Chris' Original Blogbeque

A fresh, vinegar-based examination of life

Global food prices, Part II: Excuses and Reasons

Posted by Chris on June 7, 2008

As way of an introduction, this series of posts came about as a result of all the media coverage of, and visible evidence in our grocery stores, of the rise in food prices and the effects globally.
In Part 1 I looked at some of the problems that result from higher food prices and gave some examples. It was by no means comprehensive; rather, it reflects simply the most recent anecdotal things I’ve read and heard, along with some of my own perspective. In this post I’ll look at some of the explanations for the rising food prices and talk about excuses vs. reasons as a way of evaluating the theories in terms of which ones are important in determining what we can personally do. So this is not a quantitative analysis to show how much each factor has to do with the rise in commodity prices– it’s a bunch of individual puzzle pieces from which I’ll pick a few over which we, as individual Americans, have some control.

I am drawing from a specific set of articles that I have read lately which are listed here as my sources. In addition, I am remembering other things I’ve read but do not have the url and drawing on conversations with people. I will try to give credit where it’s due as much as I’m able (denoted by a # in parentheses). But I can’t really take the time to do a bunch of extra research and will mainly draw from my head.

Part II: Why food prices are rising
Of course there are many factors that determine the price of food. And some explain for the rise. With some precision you can easily figure out which factors are definitely important and which are not behind the rising prices, however.

Demand for food

It is rising in China and India. Some say that the rising demand for food staples (either its homegrown rice, or for imported wheat, etc…) in these two countries explain almost all of the surge in commodity prices. Econ 101: if demand increases, the demand curve shifts outward and creates a new intersection with the supply curve (equilibrium). Since supply curves are upward sloping (i.e., low on the left near the ‘y’ axis which represents price and low on the right near the ‘x’ axis which represents quantity), a shift in demand leads to a higher price (because the equilibrium pt is now higher along the ‘y’ axis as suppliers will sell more at higher prices).
All things being equal, more people, eating more food, will equal higher prices. Things like the industrial revolution have helped to decrease food and manufacturing prices. Agrobusiness is the new industry trying to bring cheap food to the global masses. But it is possible that the effects of demand could begin to outstrip the effects of technological and agricultural improvements in efficiency.
It is also worth mentioning that part of the rising demand due to China and India is not just from more people, but more people with more money who are now eating things besides traditional staples like rice (such as meats and grains) (8).

Demand for alternate uses
Corn demand has increased a lot, but not for food purposes. Instead, corn and other crops like soybeans are being diverted from human or cattle food to the development of alternative fuels like ethanol. Richard Posner has written:

The demand for agricultural products has grown, though not as a result of population growth; instead as a result of increased demand for ethanol and other biofuels, and for food that requires more agricultural acreage to produce. Today, besides people and pigs eating corn, our motor vehicles “eat” corn that has been converted into ethanol. (7)

Blame Western governments
I have mentioned excuses vs. reasons. CS Lewis, writing about forgiveness, requests that people not make excuses for their sins, either to God or each other. If your actions are excusable, they are not wrong and you do not need forgiveness.
The accusations of infamous West-hating leaders Ahmadinejad & Robert Mugabe that British and US policies are to blame fall short of legitimacy (1). Mugabe is widely held responsible for wrecking the agricultural output of Zimbabwe and his rule has been marked by rising food prices and extreme inflation (I saw a receipt online the other day where a meal cost something in the neighborhood of the billions of Zimbabwean currency, the equivalent of a few US dollars).
These men are making excuses which are not legitimate reasons. For the purpose of this article, I will consider excuses and reasons as a Venn Diagram. Demand, discussed above, falls in the overlap. It’s a legitimate reason but serves as an excuse for the inaction of Americans.

Natural Disasters
Floods and tsunamis and cyclones have ravaged parts of our world in the last few years, destroying crops and the farmers who tend them. Ignoring global warming and the hypothesis that we could be responsible for increasing volatility in weather, there is little we can do about natural disasters.

Natural causes
I haven’t heard alot about this yet but there are some potential problems on the horizon. Pests have always plagued crops, and as we eliminate one, another takes its place. Bees are mysteriously disappearing in America. If you’re seen Bee Movie, you know the consequences of the absence of bee pollination– plant life dies. A guy who studied this in grad school told me that the bees are going out but are then unable to find their way back to the hive– scientists think that they may have some kind of virus or sickness inhibiting their instincts.

Government policies
Not political policies towards Zimbabwe, but agricultural policies. Quotas, tariffs, subsidies. Barriers to free trade hurt everyone except for a select few farmers. I like the idea of fair trade coffee but the lack of free trade in crops that are also grown in rich countries hurt poor farmers more than fair trade will ever help them.
Because of the cost of labor and other inputs, food can generally be grown cheaper in the third world (assuming they use relatively good agricultural technology/efficient methods). Let’s say wheat cost 1$/lb to produce in Africa but $3/lb here. To ship it to the US is another .50/lb. There is a .50 markup by the African farmer and the US grocery store. What would be best for the most people? I buy my wheat for $2.50, the African receives .50, the boat owner receives .50, and the grocery store receives .50.
[I’m oversimplifying and probably saying some stupid untrue things– I’m not an agricultural econ expert. But I’m pretty sure that in theory this could happen and I am confident in my assertion that free trade would be better]
Instead, the US govt would put tariffs so that wheat costs $3.50 from overseas. The grocery stores buy it either from overseas or the US– both cost $3.50 with the domestic farmer markup. Then I end up buying my wheat for $4, the African receives only what his fellow africans can pay (say, .1), the boat owner has to go and ship rubber to China which only pays .25. The american farmer gets .5 and the grocery store gets .5 while consumers pay $1.50 extra. I have no bias against American farmers. I have a bias against higher prices. And higher food prices are the subject of this blog post.

My final reason: No excuses
The preceding causes are what I’m putting in the category of reasons which are also excuses. That is, they do explain food prices, and perhaps even the recent rise in prices, but if I as an American focus on one and say “It’s because of all the people in China”, then I remove any personal responsibility or ability to help. In other words, they are also functional excuses for the people who have nothing to do with the particular reason. This final reason is about American individuals. Some of you do not share guilt in this, but most do, and I am the chief: Overconsumption of food. If I spoke of overconsumption in general, then nearly every American would be indicted. Most of us overconsume food. I don’t just mean overeating, although that is part of it. We eat more than our proportional share. We eat inefficient meals in terms of nutritional value and we are wasteful. People in poor countries are astounded that we would exercise in order to lose weight; it’s incomprehensible to someone with a realistic fear of starvation for theirself or their neighbor. The next blog post will talk about American gluttony and what we can do, how, and why, to lower food prices and be better global citizens. In addition, it will touch on a lot of other topics, notably the issue of self-control which should be of especial importance to the Christian and is the reason that I have been personally concerned about my own behavior before I thought about my role in global food prices.

Sources/Articles I’ve read lately

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