Tobold's Blog
Wednesday, January 02, 2008
 
Iowa primaries and global food prices

My excuses for writing one of my rare posts that are about politics and not games. But I read a bunch of news over the holidays and started to make a surprising connection. Fact is that food prices rose a lot globally in 2007, due to supply not meeting demand. Global grain stocks dropped by 55 million tons in 2007. At the same time America turned 30 million tons of maize into fuel, more than half of this drop. But ethanol from maize isn't efficient or economically viable, you could feed one person for a year with the maize needed to create enough ethanol to fill up a SUV. The maize to ethanol fuel business exists only due to generous subsidies.

So why do these subsidies still exist? Many sensible people, even US presidential candidates, have in the past spoken out against them. But today every single US presidential candidate is either silent on the issue or supports ethanol subsidies. Was this change of heart caused by a change in scientific findings? No, it was caused by the curious way the Americans elect their president. Before the presidential election the two parties first elect a nominee. And the elections of the nominees do not all take place at the same time in every state. The Iowa caucuses for the election of both the Republican and the Democrat presidential nominee are first. Winning those gives a candidate a big advantage for the elections in the other states. In the past some people who nationwide polled far behind managed to win the Iowa caucus, and surfed that wave of success all the way to the US presidency. Iowa being predominantly white and rural has profited very much from ethanol subsidies in the past. And that is why no candidate dares to speak out against ethanol subsidies.

Higher food prices create winners and losers, with the winners being farmers, and the losers being poor urban populations. Which really makes me wonder how the picture would look if the first primaries were in New York instead of Iowa, and suddenly all candidates were against ethanol subsidies, because apart from being expensive and inefficient they drive up food prices. In 2004 only 130,000 people came to the Iowa caucuses. It is curious what a big influence this small number of people has on global food prices.
Comments:
In 2006 the US used around 20% of its corn crop to make around 5 billion gals of ethanol (about 3billion gal of gasoline equivalent). In 2006 the US consumed around 174 billion gals of gasoline. in 2003 the US used an estimated 3 billion gals of gas sitting in traffic jams. The number of people who work on the land is quite low in the US, compared to the number of people who drive or live in cities. But the farmers are organised as are the large companies that process food and this lobby is efficient in raising money. If you want to change it you'd probably have to start by joining the parties and lobbying for the primaries in urban states to be held earlier. Sounds like a game of strategy skill and cunning. Which should suit gamers like yourselves...
Have fun.
 
Not at all that global but still fatally interesting: much more (min 2-3x) death-sentenced prisoners are killed in the years of election than in 'normal years' in the U.S. That might lead to the conclusion, that no elections are good for humanity... *shrug*

And what do you,biofuelsimon, imply with "Which should suit gamers like yourselves..." - do you present any solution to the phenomenon described by Tobold and I simply overread it? Your numbers might suggest to just get rid of traffic jam - that sounds great!

\\sorry for sarcasm
 
"ethanol from maize isn't efficient or economically viable"

If you think that's bad, go figure out how sitting on dead dinosaurs and other organic matter for millions of years ranks on the scale. No, corn is not the best crop to turn into biofuel, but please save your outrage for the "massively multiplayer" clusterfuck that is everyone's own personal carbon footprint. Reduce your consumption of fossil fuels, regardless of what anyone else does, if you expect us to take your moaning seriously. Unless we know where you stand personally, you're kind of like those moron SUV drivers who added to their drag, and thus fuel consumption, by sticking on a flag after 9/11.

Like Biofuelsimon said, you could make a game of it. I know you've posted about Chore Wars, and this seems like a very similar issue. So let's play a game: the person with the lowest gas consumption in 2008 wins. I must admit, though, I commute by bike, so I'm likely to end this year like I ended 2007, by purchasing 0 gallons FTW!

Oh, and one of the reasons food prices rose is because fuel prices rose. Unless you're living on a farm, transportation of food is a non-trivial matter. We still can produce enough food to feed the world, but distribution is costly. A more globally friendly corn policy would be great, but you're kidding yourself if you think would be a big win.
 
...and the sad fact is, that the farmer her/himself isn't going to get rich, but the seed, feed and pesticide manufacturers. Most of the maize/corn grown in the world is gm-origin, and can only be purchased from the 'manufacturer' who owns the patent. This has lead to a situation that the farmer is just in the middle of the money flow, trying to survive against lawyers, salesmen and crop markets.

Cars could run on alternatieve power sources already, if the gasoline and car manufacturers weren't so closely married... one's designs feed the others success and vice versa.

