The Wall Street Journal, in a wide-ranging round-up, has a page one story (subscription required) on the growing tensions between demand for food and fuel:
Soaring prices for farm goods, driven in part by demand for crop-based fuels, are pushing up the price of food world-wide and unleashing a new source of inflationary pressure.
The rise in food prices is already causing distress among consumers in some parts of the world -- especially relatively poor nations like India and China.
The article points out that biofuels are altering food economics, since ethanol and biodiesel can be made from corn, palm oil, sugar and other crops. Food inflation in Hungary is running 13 percent a year, in China, 6 percent, triple the rate of a year ago. China has only about 2-3 months of surplus food, meaning a bad crop could be disastrous.
Some economists say China will have to take more
aggressive steps to prevent future food problems. These changes could
include allowing the proliferation of large -- but more efficient --
corporate farms similar to the ones that drove many small growers out
of business in the U.S. in recent decades. Such a push would be
extremely difficult for China because it needs to preserve jobs for the
tens of millions of people who live in rural areas.
It's
interesting though not surprising that large-scale farms are viewed as
the unquestionable answer to this issue rather than the small-scale
farms which are far more productive per acre of output. (Grains in
large-scale farms go to produce other foods or animal feed rather than
being eaten directly by people -- not a terribly efficient food chain
or use of an abundant labor pool).
Meanwhile in the U.S.,
... consumers are likely to
see higher prices at the supermarket for everything from milk to cereal
to soda pop, since corn is used to feed livestock and make
high-fructose corn syrup, a key ingredient in many soft drinks. A
spokesman for the National Chicken Council, a poultry-industry group,
recently testified to a congressional subcommittee that Americans
should expect higher chicken prices because of what the group described
as "the ethanol crisis."
The somewhat silver lining
to the trend is that the higher prices "could help boost incomes for
the rural poor in developing nations, who have been bypassed by gains
in the manufacturing and service sectors." But I wonder if that's the
way it will shake out -- whether the benefits will, indeed, trickle
down, or whether the farmers will be bypassed on the upswing as they
have been when prices tank.
- Samuel Fromartz