The moralising on the supposed evils of converting grain to biofuel and pushing food prices to record levels in a soon to be hungry world has only just begun. It has been described as nothing less than a "crime against humanity" by UN expert, Jean Ziegler and these sentiments were also echoed by the IMF. The only thing missing were the "four horsemen of the apocalypse", but give them time, they are only just warming up yet.
Just be sure to take it all with a grain of salt because that is a narrow minority urban view. Afterall, the majority of the world's population are still farmers and fisher folk. And under the principles of universal sufferage and one vote one value, it is the farmers perspective of high food prices that should, but rarely does, prevail over the bleatings of minority urban panic merchants.
It should not be forgotten that in the entire sweep of human history prior to 90 years ago, almost all non-railway transport fuel was grown on farms and the trade-off between the use of grain for food or transport was a central element of all human commerce. A part of every farm was set aside as the "horse paddock" and part of every oat or corn crop was set aside for both family consumption and horse transport and traction purposes. The family's ride into town was fueled by a stomach full of grass but it was the bag of oats, that was contentedly munched on while the shopping was done, that fueled the ride back home. Every farmer also knew that if they wanted the ploughing done on schedule then they would need a few more bags of supplemental grain to maintain the effort. And all the products the family had bought had been transported by animals whose sole source of fuel was grain that had been bought in the same market where the same grains (of slightly different quality) were sold as food for humans.
In fact, the traditional Amish communities are still doing it to this very day. And somehow, lumping them in with the likes of Pol Pot, Adolf and uncle Jo Stalin seems just a wee bit over the top, don't you think? Especially when you look at their CO2 emissions per capita. And if the Amish are committing crimes against humanity for diverting human food for transport purposes then what does that say about Hindu farmers who, for religious reasons, allow perfectly good cows to die of old age, un-eaten by anyone?
More to the point, there is not the slightest doubt that the presence of this competing demand for agricultural output played a major role in maintaining food prices at levels much higher than these recent "record levels" that have been attributed to rising oil prices. And it was these very same high prices for agricultural produce that ensured that small scale family farming remained as a profitable occupation. It is what maintained most of the population, and the jobs, in rural and regional settlements where their ecological footprint was incapable of producing excess CO2. It took cheap oil, cheap food and the urban megopolis to pull off that stunt.
It was also these higher food and transport prices that played a major role in curbing mankinds propensity for the kind of conspicuous consumption that is having a major impact on the ecology of the planet. These higher prices ensured that houses remained at sensible sizes, used less resources, were easier to heat, cheaper to maintain and were built closer together. People could afford to buy them with just one income. This produced denser housing in more compact towns and cities where walking, bicycling and public transport were more viable. They formed stable, safe neighbourhoods where kids could walk to school and be monitored by a careing community. And despite the past lack of medical advances, people were fit, active and rarely obese.
The drift of population to the cities was much slower under high food prices and this slower pace of development was at a rate that planners could cope with. These smaller cities enjoyed greater utilisation of infrastructure, lower maintenance costs and fewer diseconomies of scale. It was, dare I say it, a much more ecologically sustainable pace of change.
So we need to be cautious about the underlying perspectives of those predicting catastrophic outcomes from high food prices. For it may well be the case that the simple lifestyle and market induced responses of ordinary folk to higher food and transport costs will do more to cut CO2 emissions than all the climate wallies combined.
Yet, many would agree that it is not good sense to be starving poor people all over the world for the sake of a target set by uncertain science and rampant green whimsy. But it must also be remembered that most of the worlds poor are rural poor, not urban poor. And it is only the minority urban poor who will be in serious trouble from higher prices.
For the rural poor this doubling and trebling of food prices is the good economic news that well informed development economists have been calling for for decades. The major cause of their poverty was the low cost of energy and the resulting artificially low break even price of industrially farmed commodities. These low priced industrial food stocks undermined the prices of third world farming produce to the point where the results of a days labour were insufficient to feed the farmers family for that day. This was further exacerbated by the dumping of subsidised food as "aid" to the expanding urbanised populations that needed to be placated to maintain any semblance of order.
In contrast, the major increase in energy costs has produced a major increase in the price of fertiliser which is obviously not good for those users. But in the third world this also means that the nitrogen in a cows turd has also undergone a major increase in value to a point where the effort expended in collecting that turd will be properly rewarded by the additional food it will grow and the major increase in price that food will command.
