might be in danger of getting SARS or Avian Flu.

[Ronald Brak]

Nothing is wrong with the picture. It is the perfectly natural result of decisions that have been made. Now the wisdom of some of the decisions can be questioned, but those sorts of discussions can veer into politics, which is to be avoided in this forum. But to basically sum it up, that's what you get when high oil prices combine with a host of other factors in the system you have. You might consider changing the system, but again, they sorts of discussions are unavoidably political. Specific questions on economics that avoid politics are probably okay, but I'm afraid lots of people have trouble keeping politics and economics seperate. I guess it's because a lot of people are only familiar with economics from political discussions and don't even know how to discuss economics without dragging politics into it.

Specific questions on general economics should be okay, provided they stay on economics

[weatherc]

The environmentalists have been saying that the cost of fuel should be higher for years. Now that they're finally getting their wish, everyone's griping that increasing fuel costs are causing increases in prices for other items.

Well, make up your minds, and choose which evil scenario you want, because you can't have it both ways.

[Ronald Brak]

Well, we could go back to not sending food to the starving in the developing world...

Done:

http://www.nytimes.com/2007/09/29/world/29food.html

Note that while U.S. food aid certainly does help the hungry, it is not just done to feed the hungry. It is also a subsidy to American farmers. If it was just to help the hungry then the money would be used to buy the lowest cost food and use the cheapest transport available rather than using American food and American ships as current U.S. law requires.

[Ronald Brak]

The environmentalists have been saying that the cost of fuel should be higher for years. Now that they're finally getting their wish, everyone's griping that increasing fuel costs are causing increases in prices for other items.

Well, make up your minds, and choose which evil scenario you want, because you can't have it both ways.

Actually you can. An environmental tax can be used to increase the price of fuel and be rebated back to a nation's citizens, increasing the price of fuel while keeping their average spending power of citizens almost the same. This is quite different from a straight increase in the price of fuel.

[Noclevername]

We could always just use the nonfood parts of crops to make biofuels-- stems, husks, shells, pods, leaves. Not as efficient but much cheaper (since it's stuff we normally throw away), and doesn't effect our food costs at all.

[korjik]

Actually you can. An environmental tax can be used to increase the price of fuel and be rebated back to a nation's citizens, increasing the price of fuel while keeping their average spending power of citizens almost the same. This is quite different from a straight increase in the price of fuel.

Why do you think that is a good idea? You are taking money from people just to give it back. All that does is cause some of the money to go to supporting the govt agency that collects the money and writes the checks. Why not just let people keep their own money?

[korjik]

Has anyone else noticed the skyrocketing cost of food as of late? Bread/milk/eggs....all pretty basic things. The price of wheat has doubled due to increased demand in developing countries and the fact that farmers are growing less wheat in favour of corn or other crops that can be turned into bio-fuels. Also, the rising cost fuel is affecting the cost of transporting these very basic things....the things that we need to eat, to feed our families. It all goes back to energy/fuel/ and greed. Can anyone tell me what is wrong with this picture?

Why is wanting to get the best price for the use of your farm automatically greed?

[Ara Pacis]

Why is wanting to get the best price for the use of your farm automatically greed?

I think that's kinda the definition of the word. It's placing monetary value ahead of other considerations, such as the well being of starving people.

[Larry Jacks]

Note that while U.S. food aid certainly does help the hungry, it is not just done to feed the hungry. It is also a subsidy to American farmers.

Food aid in response to a natural disaster (e.g. the tsunami a few years ago) is one thing. However, long term food aid is a disaster in itself for the country receiving it. The local farmers can't compete with free food so they get wiped out. That creates permanent dependency on food aid which is the opposite of what's needed.

[Torsten]

We could always just use the nonfood parts of crops to make biofuels-- stems, husks, shells, pods, leaves. Not as efficient but much cheaper (since it's stuff we normally throw away), and doesn't effect our food costs at all.

However, even this comes at a cost: the combination of certain tillage practices and repeatedly stripping all the biomass off a site reduces the soil organic carbon content, affecting important structural properties of agricultural soils. Adding chemical fertilizer to the soil does not necessarily make up for the long term loss of humus.

[Ara Pacis]

However, even this comes at a cost: the combination of certain tillage practices and repeatedly stripping all the biomass off a site reduces the soil organic carbon content, affecting important structural properties of agricultural soils. Adding chemical fertilizer to the soil does not necessarily make up for the long term loss of humus.

It takes humus to make hummus.

[Noclevername]

I think that's kinda the definition of the word. It's placing monetary value ahead of other considerations, such as the well being of starving people.

