Good News on High Fuel and Food Prices - A Note from Ian Mott

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