And while the increase in energy costs has raised the price of weedicide for the developed world, for most of the worlds farmers it has re-created the circumstances in which a day spent chipping weeds with a hoe will be rewarded with more than enough food to make it worth his while. The improved weed control improves the water use efficiency of their limited rainfall supplies. It can have the same effect on farm output as a 30% increase in rainfall.
The problem in third world agriculture was never one of lack of underlying capacity. Cheap commodities from cheap oil simply undermined the structure of their local economy to a point where the effort required to produce a surplus of food over their own needs was more than the extra food was worth and the people who might have bought that surplus were all in the city, too far away.
Those days are now gone. These farmers have been sent a very powerful price signal from the market place that their efforts are now valued more highly and are prepared to pay a much fairer price for what they produce. The additional spring in their step that this will produce will be akin to giving them an extra acre of land each and an extra 100mm of rain.
And those members of the starving, rioting urban poor who still retain their links to the rural community will soon discover that there are new, secure jobs back home providing services to those who, some for the first time in their lives, are enjoying an investable surplus and economic security based on their own effort, under their own control.
And after all they have endured under the tyranny of cheap oil and cheap food, who of us would not wish them all the very best in their endeavours. As Candide said to Pangloss after a lifetime of catastrophe, "that is all very well, but there is work to be done in the garden".
Ian Mott
I must say that this has been a really thought provoking thread. It has never occured to me that cheap oil and the cheap food from it has played a major role in keeping third world dictators in power. The cheap food, and especially food aid, enabled them to keep the urban poor on their side. This provided a buffer between themselves and the majority in the countryside that they neglected and exploited with impunity.
Higher prices for food will empower the rural majority in a way that will ensure they are taken more seriously and be served properly. That is good news and a long time comming.
So what, Grendel? Go back and read my article without your ideological blinkers on. Especially read the part where local farmers can and will respond to the higher prices by increasing their major farm input, their own labour and that of sons and daughters returning from city slums, to produce more food.
The notion that output from a farm is fixed and already operating at maximum capacity is way off the mark. The primary driver of farm productivity in the third world is the motivation of the farmer and his family.
If the market has been corrupted by cheap food from cheap energy then they are only motivated to produce for themselves with a mild surplus as buffer. But when the market puts a higher value on their produce, and their own urban markets remain open to them, then they can and will increase production to meet that market.
The hardship of the urban poor minority will only be temporary because the farmers will respond to fill the gap left by food diverted to fuel. Prices may drop back a bit but not to the levels of the corrupted markets of the past.
To take other steps, to either prevent the diversion of food to fuel, or to deliver subsidised food to third world urban poor, will only prolong the suffering and market failures of the past.
I quite agree that policy should not be shaped one way. But isn't the point that normal market transactions for food are being reshaped by the addition of biofuels as a consumer of former food production capacity?
"Lead a horse to water .." Grendel.
You have presented some useful numbers but your analysis is distinctly one sided. At best you can identify about 840 million urban dwellers who live in slums. But the living in a slum (whatever that is) is only a sign of comparative poverty. Many slum dwellers earn a steady income, have discretionary spending, are far from starving, but do so because the cost of non-slum housing is beyond their means or, more likely, the supply of non-slum housing does not meet demand.
Using your own numbers,
"Developing Asia/Oceania – 3.821 billion (1.49 billion urban) Africa – 38% - 922 million (349 m urban)" leaves us with 2.904 billion non-urban residents in Africa and Asia. Add the 125 million non-urban latin americans and we get 3.029 billion non-urbanites.
But lets take a closer look. In Developing Asia the non-urban population is 2.331 billion while you can only identify 546 million urban slum dwellers, (4.27 to 1) some of whom are not necessarily at risk of starvation. In Africa the non-urban population is 573 million while you can only identify 177 million urban slum dwellers (3.24 to 1).
You chose not to glean this information from the data you retrieved. And to top it all off, you then gave stats that completely undermine your position. You tell us that;
"Around a billion people live in extreme poverty (less than $1 USD a day). A further 1.8 billion live in moderate poverty (basic subsistence living) on $1-$2 USD a day). That is a total of 2.8 billion people in either extreme or moderate poverty, either going hungry each day or only managing at a basic subsistence level".
