Deglobalization – The Price of Food in the New World Economy


When we think of how low prices for food have been in the United States since the industrial revolution, we mostly congratulate ourselves for our technological and agricultural prowess that made this possible. Our ingenuity of being able to produce more food per acre than ever before is a badge of honor in our collective unconscious. All of us can’t help but take for granted how cheap food really is for the American consumer.

American organizations such as the Red Cross come to the rescue when disaster strikes in various parts of the world. Supported by our huge reserves of grain, wheat, corn and rice, transport planes are loaded with “surplus” grains, flours, milk powders and ready to eat meals. As Americans, we think that we have conquered the food production challenge – a perfect example of humanity winning out over nature.

Nothing could be further from the truth. The world has changed dramatically in just the past 10 years and yet our approach to agriculture has not evolved to meet today’s changing environmental landscape.

World Food Price Crisis

World Food Price Crisis

In July 2008 the price of oil – inexorably linked to the price of food – shot up to a high of $147.30 per barrel. This surge in oil prices (much of it stemming from commodities traders) has a multiplier effect on food prices. First, because fossil fuel is a major source of nitrogen fertilizer used in much of the large farming operations run by the worlds leading agribusiness concerns. Next, the transportation of food is run almost entirely on a system completely dependent upon fossil fuels. The result means increased pricing for food that is a staple for hundreds of millions of the world’s poorest people.

This multiplier effect was evidenced here in the United States when, in April 2008 Sam’s Club instituted a limit on how much long-grain white rice restaurants and retail customers could purchase due to world-wide shortages. The U.S. was mostly spared from major price jumps in food commodity prices – but, other developed nations were effected severely with the developing nations being the hardest hit by what has been labeled as the Global Food Crisis.

In India, food riots were reported in the Indian state of West Bengal in 2007 over shortages of food. Haitian food riots caused several deaths and prices for food items such as rice, beans, fruit and condensed milk have gone up 50 percent since late 2007 while the price of fuel tripled in only two months. The Brazilian government reacted by announcing a temporary ban on the export of rice to protect their consumers from shortages.

Many other factors were at work to create this dire scenario that led to the Crisis. The administration of former president George W. Bush was active lobbying Congress to pass the Energy Independence and Security Act that focused on promoting agrofuels and the automobile fuel industry. The act targeted the increase of agrofuels production by more than eightfold from 4.7 billion gallons in 2007 to at least 36 billion gallons in 2022.

Many small and mid-sized farmers were being offered exorbitant prices for their land by those wishing to cash in on the rush to turn corn into ethanol.

Price of Oil Peaks in 2008

Arable lands that once had been utilized for growing corn for consumption, were being diverted to the production of ethanol. This phenomena led to the relatively short-lived boom\bust of the ethanol craze in the U.S. The cost to grow the corn and convert it into ethanol was, as it turned out, a negative sum proposition. Only if the price of oil were to continue to climb past $140 could corn ethanol hope to be price competitive.

So far, just Brazil has proven that sugar cane can be converted into ethanol efficiently. After 30 years of technological innovation, government mandates and public acceptance, Brazil’s mandatory fuel blend is 25% of anhydrous ethanol and 75% gasoline or E25 blend. The combination of vast arable land and superior agri-industrial technology makes this possible.


Bibliography

1. 2007–2008 world food price crisis, Wikipedia
2. Food Wars by Walden Bello and Mara Baviera, Monthly Review (July-August 2009)
3. The price of food: ingredients of a global crisis, Heidi Fritschel (April 9, 2008)
4. Ethanol fuel in Brazil, Wikipedia

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  1. […] Deglobalization – The Price of Food in the New World Economy (buildingsustainablelifestyles.wordpress.com) […]

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