Food Price Spike

Back in 2007, food prices surged. Millions went hungry, and there were riots from Egypt to Haiti and Cameroon to Bangladesh. In 2008 they dropped, but starting at the beginning of 2009 they’ve been going up, and now they’re staying high:

This graph shows the “food price index”, which is a weighted average of food commodity prices. The exact formula seems to be a carefully guarded secret… well, at least they don’t make it easy to find!

Here’s a more long-term picture:

taken from here:

• United Nations Environmental Programme, The Environmental Food Crisis, 2008.

What’s been happening since 2000? You can blame the rising world population, but that’s not something that suddenly hit us at the turn of the century. People point to many causes, including:

1) A growing middle class in India and China, eating more—including more meat, which pushes up grain prices. For example, according to the Economist, the average Chinese consumer ate 20 kilograms of meat in 1985, but 50 kilos of the stuff in 2007. If you consider the population of China, that’s a lot more meat!

2) The use of grain and other foodstuffs for biofuels, heavily subsidized by some governments like the US, has increased competition for grain and, perhaps worse, created a tighter link between oil prices and food prices. If the price of oil goes up, gasoline costs more, so people can charge more for ethanol, so grain prices go up!

One small piece of good news: the US federal budget crisis is making more people consider cutting grain ethanol subsidies. But it hasn’t happened yet: don’t underestimate the power of the corn lobby.

3) More weather disasters, like the heat wave that caused Russia to halt grain exports last year, or the drought in Brazil that’s pushing up sugar prices now, or the drought in India that set sugar prices soaring in the summer of 2009.

People like to argue about whether these weather disasters are really increasing, and whether they’re really due to climate change. It remains hard to prove. Some people, like Al Gore, have already made up their minds. On 20 June 2011, he said:

Look what’s happened in the last twelve months:

– The twenty million people displaced in Pakistan, a nuclear-armed country, one of the biggest flood events in their history.

– An area of Australia the size of France and Germany combined, flooded.

– The nation of Colombia, they’ve had five to six times the normal rainfall. Two million people are still homeless. Most of the country was underwater for a portion of last year.

– My hometown, my home city of Nashville, a thousand-year flood. Thousands of my neighbors lost their homes and businesses. They had no flood insurance because there had never been a flood in areas that were flooded.

– Drought. Russia, biggest drought in their history, biggest fires in their history, over 50,000 people killed, and then all of their wheat and other food crops, along with that of Ukraine and Kazakhstan, taken off the world markets, leading to an all-time record spike in food prices.

– Texas, right now. The drought raised from “extreme” to “exceptional.” 254 counties in Texas, 252 of them were filed in the major disaster.

– Today, biggest fire in the history of Arizona, spreading to New Mexico.

– Today, biggest flood in the history of the Mississippi River valley underway right now.

At what point is there a moment where we say, ‘Oh, we ought to do something about this?’

A growing world middle class, the rising use of food for fuel, the effects of climate change… when it comes to rising food prices, there are lots of other causes one can point to.

But the big question is whether it’s a matter of many small causes that coincidentally happen to be boosting food prices now, or something more systematic.

In other words, is our world civilization hitting the limits of what the planet can support?

26 Responses to Food Price Spike

  1. streamfortyseven says:

    Almost certainly those countries dependent on Western food aid to feed their populations and which have been dependent on such aid for the last 40 or so years have grown far beyond their natural carrying capacity. Western food aid has two functions, one well-known and the other not so well known: to feed the hungry, and to siphon off agricultural surplusses to create artificial scarcity and thus serve as a price support for products from mechanized agriculture. The rise in the price of oil may mean that these surplusses will decrease or disappear entirely, which will have disastrous consequences for those countries dependent on food aid.

    • Speed says:

      … to siphon off agricultural surplusses to create artificial scarcity and thus serve as a price support for products from mechanized agriculture

      Perhaps you meant that importing free food destroys the market for locally grown products putting indigenous producers out of business.