But you looked no further into the data. For when we deduct your 840 million urban slum dwellers from the 2.8 billion people who live on less than US$2 a day, we are still left with at least 1.96 billion non-urban poor people.
Those people clearly do not reside in any of the OECD nations and they clearly do not reside in the non-slum parts of African and Asian urban areas. By elimination, the only place they can be found is in the non-urban parts of Africa, Asia and Latin America.
At the very best, only 28% of people in extreme or moderate poverty in the world are in urban areas. It is more likely to be less than 20%.
Your claim that many in non-urban areas are not farmers is also unfounded. The CIA World Fact book indicates that 40% of all people in the workforce are involved in agriculture. They clearly are not part of the urban half of the population so, by elimination, they MUST form 80% of the non-urban population.
So at very best, only 600 million (20%) of the non-urban population could be engaged in occupations other than farming. This non-farming cohort would include salaried government officials etc.
Accordingly, I can state that there is not the slightest room for doubt that the overwhelming majority of the worlds poor are farmers. And the benefit delivered to that poor farming majority, in the form of increased prices for their produce (whether or not all or part is consumed by themselves), will far outweigh the adverse impact on the poor non-farming minority.
To shape world food policy in a way that favours the minority urban, non-farming poor, at the expense of the farming majority, is metrocentric discrimination of the worst kind.
And if this metrocentricity has been a core element of UN food and anti-poverty policy over the past half century then it is the United Nations, itself, that is guilty of a serious crime against humanity.
Ian, lets go back to the beginning.
Jean Ziegler’s comments were directed at the issue of rising food prices and the impact of this on the capacity of the world’s poor. Your article seemed to suggest that this is not really an issue as most of the world’s poor live in rural areas and therefore would benefit from rising food prices.
Is that a correct summation?
You further stated: “the majority of the world's population are still farmers and fisher folk”. I disagree. We know that urbanisation is around 50%, but equally those who live in Rural areas, while not “urbanised” are not all fishermen and farmers – many small towns, hamlets and farming villages maintain the expected range of local services to support the major agrarian of fishing activities. I would suggest you’re your initial claim of a “majority” of the world’s population as farmers or fisher folk is demonstrably erroneous. I do note that in a later comment you amended this to include “people providing services directly to them (locally)”.
It is certainly true that in Africa and in Asia the levels of urbanisation are below 50% and that broadly speaking most people in Africa and Asia are going to be involved in the production of food and the increase in prices will be an economic benefit to them.
This issue of concern outlined by Jean Ziegler was not the rural poor but the impact of rising food prices on those who cannot afford a rise in food prices.
You approach seems to have been one of – “well, is this the lesser of two evils?”
“A person is considered poor if his or her consumption or income level falls below some minimum level necessary to meet basic needs.”
(http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/EXTPA/0,,contentMDK:20153855~menuPK:435040~pagePK:148956~piPK:216618~theSitePK:430367,00.html)
In order for the rural poor to benefit, the increased value of their crops must exceed that minimum level – I haven’t seen than demonstrated in your post, just assumed.
My concern is that this approach ignores the minority in favour of the majority, but we are in fact dealing with hundreds of millions of people in taking such a sweeping approach.
Looking at the world generally we can see that urbanisation is as follows:
(for my sources I am using the World Bank PovertyNet and the UN office of Population)
Northern America – 81%
Latin America and the Caribbean – 78%
Europe – 72%
Other Developed (Australia, New Zealand and Japan) - 69%
Developing Asia/Oceania – 39%
Africa – 38%
Naturally the global population base is not spread equally across these areas.
Northern America – 332 million (269m urban)
Latin America and the Caribbean – 557 million (432m urban)
Europe – 731 million (526m urban)
Other Developed (Australia, New Zealand and Japan) - 152 million (104 m urban)
Developing Asia/Oceania – 3.821 billion (1.49 billion urban)
Africa – 38% - 922 million (349 m urban)
As a rough guide to how many of these might be poor we can use slum dwelling as an indicator. Three of those groups have a considerable number of their population living in urban slums:
Latin America – 27% of urban dwellers reside in slums (116 million people)
Developing Asia/Oceania - 35% of urban dwellers reside in slums (546 million people)
Africa – 51% of urban dwellers reside in slums (177 million people)
A total of around 840 million urban dwellers who live in slums.