Farmers rarely make enough to be able to stop worrying about money. If they give away too much, they become starving people themselves.

[Ronald Brak]

Why do you think that is a good idea? You are taking money from people just to give it back. All that does is cause some of the money to go to supporting the govt agency that collects the money and writes the checks. Why not just let people keep their own money?

It's done to reduce the amount of polution. It would of course be pointless if applied to something innocuous. But a revenue neutral tax on carbon emissions would reduce carbon emissions while causing less disruption to the economy than mandating carbon emission cuts. To make an environmental tax revenue neutral the revenue collected can be directly distributed to citizens or the revenue can be used to lower existing taxes. Taxes that the government already collects and redistributes. The goal of sensible environmental taxes is to reduce costs for citizens, both direct and indirect. For example, a carbon tax could prevent tax increases used to pay for flood control and sea surge protection measures. No one has yet come up with a practical method for reducing carbon emissions that is clearly less disruptive to the economy than a carbon tax/credit.

[Fraser]

The price of food was so cheap historically because of the cheap price of fossil fuels; necessary for transportation, fertilizer, harvesting, planting, etc. Now that the price of fossil fuels are going up, the price of everything that depends on it is going up too. We're going to find the true price of food, not the fake old price that it was.

At some point, it might make sense to not eat meat. Or transport food further than 100 km. The market will work this out.

Unfortunately, people around the world who can barely buy food today are going to suffer terribly.

[Noclevername]

The price of food was so cheap historically because of the cheap price of fossil fuels; necessary for transportation, fertilizer, harvesting, planting, etc. Now that the price of fossil fuels are going up, the price of everything that depends on it is going up too. We're going to find the true price of food, not the fake old price that it was.

We might see the suburban lawn replaced by the vegetable patch; produces food, and doesn't need to be mowed! ;)

[Van Rijn]

The price per barrel of oil is currently above the cost of producing "unconventional" oil sources and synthetic fuel from coal, so this isn't a sustainable price point.

[Ronald Brak]

At $100 a barrel the U.S. will spend about $730,000,000,000 on oil. That's out of a $13,000,000,000,000 GDP, or about 5.6% of GDP. If the price of oil doubled tomorrow to $200 and stayed there then Americans would be about 5.6% poorer. This would be painful, but won't be enough to stop people eating meat or to prevent food being transported long distances. Even if the United States passed a law banning the importation of foreign oil, people would still eat meat and transport food long distances, but there would be an extremely painful period of adustment as fuel efficient and electrified transportation infrastructure such as rail is built and your V8 becomes a garden shed. Non-conventional oil within the United States, such as oil shale and liqufied coal, would also be developed. The response of countries during Word War Two gives many examples of how economies can adapt to limited oil supplies .

[Gillianren]

We might see the suburban lawn replaced by the vegetable patch; produces food, and doesn't need to be mowed! ;)

Feh. Weeding my mom's vegetable garden always took far longer than mowing the lawn, and my mother's got a lot of lawn.

[hhEb09'1]

For example, a carbon tax could prevent tax increases used to pay for flood control and sea surge protection measures. No one has yet come up with a practical method for reducing carbon emissions that is clearly less disruptive to the economy than a carbon tax/credit.A regressive ocean tax--the farther the ocean moves away from your property, the less tax. :)

[Trocisp]

Feh. Weeding my mom's vegetable garden always took far longer than mowing the lawn, and my mother's got a lot of lawn.Yes, but you didn't have to use gasoline to mow the thing. At least, that is what I believe the point was.

[The Supreme Canuck]

But:

Link (http://www.composters.com/gr/silent_reel_mower.jpg)

I think the point was that not only do you not use oil to mow the lawn, you grow food there and so do not need to pay for the cost of transportation, including fuel costs.

[Van Rijn]

Growing and processing your own food is a lot of work. I had a peach tree and had too many peaches (and rotting peaches stink). The peach tree finally died of old age. I do have an orange tree outside the master bedroom. That's not too much work, but it's not a great location for the tree (it tends to go over the roof). Last year, for the first time, I had a great tomato crop. That was worth it because they were great tomatoes - far better than what you get in the store. I have olive trees, and never use them for food (just too much work).

The yard is enough work as it is. I don't need more.