  2. Robert Smart says:

    In Australia we love La Nina. It rains. Farmers go from seeking drought handouts to seeking flood handouts. In truth La Nina is a mini/temporary climate change that is perhaps a warning. It doesn’t, to my knowledge, affect total world rainfall, but it sure changes where it falls. If it fell like that in Australia every year and our farmers were geared up to take advantage we’d certainly produce a lot of food. But we aren’t actually able to utilize the rain, while the place that are geared up don’t get it. A couple of other points. 1917 wasn’t the end of WWI (11/11/1918). Another food price factor is rising farm worker income, which forces everyone to get more income to pay for food (e.g. you couldn’t go close to living in Aus on the income that sustains poor people in poor countries).

  3. jrshipley says:

    I’m not a labor or ag economist, so I’m arguing from a speculative position here with the aim of injecting a contrary ideas for consideration. With that caveat…

    According to a 2009 CBO report ethanol production contributed to just 0.5% of the 5% increase in food prices in 07/08. In my state, Iowa, the ethanol industry has created jobs at all stages of production and has helped to stabilize fuel prices somewhat (at least relative to the rest of the country). It has become fashionable for both liberals and conservatives outside of producing regions to bash ethanol, but some of the talking points are misguided. In many ways, ethanol should serve as a model for the kind of industrial and manufacturing policy the US should adopt more widely, aiming for increased sustainability and economic independence, focusing on development of local resources, and creating jobs that cannot be outsourced.

    Higher commodity prices are, also, not automatically a bad thing. Higher commodity prices transfer wealth into rural, agricultural regions, allowing reinvestment in technologies to meet growing demand. Sine the “green revolution” farmers that traditionally operated without financing have gone into debt to afford hybrid seed and modern farm tech. That they should have means to pay down that debt is not bad. One hopes that the rising cost of food creates upward pressure on wages in manufacturing, of course, and when food prices increase for laborers lacking collective bargaining and union rights it creates a conflict of interest between the rural and urban poor and middle class. The solution, however, is to promote economic justice for labor, not to dump cheap commodities in the form of surplus Western agricultural production.

    To be sure, when there is a drought or other natural disaster food aid is a moral imperative, but I don’t think it is clearly the case that we are helping countries in development when we drive down commodities prices artificially. Population growth cannot, obviously, continue unabated, but we do have the capacity to feed the world with current agricultural technology informed and complemented by traditional farming practices (I think modern tech need not be automatically applied in monoculture production). There is considerable waste in agriculture as well, and increased efficiency as well as broader acceptance of a “nose to tail” ideal from consumers can be achieved. For instance, even as we hear of food prices rising we also hear of Tyson trying to find ways to market dark chicken meat. The American fixation on the chicken breast is an artifact of decades of artificially low commodity prices making prime cuts the norm for everyday dinners.

    • nad says:

      jrshipley wrote:

      The American fixation on the chicken breast is an artifact of decades of artificially low commodity prices making prime cuts the norm for everyday dinners.

      In Japan I met a woman, who was doing her Ph.D. in nutrition science for animals. Her goal was to find nutrition which makes chickens grow more meat on the legs.
      The reason for this goal was that in her home country people favored chicken legs, rather than other chicken parts.

      The woman came from Bangladesh.

      jrshipley wrote:

      In my state, Iowa, the ethanol industry has created jobs at all stages of production and has helped to stabilize fuel prices somewhat (at least relative to the rest of the country).

      On should maybe mention in this context that there may eventually soon be problems with the corn in Iowa:
      From the article
      Vilsack clears industrial biotech corn:

      Agriculture Secretary Tom Vilsack today approved a biotech corn variety that was engineered solely for producing fuel ethanol. Companies that mill corn for breakfast cereals and other foods have been fighting the move for fear the grain will contaminate their supplies.