Copra
 
copra is a somewhat correct, but even with the higher costs of production for the biofuel crops, farmers still make more revenue off producing them. Subsidies help that even further.

There is no incentive for American farmers to produce food crops. Cheaper imported crops will never allow them to return to supplying America with the majority of their food supplies. So, farmers turn to biofuel crops which let them actually make money.

I come from the land of farming and have my fair share of cow-milking , tractor-driving behind me. Farming is an unrelenting job and I know more people that have given up on it than have kept at it. I know more farmers that have had to sell land just to survive two consecutive years of bad weather (early frosts, mid-season droughts).

Even though some of these farmers are long-time family friends, you won't catch me lobbying the government to help them any more than they already are. American farming has just grown too costly and inefficient. That is why there is a solid move towards mega-farms in the US, where a dozen farmers get together and manage one huge farm instead of them all fighting and scraping on their own little farms.
 
From this interview of Ron Paul:
http://www.grist.org/feature/2007/10/16/paul/

"On energy, I would say that the reliance on the government to devise a policy is a fallacy. I would advocate that the free market take care of that. The government shouldn't be directing research and development because they are bound and determined to always misdirect money to political cronies. The government ends up subsidizing things like the corn industry to develop ethanol and it turns out that it's not economically feasible. So, my answer to energy is to let the market work. Let supply and demand make the decision. Let prices make the decision. That is completely different than the bureaucratic and cronyism approach."

Also a brief mention in this interview by John Stossel around the 3:00 mark:
http://www.youtube.com/watch?v=ky3CTT7Hw4s
 
The problem is it was a politically convient way to do absolutely nothing but convince people that it helps. Like battery powered cars. People think they are a great way to help the environment. But the batteries are Toxic waste and by the time you build the car and pay more for it your better off with a new energy efficient diesel.

The ethanol subsidy will raise food prices world wide hurt the american image even more.

The only economically feasible solution I've heard todate is nuclear power. A coal or gas powered plant burns fuel on demand. A Nuclear plant uses the same amount of fuel all the time. Nuclear plants could use thier off peak production to make Hydrogen gas that could power cars. Clean fuel and clean power. And for those who will scream about the nuclear waste do you realize you are talking about a walnut sized piece of waste every year or so?

We have made leaps and bounds technologically since 3 Mile island on safe nuclear power but fear and the fact that it's still a bit more expensive scares people.

.
 
@roth.

I believe the free market is good at some things. But if you look back on history most big things done by governments that made the world better were not cost effective in the short term. Polio Vaccines, The near eradication of smallpox, things like this were'nt done by the free market they were done by focused government spending and someone with an agenda monitoring it.

Free Market solutions only work if there is a short and long term profit to be made. If the government hadn't funded Aids research probably 50% of the medical advances we've made in understanding how cells work and manipulating DNA would not have happened by now.

If you are waiting for a free market solution that will come when gas in america hits 5 or 6 dollars a gallon like it is now in Europe. They are further along on Environmentally friendly programs because of stuff like the big chemical spill in the Rhine Many years ago. Not just because it was the "cool" thing to do. Because they had it shoved in thier face by a couple of big accidents.

Till we feel the pain in our wallets, suffer some big disaster, or we get a president who is willing to risk some political capital nothing will change here.

To be fair though the US is far cleaner and safer environmentally than it was in the 50's or even at the turn of the 19th century. We've made huge strides. But If you think free market is always the way go back and read the history of Leaded Gasoline and Leaded paint. We knew in the early 1900's it was bad for the environment and bad for our kids but the free market put the lead in the products because it saved them money and made the paint look better and more durable so it sold better.
 
I'm not interested in debating the merits of the free market here, but I wanted to point out that Ron Paul has not been silent on the issue.
 
Let's talk about high fructose corn syrup. Another odious result of government corruption. It's almost impossible to avoid it, and the concerns over it's impact on public health continue to be ignored.
 
I am in general against subsidies, especially the corn subsidies. They actually harm farming quite a bit, and promote large corporate-owned farms, instead of individual-owned farms. In the unites states, states like California with almost no subsidies experience vibrant farmer economies. Small farms do well in those states.

And also skew our eating habits. I'm sure American food wouldn't be filled with high-fructose corn syrup if it weren't for subsidies.

