Going Green

Friday, April 11, 2008

Human Behavior's Impact on Food Prices

Below is linked a thoughtful article on the rising price of basic food grains throughout the world. There is only one factor discussed with which I would take exception. That is the impact of biofuels on the prices of wheat and rice. Although there could arguably be a point at which competition for acres will impact production of these two crops, I do not believe that it has occurred at this point.

Traditionally, in the U.S., corn is primarily destined for cattle feed. In the southern part of the wheat growing areas of the country -- such as Texas and Oklahoma -- cattle often graze wheat pasture (stocker phase) prior to entering the feed lot for finishing. The cattle are removed from the wheat pasture at an early date so that the wheat can continue to mature and produce grain. These are complementary enterprises. With the high prices for corn due to competing demands from ethanol production, it would be assumed that cattle would remain in this stocker phase of production longer -- thus taking the wheat acreage out of harvest for grain. High prices for wheat have actually had the opposite effect. Farmers are electing to forego income from stocker cattle in the hopes of harvesting even more wheat from their planted acres. This is a purely economic decision on the part of the farmers who often lease their land to cattlemen for grazing.

My point is that in spite of the potential for ethanol production taking acreage away from wheat production, it has not in fact occurred due to other market factors. If allowed to operate, free enterprise will allocate resources in the most efficient manner possible. Rising food prices are certainly a part of that mechanism, but they are not the driving force. Fuel prices are driving the issue and they are a function of many factors. (see this post)

How Countries Worsen the Food Price Crisis

By Kent Garber

Since early 2007, when food prices began marching noticeably upward, there have been violent riots in more than a dozen countries, growing malaise in developed areas, including the United States, and a fluid debate about the origins of the spike. On the last point, a consensus has emerged. A slew of factors--record fuel prices, ethanol production, unprecedented demand, the effects of climate change--have been blamed, creating a sort of perfect storm for the world's food supply.

Although each merits attention, another culprit must now be added: the human reaction to the crisis.

Since the first of the year, additional jumps in food prices have bred not only uneasiness and widespread fear but also...(complete article here).

No comments: