Food prices are going up. I don’t think anyone will disagree on that.
We should care about rising food prices not because it makes it harder to make ends meet in our own families — it does — but because higher food prices lead to war. World food price spikes in 2007-08 and again in 2010-11 led to the destabilization of governments and led to the Arab Spring, according to www.growingproduce.com.
When people are desperate for food they will follow anyone who provides a solution, and radical Islam was there to fill the void. Had those price spikes not occurred, it is likely the radical Islam genie would still be in its Sykes-Picot lantern.
So who is responsible for those price spikes? People argue vociferously at times over whose fault it is. Lagi, Bar-yam, Bretrand and Bar-Yam published their research and model in the Proceedings of the National Academy of Sciences in September that answers those questions with mathematical precision and accuracy and puts those arguments to rest. Go to necsi.edu/research/social/foodprices/PNAS.html to see the report.
You are not going to like the answers. As Pogo said, “We have met the enemy, and he is us!” There are two drivers that explain past events and predicted current events: Commodities speculation and ethanol production in the U.S. Facts are stubborn things. The underlying base price or floor price of world food prices has risen from an FAO Index of 112.7 in 2004 to 220 by 2012. It has not been a straight-line increase. The cost of food for the world is rising at an increasingly faster rate. The base price rise is directly attributable to the diversion of 5 billion bushels of corn from the food chain into ethanol production for vehicle fuel. The cost of food has doubled since 2004. On top of that are two major spikes and one minor spike in food prices that track well with commodity speculation. This speculation in the commodities markets was enabled by the U.S. government when it passed the Commodities Futures Modernization Act of 2000.
Commodity speculation was the cause of the 2007-08 and 2010-11 spikes in food prices that precipitated world crises. In 2008, the food price index peaked at 201.4. Were it not for commodity speculation, the food price index would likely have been 140, up 28 points from 2004. Those 28 points would have been due to ethanol production for fuel in the U.S. The remaining 61.4-point jump was due to commodities speculation. The 2007-08 food price spike yielded political instability in Somalia, India, Mauritania, Mozambique, Yemen, Cameroon, Sudan, Cote d’Ivoire, Haiti, Egypt, Somalia (again), Tunisia, India and Sudan (again). Food prices retreated, and the political unrest dissipated.
By 2011, the index was 180, all of which is explained by ethanol production. Commodities speculation spiked the price to 229.9 within six months. Unrest in Mozambique signaled a new round of political destabilization. In Tunisia, Mohamed Bouazizi’s self-immolation began the Arab Spring, toppling Tunisia’s, Lybia’s and Egypt’s governments and breeding unrest in Algeria, Saudi Arabia, Mauritania, Sudan, Yemen, Oman, Morocco, Iraq, Bahrain, Syria and Uganda. Food prices fell in 2012, and new conflicts did not appear.
Commodity speculators expected prices to fall more than they did. The price decrease stopped right where the ethanol production equilibrium model predicted, so the model proved itself in this first cycle.
I don’t understand the mathematics. People far beyond my abilities have vetted the paper and model, and it stood up to testing well enough to be published in the Proceedings of the National Academy of Sciences.
The problem facing American agriculture is not our ability to grow enough food to feed the world. We can grow so much food and fiber that we depress the prices below production costs. Our problem is being able to grow enough food or fiber at a profit that allows a farmer to stay in business and still allow the hungry world to buy it.
Given that we have not solved that problem, how do we defend passing laws and policies that push the costs in the opposite direction? Yes — for the votes. That’s right, it’s for the votes, and the campaign contributions.
Before we dump on our political class too hard, remember that it is hard to accept a bribe if no one is offering one.
Pogo was right.