But one of the big problems with removing them that is always brought up is that many European countries also subsidize farms. It is hard to convince the US to drop subsidies when Europe has so many. Most politicians respond by saying it would put US farms at a competitive disadvantage if they were to drop subsidies. If the US can convince Europe to do so at the same time then maybe it will get done.

Europe has a lot of food laws that also do the same thing of supporting large or already-established businesses. Many of the labeling laws, the anti-Gm laws, all of these have side effects of punishing small businesses, punishing African farmers trying to sell in Europe, etc.

The problem is more of us big, old, rich westerners have a market and don't want to open it. But it's bad for our small businesses already here, and bad in the long term because without the need to compete, we won't. Eventually farms in other countries will learn to compete, and then surpass us.

Subsidies are a short term fix that causes long term problems. Now that we have them eliminating them presents problems as well.
 
continued.
So, subsidies have been around a long time, and helped to keep grain prices artificially low. You have it backwards, the subsidies allowed large farms to be profitable making grains that were less profitable before. This meant lower costs to the consumer.

However, now everyone is now dependent on those same subsidies. Cheap corn syrup was used in everything, cheap grain was used in everything. If you look at US food vs European food, we have these subsidized products in almost all our foods. Or we feed them to our animals.

While this lowered costs and made cheaper food, it also meant dependence on one product. Now that ethanol has driven corn prices up, you see the prices go up.

This is unlike Europe whose subsidies are for different products. But certainly if cars began running on cheese you'd see a similar problem there :)
 
I heard that the effect of using corn for biofuel has had a much bigger impact in Mexico. Corn is a more important crop to their diet but farmers there increase their profit greatly by selling the crops for biofuel instead of food.
 
Don't worry Jimmy Smits will save us, and look sexy doing it!
 
I fail to see how ethanol maize (unfit for human consumption BTW) is linked to a global decrease in grain production.

Frankly, the world has always hated the United States and always will. Burn oil and we're horrible polluters. Switch to cleaner ethanol and suddenly we're starving the world. There is a new generation of Americans getting used to the hate. Modern communications have turned the steady trickle of criticism, anger, and jealousy into a torrent.

BTW Tobold, do you realize that almost every time you make a "political" post, it is a thinly veiled criticism of the United States? Our health care system, our banking laws, our electoral process, our environmental policies, our grain imports etc etc etc. Everyone knows the best way to run our country, but can't really seem to get the ball rolling in their own neck of the woods.

You know why I don't blog about European health care systems? Because I don't live in Europe, I don't pay European taxes, and no one in Europe cares what I have to say about their health care system.

Anyway, your train of thought in this post is extreme oversimplification and assumes and implies wild, causal links.
 
Tobold, in as much as I respect your MMO experience and knowledge, you greatly misunderstand the agricultural subsidy issue.

One word: "Congress"

The farm lobby is not small, and it has absolutely nothing to do with Presidential politics.
 
Subject matter close to my heart!
I am speaking from a European point of view here too.
I think it is an over generalisation to connect global food prices so strongly with any political system.
Subsidies are wrong full stop in my book! If your choosen market isn’t viable then bail out and find an income that is. I have no interest in paying farmers big fat bonuses so that they may undercut other countries. It boils down to protectionism. America is at it, as is the UK, France, China etc.
Here’s a question for you. The figure is at the end of the post.
What would you guess the rough GDP contribution of farming (cattle, dairy, crops, etc) is to the UK economy as a percentage? A ball park figure will do.
When you get the figure... ask why we subsidise food and sell it cheaper to countries that rely on aggriculture as GDP in levels of say 85%. Farmers in such countries will often not harvest a crop and waste money on labour as the West can sell the subsidised product to them cheaper.
On the whole I think farmers and large associated companies in aggriculture are morally bankrupt and as evil as they come. A generalisation and I realise there are economies and individual farmers that don’t fit within that statement. New Zealand for example has done away with all it’s subsidies and now has a thriving and sustainable contribution to GDP.
Member states of the EU however fleece their taxpayers in order to subsidies failing businesses and the likes of the British Queen as well as the likes of: http://image.guardian.co.uk/sys-files/Guardian/documents/2005/03/23/CAP.pdf
Tate and Lyle £97 million & Nestle £11.5 million WTF is going on?
This kinda crap makes me mad! Big companies using the law and smarmy accountants to fleece taxpayers!
It is time to end the CAP, common aggricultural policy. It is time to end this kind of futile protectionism now. In Europe, Asia and the US.
A real example of farmers screwing us over... the UK was recently hit with ‘Foot and Mouth’. A harmless viral infection of cattle. It swept the UK. All cattle sales were banned, transport of all livestock halted, and the populus unable to visit the countryside in general. Thus small rural cottage industries losing millions in revenues due to lack of tourism like B&B’s, local tourist attractions and cafes etc.
A vet turns up a farm, inspects herd. If one cow has it, the whole herd is destroyed. By the end of the affair, it was estimated that nearly 10 Million animals were destroyed due to infection or locality to infection.
The 2001 outbreak cost the British tax payers £8 billion ($16 billion). Farmers were subsidised back at full market value for each beast slaughtered. Tales of farmers swopping cattle for infected beasts in order get full market value have a lot of truth attached to them. Why are farmers not insured for such things? Why do we pay our taxes to subsidise them? If the market isn’t working - fix it, don’t subsidise it.
Subsidies are more about a corrupt system and a lobby with too much power than a couple of wannabe American Presdidential hopefuls.