I’d suggest a fairly high percentage of slum dwellers could be considered as “poor” certainly poor enough that a rise in food prices hurts.
My contention was never that rising prices in food are bad for farmers, but that if there are areas on which we can place downward pressure on demand (i.e. biofuels) then doing so would ease the pressure on the urban poor.
Your post makes the assumption that ALL rural and fishing people will benefit – I’d suggest that is an unlikely outcome. There are areas the soil degradation has advanced to the point where agriculture has regressed to subsistence levels, because that is all the land can produce. I’d like to be able to quantify that further but I can’t – if you have better information perhaps you can present that.
The issue of poverty is a large one. Around a billion people live in extreme poverty (less than $1 USD a day)
A further 1.8 billion live in moderate poverty (basic subsistence living) on $1-$2 USD a day)
That is a total of 2.8 billion people in either extreme or moderate poverty, either going hungry each day or only managing at a basic subsistence level. Estimates are that around 800 million people go hungry each day with a further 2 billion right on the edge of this. I wonder just how many of that 2 billion will get tipped in one direction or another.
Would you care to provide an evidence based estimate?
Thanks, Aaron, hope to read where it takes you.
I am in two minds about this term "food inflation" because it carries the standard metrocentric implication that it is somehow bad and something that needs to be restricted. In the current circumstances the rise in food prices marks a fundamental correction in the resource allocation mix. Specifically it marks a change in the composition of the basket of goods and services that is, or should be, used to determine the broad rate of inflation.
So to single out the element (food) that is increasing in value as being subject to inflation is to ignore the other elements that are likely to reduce in either value and volume.
It is a bit like measuring the affordability of houses by reference to the total increase in house values without taking into account the increase in the size of houses, the number of bedrooms and bathrooms, and the type of fittings. Clearly, a house of the size bought by our parents 40 years ago, with the fittings used in that house, would be a lot more affordable (if councils would let you even build it) than the supposedly unaffordable ones we have today.
So we should not fall into the trap of using metrocentric terminology to describe what is essentially a market correction. The rises in food prices are a partial return to the proper valuation of energy, land, rural labour, capital and enterprise to levels that reflect their actual availability, their true demand and supply relationship.
And folks you haven't seen anything until you have seen the effects of hyperinflating meat and animal protein prices on OECD economies. That's when you'll truly see what food inflation is. Time to get long the meats, they are going to move to 'unfamiliar' levels.
You could always go to the farm gate and buy a 1kg of wheat for 40c - FOB price of course.
Fantastic piece Ian ... maybe we do have more in common than I realise. Even stimulated some new train thoughts for me. Good stuff!
Food will always be used for fuel and as Ian has described it always has. Your problem folks is not expensive food, it is expensive oil and it is going to get a lot more expensive. A nice time to get 're-acquainted' with your rural roots for any hope of managing food price inflation.
Meanwhile, back at the ranch:
http://www.dailyreckoning.com.au/farmers-say-rain-go-away/2008/05/13/
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No Grendel, I have already provided the data but you chose not to retain the information. You then started plucking numbers from every orofice to fit your argument but, when asked, not only conspicuously failed to substantiate, but then had the gall to accuse me of the very thing that you were doing.
As I have already pointed out, 50% of all humanity is non-urban and given that most of the developed world (the rich) is highly urbanised it becomes self evident that much more than 50% (a large majority) of the less developed world is non-urban. And being non-urban, they are either employed as, or family of, farmers, fisherfolk, or people providing services directly to them (locally).
This basic knowledge forms part of the suite of information that the average year 5 student is expected to have on board but you continue to posture as if it is yet to be proven. Have you never seen a single documentary on third world conditions? Have you had your head in a paper bag for the past four decades?
You also wrongly claimed that all Amish economic activity is directed at food production but when the obvious evidence to the contrary was provided you ducked for cover.
Much more to the point, Grendel, you have avoided the larger issues. That is, an increase in price produces an increase in supply. Any diversion in supply produces an increase in price. So any perspective that assumes that a diversion in supply will not produce a response by other suppliers is a perspective of the economically illiterate.
And that is not meant as an insult, Grendel, it is a reasonable conclusion based on the facts.