      The corn, a product of Syngenta, contains an enzyme that reduces the cost of turning the grain into the biofuel. That same enzyme can make the corn unsuitable for some food products, including cereals and coatings on corn dogs, according to millers. But Syngenta insists that the corn will be kept away from food channels through the use of grower contracts and financial incentives and by growing it only in areas where food companies don’t procure their grain supplies.

      I actually wrote an email to the Böll Foundation that I think that these problems should be mentioned in their report.

      The answer was that they decided to do the report without mentioning these genetic manipulation problems. They wanted to win people for the renewable-energy-agenda.
      I was quite astonished about that answer.

    • Ben Antieau says:

      From your numbers, ethanol subsidies actually had a large impact on the increase: .5% out of 5% looks like a contribution of 10% of the increase.

  4. Speed says:

    Another view is presented by John Christy, University of Alabama at Huntsville in a written statement to the US House Subcommittee on Energy and Power, Committee on Energy and Commerce (March 8, 2011).

    Recently it has become popular to try and attribute certain extreme events to human causation. The Earth, however, is very large, the weather is very dynamic, especially at local scales, so that extreme events of one type or another will occur somewhere on the planet in every year. Since there are innumerable ways to define an extreme event (i.e. record high/low temperatures, number of days of a certain quantity, precipitation over 1, 2, 10 … days, snowfall amounts, etc.) this essentially requires there to be numerous “extreme events” in every year. The following assess some of the recent “extreme events” and explanations that have been offered as to their cause.

    … today should be considered a warning – that the climate system has always had within itself the capability of causing devastating events and these will certainly continue with or without human influence. Thus, societies should plan for their infrastructure projects to be able to withstand the worst that we already know has occurred, and to recognize, in such a dynamical system, that even worse events should be expected. In other words, the set of the measured extreme events of the small climate history we have, since about 1880, does not represent the full range of extreme events that the climate system can actually generate. The most recent 130 years is simply our current era’s small sample of the long history of climate. There will certainly be events in this coming century that exceed the magnitude of extremes measured in the past 130 years in many locations.

    … there are innumerable types of events that can be defined as extreme events – so for the enterprising individual (unencumbered by the scientific method), weather statistics can supply an almost unlimited set of targets in which to discover a “useful” extreme event.

    • jrshipley says:

      Christy is an interesting choice of witness for the House Subcommittee. After years of flogging his and Spencer’s satellite date for tropospheric temperatures as contradicting mainstream climate science, he was finally forced to admit that the UAH data was incorrectly interpreted due to miscalculations of, I seem to recall, orbital drift. In the broader scientific community it is good to have contrarian types like Christy; even when their data and analysis prove misguided they push others to refine their arguments. However, it seems to me that it is a mistake to cherry-pick the contrarians as “experts” in a broader public policy debate such as a blog forum or, especially, a Congressional hearing. Having said that, causal attribution of specific weather events is well known to be nearly impossible, although there seems to be a lot of evidence that we can expect a statistical increase in frequency over time.

      • Christy is at least an atmospheric scientist . The kindergarten called U.S. congress also heard the Viscount Monckton of Brenchley (not a Monty Python character, but seriously real) or Pat Michaels (invited again after fraudulent testimony on Hansen’s work), etc. etc. So, better forget about anything said there.

        — Martin Gisser

        • John Baez says:

          Florifulgurator: don’t forget, we have a policy against insults and name-calling here. This even applies to groups, like the U. S. Congress. One reason is that insults automatically get people’s adrenaline flowing and degrades their ability to think clearly. This is true regardless of whether they agree or disagree.

      • Speed says:

        So … you agree with what Christy said in the above quote.

    • John Baez says:

      I wasn’t familiar with Christy. Some quotes of him can be found here. Here are a few:

      We are finding that the climate is not very sensitive to CO2 and those kind of gases.

      and

      I think I might like it warmer actually.

      and

      On the climate front, [Australia cutting its emissions by 5% by 2020] will be imperceptible or minuscule compared to what the rest of the world is doing.

