Donald Coxe View from "Basic Points" Jan. 2008:
The fast-growing Asian middle class who have given the world $95 oil, $3.00
copper and $12 nickel is about to give the world a full-blown food crisis.
Here’s why:
1. The supply of arable land under cultivation has not increased during this
decade, primarily because of industrialization, desertifi cation and urban
sprawl across much of the Third World, particularly China and India.
2. When people by the hundreds of millions switch from a diet of rice
and bread to three square meals a day, their protein consumption rises
rapidly. That protein can come from dairy products and/or meat. Their
physiognomies actually change—they’re no longer skinny, and their
children no longer stay small. Their caloric intake is transformed—along
with their forms. (Form follows bodily functions.)
3. In all past periods of soaring food prices, major crop failures or wars were
the sole cause. Once the droughts or fl oods, plagues of locusts, or wars
ended, surpluses were again the norm, and food prices collapsed, forcing
governments into further subsidies. Example: more than 40% of the EU
budget goes into farmers’ pockets, because raw food prices have so rarely
been far above production costs.
4. Wheat prices doubled last year, and, as we are told (in such media as can
fi nd space to write about grains), that surge came because of crop failures in
Australia and Eastern Europe. Nobody noticed it when the USDA reported
that world wheat production was up 1% last year.
Can we trust the USDA? Its data come from a huge worldwide satellite
system that monitors production everywhere. That system was first
launched by President Ford, and his successor took money from the
Defense Budget to beef up (no pun intended) the satellite surveillance.
Why? To prevent a repetition of “The Great Grain Robbery,” when Nixon
sold the USSR virtually the entire US wheat crop in 1972 at $1.65 a bushel,
sending wheat up to $5 a bushel, and triggering global food infl ation.
That was economically greater aid to the Soviets than Stalin got in any
year under Lend-Lease.
5. The US Midwest, which prides itself on being “The Saudi Arabia of
Corn,” has had 17 straight years without a signifi cant crop failure—the
longest winning streak on record. Although global warming could have
contributed to that remarkable record (by lengthening growing seasons
in the key northern states—Minnesota, Iowa, Illinois, and Ohio), history
tells us that the good years for growing ears of corn don’t last forever. We
in the Midwest have more than doubled the Joseph quota for great growing
conditions, and are due for a reversion to the mean. When that happens,
the world will almost surely face its greatest-ever food crisis.
6. “Greatest-ever food crisis?” Isn’t that hyperbolic? Famine has been one of
the Four Horsemen forever. What’s different this time? Answer: In the past,
supply pressures came from crop failures or war, and so were local. This
time, the pressure comes from demand, which is global. (To give the reader
some idea of the scale of the increase in demand as people get richer, the
FAO reports that from 1981 to 2001, per-capita daily protein consumption
in the US rose from 99 grams to 114, while in China it increased from
54 to 82. In light of the increase in Chinese incomes since then, that gap
will, presumably, have narrowed further.)
7. The ethanol-biodiesel booms are driven by powerful political coalitions
that include campaigners for “energy independence.” Brazil, with its vast
production of sugar and soybeans, has managed to switch more than
70% of its motor vehicles to alternative fuels. The fact that corn ethanol
has become a new example of government farm folly with $5.00 corn
doesn’t mean biofuels aren’t worth pursuing. The world’s shortage of
oil is a fact—although one wouldn’t know it from listening to electionyear
demagogy. Biofuels from other sources—including animal fats and
cellulosic materials—will become increasingly economic. But there is so
little well-watered land—and so much demand.
8. To date, the prices of food growing on stalks have soared like tech stocks
during the era of another kind of moonshine-driven markets. Although
food prices have climbed in many Third World countries—notably China—
there has not been full cost pass-through to consumers in North America.
Prices for eggs and dairy products are up in North America, but not as much
as feed prices. Meat is still priced as if little of signifi cance had occurred.
US Grocers and food manufacturers are still eating higher raw food prices,
in large part because Wal-Mart—with a 40% market share—continues to
subsidize general merchandise sales with cheap food. Either Wal-Mart is
about to reconstitute itself as a tax-exempt charity devoted to feeding the
poor and the lower middle class, or food prices will climb. Sharply.
9. We are frequently asked whether it is reasonable to include India in this
analysis of soaring Third World protein consumption. Aren’t most of
those teeming millions vegetarians? From our visit there, we learned that
vegetarianism is indeed widespread, but many vegetarians consume eggs,
fi sh, and dairy products. Taboos dictate which meats they eat: Muslims
won’t eat pork, but will eat beef, whereas non-vegan Hindus reject veal
or beef, but will eat lamb, pork, or goat.
