Redstate

By Raven Posted in Archived — Comments (0) / Email this page » / Leave a comment »

The World is suffering a major food shortage. We all know about it. We're all talking about it. A lot of us are blaming it on ethanol subsidies. It doesn't exist.

...Wait. That's not possible. People are going hungry. They can't get the food. It's not there to get, even aside from the usual political problems. There Has to be a food shortage.
...But, there isn't. There is plenty of food out there. We could feed the world. So why aren't we? Well, because the world can't afford the food. Inflation has struck harder in the agricultural markets than in recent memory. And it's happening to the worldwide market. Not just in the USA. Well, again, Why?

Ask that question here in Redstate, and you'll be pointed to the diversion of so much of the corn production in the USA or the sugarcane production in Brazil to ethanol production. And it makes sense. After all, due to ethanol subsidies in both nations, these 2 crops are taking over more cropland from less profitable crops like wheat and rice and barley. And less of the corn and sugarcane goes into food production, both in total amounts and in percentages of the total. But that's only part of the problem. It's only the most recent, smallest part that only serves to push the overall issue into a crisis.

There are 3 more important pieces to this puzzle. The first, and the cause of the second, is soybean production. The second, rice hoarding, triggered by huge purchases by a single buyer. And the third is massive, worldwide wheat failures. This is just wonderful. The world's 3 largest crops, the dietary staples of nearly every human on Earth have been tied into a single problem. And they don't just feed people. They feed the animals we eat or get our milk or wool or eggs from. With less of them on the market, and growing demand due to a growing population, the price is shooting up at an almost geometric rate. Once you add in the increased transportation costs (tied to fuel costs, which are tied to growing demand and the addition of the more costly ethanol which gets more costly as corn becomes more expensive, which gets even more expensive as fuel costs increase...) you get a spiralling level of inflation that, if it hasn't already, will catch up to oil inflation and then pass it by with no end in sight.

At the core of these problems is the growing soybean production. A nastier vegetable, I can not imagine, but a more useful vegetable, I can not find. Soybeans are used in hundreds and thousands of different products. Eaten directly, raw or in tofu. Squeezed for their milk and oil. Ground into meal and flour. Soy products can be found in nearly every processed food in the USA and in soaps, shampoos, clothes, inks. The list goes on. This is a Massively profitable crop. The world's greatest producer of soybeans? China, the world's greatest producer of rice. Rice is not so profitable. Well, the Chinese aren't stupid. They need more money to fed their growing economy and military machines. Rice fields are giving way to soybeans. The equation is the same in the USA. Soybeans are taking fields from corn and wheat and the US Farm Subsidies aren't doing anything to even slow this process, let alone stop it, with an expected 10% increase in the production of soybeans in the US causing a reduction of 7% in the US production of corn. Even accounting for increased production of corn in some areas due to ethanol, the total US crop has been reduced for the last 2 years straight and is expected to take another 7% dive this year. Because of soybeans. It's a very useful crop, but is not now, nor ever likely to be a dietary staple on par with Rice, Wheat, or Corn.

This brings us into the next piece of the puzzle. China maintains a sufficient rice reserve to feed it entire population for a year. Rice doesn't keep forever. The rice reserve must be regularly replaced. It's a government run system. This means that they do it in the least efficient manner possible: the Chinese government replaces the entirety of its reserve in a short period. This is where the soybeans come in. The Chinese have replaced so much of their rice crops with soybeans that they can no longer replace their rice reserve internally, so they go to the outside market. Again, we have a point where the entire crisis could have been avoided. Had the Chinese government been going through a cnstant replenishment process and gotten rid of only the oldest rice at a time, constantly cycling a smaller amount every year, there would not be such huge purchases of rice within the last year. But that's not how they did it. And what is the usual reaction when someone attempts to buy up the entire market of a single product? They try to get as much of it as they can themselves. And with governments being party to this process, you get hoarding on a national level. It's happening within the US on an individual level as well as people who live primarily on rice learn what's going on elsewhere. Sam's Club will only sell so much rice to a single customer at a time in an effort to stem the hoarding tide.

Okay. So that pretty much eliminates one of the world's major staples from the market, placing it out of reach of most people. A serious issue, to be sure, but not solely capable of creating the kind of food inflation the world is currently experiencing. So what about the world's other 2 staples? Corn and wheat? Well, wheat is suffering massive failures around the world. A fungus called UG99 is infesting the world's wheat crops. Genetically altered to protect against so many other pests, insects, molds and bacteria, current wheat strains are extremely susceptible to this mutant fungus. To make matters worse, it's estimated that it will take 5 years or more to design a strain resistant to this fungus. Finally, the woreld has been so dependent on the current wheat strains that there are too few seeds of old strains to fill the gap even if the fungus is eliminated. This has effectively removed the world's 2 most important crops from the market. While there are still vast amounts of those crops out there, the sudden reductions in both have driven the price of each out of range for most people.

And in waltz the USA and Brazil with ethanol subsidies. Corn, the last of the 3 major world crops is being diverted to use for fuel instead of food in the USA. And what corn production there was in Brazil has been replaced almost entirely by sugarcane and soybeans. The price of corn is skyrocketing worlwide because of ethanol. In Mexico we have heard of riots because people can't afford tortillas (though how anyone can eat a corn tortilla is beyond me). In the USA, it's affecting our meat and dairy and eggs because corn feeds our cows, pigs, chickens, sheep...

So, we have an artificial food shortage. There is plenty of food to go around. Everyone could eat plenty. But it costs so much, much of the world's population can't get what they need to survive. Any one of these pieces going another way could have prevented the entire crisis. Solving any one of them could instantly end the crisis. But the Chinese want their reserves of rice and have effectively created a worldwide run on the banks. Wheat is being destroyed by fungus. And corn is being inflated by even less intelligent government action than the Chinese rice problem. And soybeans have eliminated the world's strategic depth in grain and cereal production.

There's plenty of food out there. Everyone just wants too much of it too badly for most people to afford it.

Bibliography
http://en.wikipedia.org/wiki/Soybean
http://www.iasoybeans.com/
http://www.ers.usda.gov/Briefing/SoybeansOilCrops/
http://www.farmandranchguide.com/articles/2008/03/13/ag_news/production_...
http://www.farmdoc.uiuc.edu/manage/newsletters/fefo07_08/fefo07_08.html
http://www.worc.org/pdfs/WorldWheatFacts.pdf
http://moneynews.com/money/archives/st/2008/4/24/100454.cfm?s=st
http://socialistworld.net/eng/2008/04/28worlda.html
http://blogs.moneycentral.msn.com/topstocks/archive/2008/03/27/new-wheat...
http://yaleglobal.yale.edu/display.article?id=10583
http://www.cnbc.com/id/24276800/
http://www.thanhniennews.com/commentaries/?catid=11&newsid=38188
http://news.xinhuanet.com/english/2008-04/05/content_7921792.htm