      In short: not much man-made climate change is occurring, even if were it would be good, and we can’t do much about it anyway. This sort of argument reminds me more of a lawyer trying to defend his client in any way possible than a scientist trying to figure out what’s really going on.

      • Tim van Beek says:

        The “Lawyer joke” is about people that accept every statement that supports their viewpoint, even if all these statements contradict themselves. “CO2 does not reflect infrared radiation. Even if it does, human influence does not increase the concentration of it in the atmosphere. Even if that is false, that increase is a good thing. Even if it is not a good thing, the effect is negligible” etc.

        There are good reasons why people think this way; it is about multiple layers of defence against insurmountable uncertainties, it is an astute risk assessment.

        I think it may be more helpful to point out that it is possible to classify the statements into two classes: Statements about science, or what the physical system will do, and statements about politics, or what humans should do about it.

        Statement one of Cristy is a scientific one. Statement two may also be a scientific one (one degree of increase does not have a big effect). Statement three is political.

        We should distinguish the discussion, and also the degree of agreement, of both worlds.

    • p.f.henshaw says:

      I think resorting to a theory that this may be a “mystery event”, a statistical outlier in recent climate history, rather leaves that explanation “a mystery” doesn’t it? The statistical principle is valid enough, but as someone once said “God doesn’t roll dice” and just create great events with no causation.

      The only causal models I’ve seen that satisfactorily account for the pace, the scale, and the convergence of escalating resource prices are Grantham’s and mine.

      big news… from Henshaw, Grantham &… the earth
      http://synapse9.com/blog/2011/04/30/big-news-from-henshaw-grantham-the-earth/

    • Bruce Smith says:

      Independent of whether there is agreement about the cause of climate change or other “extreme events”, if there is agreement that they are to be expected, then maybe there can be agreement that they ought to be prepared for (with general robustness, research and development of alternatives, etc).

      I can’t find the reference, but this reminds me of a news article I read a few months ago about an organization in central USA to get farms and local rural communities to use energy more efficiently (and maybe to engage in other more sustainable practices; I forget the details, the organization name, etc). This organization’s originator was motivated by climate change worries, but she found that to successfully motivate farmers & local leaders for the changes she favored, focusing on that was counterproductive (since those theories were controversial there), but focusing on other benefits (like lowering costs) was very successful.

      • John Baez says:

        Hi, Bruce! I’m proud to say we have an article on that organization:

        Climate and Energy Project, Azimuth Library.

        They have a pretty interesting approach…

        Idea

        The Climate and Energy Project or CEP is an organization based in the Midwestern US that tries to reduce greenhouse gas emissions by increasing energy efficiency and developing renewable energies in a sustainable manner. They emphasize values that are widely held by people in this region:

        • Stewardship: Safeguarding the earth’s resources for future generations.

        • Resilience: Developing flexible energy and food systems that have the strength and diversity necessary to survive disruptions in climate or national security.

        • Balance: Acknowledging that all energy technologies have benefits and burdens, and that citizenship demands weighing this balance carefully.

        • Innovation: Supporting creative implementation of renewable energy and energy efficiency technologies that are environmentally and socially sustainable.

        New York Times story

        • Leslie Kaufman, In Kansas, climate skeptics embrace cleaner energy, New York Times, 18 October 2010.

        A quote:

        The energy experiment started as a kitchen-table challenge three years ago.

        Over dinner, Wes Jackson, the president of the Land Institute, which promotes environmentally sustainable agriculture, complained to Ms. Jackson, his daughter-in-law, that even though many local farmers would suffer from climate change, few believed that it was happening or were willing to take steps to avoid it.

        Why did the conversation have to be about climate change? Ms. Jackson countered. If the goal was to persuade people to reduce their use of fossil fuels, why not identify issues that motivated them instead of getting stuck on something that did not?