The Figure you want is 00.05%
Less than one half a single percent.
Seriously it is.
 
I would also like to add that fodds prices have been getting cheaper for about 30 years in real terms.

It is long overdue that the western world realised this and accepted an increase for a few years.

It might even promote farming without subsidies.
 
The end of cheap oil is going to restore some sanity to this equation.
 
Here is the problem with just abandoning the "farm market" completely because foreign producers are more efficient: food is a staple of life and I dread the fact that in the face of any major world event, the US could not produce enough food to survive.

Unfortunately, the subsidies are having the same effect, turning our farmland into a "fuel resource". But at least the farms are still here, producing something.

Someone talked about the California farms, but completely missed the mark as to why they can be maintained in a smaller capacity. First off, California has a ton more land than states such as Wisconsin. Secondly, California got into the farming game later and therefore has enjoyed a significant technological advantage. California farms were built on technology, increasing production and efficiency. In older farming areas, the cost to upgrade is just not feasible and it happens slowly over time, which means the growth is slower. That is where the mega farms came from, because they could build anew with technology when they joined together.

Also, I would like to note that farmers are price takers, not price makers. The food market is a purely competitive market, with prices already set for the food produced. Farmers usually make enough to cover costs and that is about it. That is why biofuel crops win out, because they allow farmers to make money for a change.
 
Wow Morally bankrupt and evil. Strong words.

I think people sometimes forget a few simple truths.

Business's are in business to make money. Thus turning everything over to FREEMARKET principles with little oversight turns the entire focus to making more money everything else be damned.

Governments are in the business of doing a lot of cost ineffective things. They by thier nature are not efficient organizations. Preventing Crime, Improving medical care, making sure all thier citizens are educated, Keeping necessities from getting expensive when some greedy freemarketer tries to corner the market on something everyone needs. In short government is there to make sure that the worst in human nature is mitigated.

those big corporations aren't evil. they are just trying to be as efficient at what they do as possible. And that means they don't care about how it affects anyone but them. Just like the nieghbor that won't turn down his music because he likes to listen to it that loud. That is why we have to have a balance between the two.

Government that kills innovation and the ability to make profit is going too far.

FreeMarket with no oversight is equally bad.

Unfortunately here in america we have become so polorized that anyone who stands in the middle and spouts commonsense gets called a traitor or worse.
 
Some good back and forth on subsidies:

http://www.cfr.org/publication/13147/

Here's a highly recommended book on biofuel by a pretty brilliant engineer. A lot of it goes into politics though, but of course, it is a political issue, not just a technical one. He thinks switching to alcohol would help free us from a lot of terrorism, war, global warming, and poverty. I guess to a certain extent that makes sense.

http://www.amazon.com/gp/product/1591025915/ref=cm_cr_pr_product_top
 
Biofuels by themselves may prove to be a useful way to replace current fuels, but it most likely won't be corn or soybeans based fuel that do it, and it most likely won't be alcohol either. With fuel from plants like corn and soybeans, only a small part of the plant is converted to fuel (Vs, say, sugarcane, which Brazil apparently uses pretty successfully to produce fuel). Separating oil from water, which is what most of the processes around nowadays do, also uses up quite a lot of energy to actually do, as compared to, say, diesel or other hydrocarbon fuels that just separate out on their own.

I have heard that there isn't enough land to produce fuel, even if all the land was used to produce corn to produce fuel. (that's compared to there being likely plenty of land if, say, wind power were used to electricity for the world.)
 
Post a Comment

<< Home
Newer›  ‹Older

  Powered by Blogger   Free Page Rank Tool