Saturday, February 12, 2011

Food Crisis 2011

The 2008 food crisis is back because of the Russian heat wave in 2010 and the floods in Australia. Here's a bit from an article in the Washington Post:
Each year, the world demands more grain, and this year the world's farms will not produce it. World food prices have surged above the food crisis levels of 2008. Millions more people will be malnourished, and hundreds of millions who are already hungry will eat less or give up other necessities. Food riots have started again.

Nearly all assessments of the 2008 food crisis assigned biofuels a meaningful role, but much of academia and the media ultimately agreed that the scale of the crisis resulted from a "perfect storm" of causes. Yet this "perfect storm" has re-formed not three years later. We should recognize the ways in which biofuels are driving it.


A broad misunderstanding has also arisen from economic models predicting price increases from biofuels that are still far lower than those of the past decade. In fact, these models do not estimate biofuel effects on prices today but those in a future market "equilibrium," which will exist only after farmers have ample time to increase production to match demand. Today, the market is out of equilibrium. Biofuels have grown rapidly, from consuming 2 percent of world grain and virtually no vegetable oil in 2004 to more than 6.5 percent of grain and 8 percent of vegetable oil last year. Governments worldwide seek to triple production of biofuels by 2020, and that implies more moderately high prices after good growing years and soaring prices after bad ones.
And here is a relevant bit from a post by Geoffrey Styles on his Energy Outlook blog:
As long as US harvests were increasing at a rate that kept pace with the growth of ethanol output, thanks to increased cultivation and better yields, that wasn't a zero sum game. Until recently, the corn that went into making ethanol was corn that might not otherwise have been grown. But in a year like this one, when annual ethanol consumption is set to rise by another billion gallons while the corn harvest is 5% smaller than the previous year's, something has to give. In fact, the US Department of Agriculture expects that ethanol plants will take 40% of this season's crop, compared to just 23% in the 2007-8 "market year." That exerts a lot more pressure on corn prices, which are pushing $7 per bushel for the first time since 2008.

If anything, the conclusion of Mr. Searchinger's op-ed downplayed the risks ahead. With output from the nascent cellulosic ethanol industry still minuscule, the EPA will be under tremendous pressure to allow corn ethanol to continue to expand beyond its current 15 billion gallon per year limit under the RFS. That's one reason the industry was pushing so hard to increase the maximum allowable percentage of ethanol in gasoline from 10% to 15%; it needs that headroom to continue expanding output beyond last year's 13 billion gallons. At 20 billion gallons per year--a quantity that I heard one USDA expert suggest several years ago was achievable--ethanol would require the equivalent of 55% of 2009-10's record US corn crop. It's hard to envision that happening without concerns about food vs. fuel rising to a much higher pitch.
The diversion of food to energy production has got to stop. It was an idiotic policy and is now positively deadly in its consequences because of current food shortages. Millions will starve so that the anti-CO2 enthusiasts and the ethanol lobby can go to bed happy each night. But blood will be on their hands. They are murders because they are pushing food prices beyond the ability of the world's poor to pay!

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