        Only 48 percent of people in the Midwest agree with the statement that there is “solid evidence that the average temperature on earth has been getting warmer,” a poll conducted in the fall of 2009 by the Pew Research Center for the People and the Press showed — far fewer than in other regions of the country.

        The Jacksons already knew firsthand that such skepticism was not just broad, but also deep. Like opposition to abortion or affirmations of religious faith, they felt, it was becoming a cultural marker that helped some Kansans define themselves.

        Nevertheless, Ms. Jackson felt so strongly that this opposition could be overcome that she left a job as development director at the University of Kansas in Lawrence to start the Climate and Energy Project with a one-time grant from the Land Institute. (The project is now independent.)

        At the outset she commissioned focus groups of independents and Republicans around Wichita and Kansas City to get a sense of where they stood. Many participants suggested that global warming could be explained mostly by natural earth cycles, and a vocal minority even asserted that it was a cynical hoax perpetrated by climate scientists who were greedy for grants.

        Yet Ms. Jackson found plenty of openings. Many lamented the nation’s dependence on foreign oil. Some articulated an amorphous desire, often based in religious values, to protect the earth. Some even spoke of changes in the natural world — birds arriving weeks earlier in the spring than they had before — leading her to wonder whether, deep down, they might suspect that climate change was afoot.

        Ms. Jackson settled on a three-pronged strategy. Invoking the notion of thrift, she set out to persuade towns to compete with one another to become more energy-efficient. She worked with civic leaders to embrace green jobs as a way of shoring up or rescuing their communities. And she spoke with local ministers about "creation care," the obligation of Christians to act as stewards of the world that God gave them, even creating a sermon bank with talking points they could download.

        Relatively little was said about climate.

        “I don’t recall us being recruited under a climate change label at all,” said Stacy Huff, an executive for the Coronado Area Council of the Boy Scouts of America, which was enlisted to help the project. Mr. Huff describes himself as "somewhat skeptical" about global warming.

        Mr. Huff said the project workers emphasized conservation for future generations when they recruited his group. The message resonated, and the scouts went door to door in low-income neighborhoods to deliver and install weatherization kits.

        "It is in our DNA to leave a place better than we found it," he said.

        Elliot Lahn, a community development planner for Merriam, a city that reduced its energy use by 5 percent, said that when public meetings were held on the six-town competition to save energy, some residents offered their view that global warming was a hoax.

        But they were very eager to hear about saving money, Mr. Lahn said. "That’s what really motivated them".

        Jerry Clasen, a grain farmer in Reno County, south of Salina, said he largely discounted global warming. "I believe we are going through a cycle and it is not a big deal," he said. But his ears pricked up when project workers came to town to talk about harnessing wind power. "There is no sense in our dependency on foreign oil," he said, "especially since we have got this resource here".

        References

        Climate and Energy Project, website.

  5. Speed says:

    International agricultural research for food security, poverty reduction, and the environment
    What to expect from scaling up CGIAR investments and “Best Bet” programs
    http://www.ifpri.org/publication/international-agricultural-research-food-security-poverty-reduction-and-environment

    Agricultural development strategy overview
    Our goal: to help millions of the world’s poorest farming families boost their productivity, increase their incomes, and build better lives.
    http://www.gatesfoundation.org/agriculturaldevelopment/Documents/agricultural-development-strategy-overview.pdf

    There is plenty of room in the world for increased food production.

  6. p.f.henshaw says:

    I think the big thing everyone misses here is that this is much broader phenomenon. We’re not taught how to think about behavior of natural systems, like reading them as much as you might read and predict the behavior of hurricanes based on whether they are finding warm water to energize them, etc.

    Oil, gas and coal are converging on this same ~20%/year price rises for the past 10 years too. The convergence of resource price escalation for *all* the world’s key food and fuel commodity markets tells you a lot about the success of the economy as a system for finding and scavenging resources from the earth. It’s suddenly acting like it can’t keep up with demand.