[Ronald Brak]

Having a vegetable garden, chickens, rabbits and even pigs in the yards of working class people used to be quite common in towns. But as wages increased most people found that the effort just wasn't worth it. It was easier to work for an hour and use the money to buy food than it was to spend two hours working in the yard producing it. It is difficult to see how oil price increases would decrease real wages enough for backyard gardens to become popular again. I think most people would deal with oil related food price increases through substution rather than going back to growing their own food. The most oil intensive foods will increase more relative to other foods and people will eat less of them and more of foods that use minimal amounts of oil in their production and distribution. Disruptions in the importation of foreign oil could certainly cause oil prices to skyrocket and result in a severe recession, but the effects are likely to be temporary as people switch to fuel efficient and electrified transport, and so seems unlikely to me to cause a long term switch back to backyard vegetable gardens.

[mike alexander]

I just want the Invisible Hand to come over and till my garden.

[Ronald Brak]

I just want the Invisible Hand to come over and till my garden.

You'll have to wait until it's done slapping me around for losing so much in the stock market.

[Jens]

One other reason for the increase in food prices is the growing middle classes in China and India in particular. As people get wealthier, they start eating more meat, which is land-intensive. And that puts upward pressure on all agricultural items because they all use land.

I think that if the development continues, we will inevitably have to pay more for food, unless we can find a new source of land. :-)

There could be a silver lining, i.e. smaller food portions in the U.S. For people living outside of the US, going into a US supermarket can be a real shock.

[Ronald Brak]

The U.S. exports far more food kilojoules (calories) than it imports and only has a population growth rate of 0.89%. (That's including immigration.) So no one in the U.S. is likely to go hungry soon. Also, the United States still represents 20% of world GDP with only 4.5% of the world population, so it will be a long time before U.S. farmers find it profitable to sell food to overseas customers and let American city dwellers go hungry. Also keep in mind that the United States has a habit of paying farmers to not grow food and to turn food into ethanol and is free to stop doing that at any point.

[HenrikOlsen]

<snip>It is difficult to see how oil price increases would decrease real wages enough for backyard gardens to become popular again.<snip>
Once it costs more than two hours wage to buy the veggies you can grow with two hours yard work, the shift will happen again.

I checked the garden last weekend, the cabbages, broccoli, onions, leeks, garlic and fava/broad beans are all coming along nicely after surviving the winter so I'm expecting fairly early results of all of those.

[peteshimmon]

And a lot of American urban gardens are quite
large! What good planning. Might even stop
looking with suspicion at folks walking a few
blocks to shop. If that is possible:)

[Ara Pacis]

Farmers rarely make enough to be able to stop worrying about money. If they give away too much, they become starving people themselves.

So? It doesn't change the meaning of the word. Most land-owning farmers around here are rich, but even if they aren't a farmer has no reason to starve if he's growing his own food.

[Gillianren]

So? It doesn't change the meaning of the word. Most land-owning farmers around here are rich, but even if they aren't a farmer has no reason to starve if he's growing his own food.

Most farmers aren't. Most farmers only grow a few crops, if that many. And, of course, there's cotton farmers, who don't grow any food crops. It's more economical for them.

[Ara Pacis]

Most farmers aren't. Most farmers only grow a few crops, if that many. And, of course, there's cotton farmers, who don't grow any food crops. It's more economical for them.

I know, but if a farmer starves instead of diversifying when he, more than all others, has the technical ability and know-how to grow feed, then he deserves to go hungry.

[Noclevername]

I know, but if a farmer starves instead of diversifying when he, more than all others, has the technical ability and know-how to grow feed, then he deserves to go hungry.

Or has only the available know-how and equipment (harvesters, etc.) to grow a cash crop, as is often the case(The required knowledge to specialize in farming economically is a lot different and more specialized than a few flowers in the garden), and doesn't "deserve to".

[Ara Pacis]

Or has only the available know-how and equipment (harvesters, etc.) to grow a cash crop, as is often the case(The required knowledge to specialize in farming economically is a lot different and more specialized than a few flowers in the garden), and doesn't "deserve to".

I disagree. He still has the tools and know-how and space for a garden to feed himself and his own. That has nothing to do with his choice of cash crop. I would think that would be obvious. Most people don't use harvestors in a garden, even a large one.

[Noclevername]

I disagree. He still has the tools and know-how and space for a garden to feed himself and his own. That has nothing to do with his choice of cash crop. I would think that would be obvious. Most people don't use harvestors in a garden, even a large one.

And the land he uses for that garden takes away even more of his income, potentially costing his land, equipment and house. Nope, for a farmer already in dire financial straits that's rarely the answer. I'm sure there are some who can do it, if they have the right circumstances available to them. But it's hardly a universal solution.