    Market systems distribute their demand to the resource of least cost, searching the world for substitutions and alternate sources, etc. So when the whole spectrum of key resource markets display escalating costs at the same time it tells you a lot about the relationship between the system and its resource limits, firstly 1) what kinds of choices the markets are having to make to keep supplying their best customers, raising the price.

    Systemic lagging supply is also indicated by both 2) how speculators are able to push up prices when there’s a natural even causing a temporary shortage, demonstrating that the world resource supply chain is relatively “maxed out” and does not have spare capacity, and 3) by the failure of the markets to recover from shocks, allowing the floor price to escalate. This is the expected behavior for a growth system that allocates demand to the to the cheapest equivalent sources of natural resources. Then resources that are in competition and have interchanges, as most food and fuel resources do, will hit their natural limits of supply all at once.

    John, I understand you have not quite gotten the idea yet of natural complex systems, and how they change their organization as they develop, dynamically. This would be a good example to study, and find a way to understand it as a behavior of the world economy as an organism.

    I think I’ve sent you this short paper on it a few times already, but you didn’t mention it, as if you didn’t notice it was a broader treatment of the same subject. Why not start mentioning that there seems to be a fresh point of view out here that may explain a wider set of facts?

    A decisive moment for Investing in Sustainability
    http://www.synapse9.com/pub/ASustInvestMoment-PH.pdf

    • Rajiv says:

      Is your argument, then, that this is not a temporary spike but something of a permanent, systemic increase in resource prices?

    • Speed says:

      p.f.henshaw said:

      Oil, gas and coal are converging on this same ~20%/year price rises for the past 10 years too.

      Oil prices, while volatile, have risen on average about 10% per year over the last five years:

      Weekly All Countries Spot Price FOB Weighted by Estimated Export Volume (Dollars per Barrel) (using end of December prices, 2006-2010).

      Coal prices have risen on average about 5% per year over the last five years:

      Coal Prices, Selected Years, 1949-2009 (calculated using years 2005-2009).

      p.f.henshaw also said:

      … demonstrating that the world resource supply chain is relatively “maxed out” and does not have spare capacity …

      Businesses operate most efficiently at close to 100% capacity and strive to do so. Normal response is to expand capacity when demand is expected to grow, not in response to transient shocks. Some people think that is what the Strategic Petroleum Reserve is for :)

  7. I think Food will be a effective weapon in very future

  8. I don’t think our world civilization is hitting the limits of what the planet can support….. maybe in the next 200 years, but certainly not in the next 50. As the standard of living rises, technology will improve along with our ability to address these problems. I’m not saying it will be easy, but as a nation, USA has consistently addressed and solved the biggest problems when we’ve had to.

    We definitely will have to adapt, but that’s what it meant to be human. See what Buffet has to say on the current economy: http://thethoughthole.wordpress.com/2011/07/11/buffets-view-on-the-economy-bloomberg-interview-july-8th/

  9. Food prices haven’t necessarily gone up… it may be that the value of the currencies have gone DOWN. See key major historical exchange rate charts here. Irresponsible government spending globally has forced fiat currency dilution. Any objects/commodities/real goods priced in those currencies sky-rocket so long as supply remains level or otherwise constrained.

  10. sc says:

    I think the effects of a growing speculative commodities bubble can, on their own, account for most of what has happened with food prices in the past few years. Kaufman’s Harper’s article on The Food Bubble was pretty excellent. There’s plenty of other material out there as well. I’ve just now seen that Food and Water Watch seems to have a good report, for example.

  11. Thomas says:

    Jean Ziegler had been initially invited to held the opening speech at this year’s Salzburg festival, then he was retracted. Here is the link to the text, which had now been published by the newspaper “Die Sueddeutsche”.

  12. John Baez, Professor an der University of California, listet dazu mögliche Gründe in seinem Blog auf und geht dabei besonders auf die Wetterextreme der letzten Zeit […]

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