[Ara Pacis]

And the land he uses for that garden takes away even more of his income, potentially costing his land, equipment and house. Nope, for a farmer already in dire financial straits that's rarely the answer. I'm sure there are some who can do it, if they have the right circumstances available to them. But it's hardly a universal solution.

Unlikely, even a couple acres of garden isn't much reduction for a cash crop. Do a cost comparison. Even with corn prices rising, it's only a few hundred dollars per acre.

[drainbread]

Every farmer I know is deeply in debt, except one...

He owns 30 moderate producing oil wells.

[Noclevername]

Unlikely, even a couple acres of garden isn't much reduction for a cash crop. Do a cost comparison. Even with corn prices rising, it's only a few hundred dollars per acre.

A few hundred dollars is a lot to someone already in financial trouble. And your cost estimate also fails to take into account lost labor time, which is more of a hardship than lost land.

[Ara Pacis]

A few hundred dollars is a lot to someone already in financial trouble. And your cost estimate also fails to take into account lost labor time, which is more of a hardship than lost land.

You must mean your cost estimate. I didn't do one. I told you to.

[Noclevername]

You must mean your cost estimate. I didn't do one. I told you to.

I have no need to, you're the one with the extraordinary claim. Your burden of proof.

I live in an area surrounded by farmers who barely scrape by.

[Ara Pacis]

I have no need to, you're the one with the extraordinary claim. Your burden of proof.

I live in an area surrounded by farmers who barely scrape by.

Well, around here they are rich, but it's beside the point. My original point was that they can grow food in order to avoid starvation. No matter what the cost may be, they can do that and if they refuse, they deserve to starve.

[HenrikOlsen]

Well, around here they are rich, but it's beside the point. My original point was that they can grow food in order to avoid starvation. No matter what the cost may be, they can do that and if they refuse, they deserve to starve.
If the cost is they can't meet the bill, they lose the farm, and can't grow their food anyway, so you're basically juust plain wrong on that.

[mugaliens]

Nothing is wrong with the picture. It is the perfectly natural result of decisions that have been made. Now the wisdom of some of the decisions can be questioned, but those sorts of discussions can veer into politics, which is to be avoided in this forum. But to basically sum it up, that's what you get when high oil prices combine with a host of other factors in the system you have. You might consider changing the system, but again, they sorts of discussions are unavoidably political. Specific questions on economics that avoid politics are probably okay, but I'm afraid lots of people have trouble keeping politics and economics seperate. I guess it's because a lot of people are only familiar with economics from political discussions and don't even know how to discuss economics without dragging politics into it.

Specific questions on general economics should be okay, provided they stay on economics

Er..,,, but sorry Ronald, your arguements don't compute. They seem to be a very strong way of saying, "I'm deliberating all sides of this issue but I can't really take a side."

Sort of like brashing about with a broom about a building without sweeping away the debris.

What's your side, Ronald, and far more importantly, why?

[Ronald Brak]

What's your side, Ronald, and far more importantly, why?

That's a tough one. What sides are there? And then there's the fact that I could be on someone's side but they might consider me to be against them because my perception of what's in their best interest is different from their own. And people on my "side" can get angry with me because I point out a weakness in their arguement and so they act as if I have done something wrong instead of helping them. It's all very confusing. So I have no sides. Just my own opinions.

Maybe I'll tell you some of my opinions in a little bit. If you have any specific questions, that would help me to focus.

[Ronald Brak]

Some opinions of mine:

There is nothing particularly unusual about the increase in food prices and a large portion of the price increase is to do with falls in the U.S. dollar. Note this means that U.S. farmers can make more money from exports, and reduce the U.S. trade deficit, so it's not all bad, but it does feed inflation. Some of the increase is due to higher oil prices and some due to demand for ethanol. Usually the biggest influence of wheat prices is the weather in the Ukraine, United States and Australia.

The subsidies that currently exist for ethanol in the United States are, economically speaking, extremely stupid. This is because so little benefit has been gained, both in energy independance and environmental protection, for so much cost. The same amount of money spent in different areas, including better insulation for buildings, could have achieved much greater results. The high tarriff on Brasillian ethanol while not having any tarriff on Middle-Eastern oil, harms U.S. energy security, the environment and the U.S. economy.

If a sensible carbon tax/credit were introduced, then ethanol would effectively be subsidized depending on how much less net CO2 it emitted compared to burning oil. In the absense of a sensible carbon tax/credit, ethanol should only be subsidised based upon it measured enviornmental benefit compared to oil. In the case of United States corn ethanol, this benefit is quite minimal.

Government funding of research into better ways to produce ethanol is not necessarily a bad thing, and would be a much more effective use of money than the current subsidies.