As the food-fuel debate really hots up, ethanol is proving to be the focal point of global - not just domestic - complaints. To be sure it IS part of the problem, but only part, and it's hard to parse out how big a part.
C. Ford Runge, an economist at the University of Minnesota, said it is “extremely difficult to disentangle” the effect of biofuels on food costs. Nevertheless, he said there was little that could be done to mitigate the effect of droughts and the growing appetite for protein in developing countries. “Ethanol is the one thing we can do something about,” he said. “It’s about the only lever we have to pull, but none of the politicians have the courage to pull the lever.” But August Schumacher, a former under secretary of agriculture who is a consultant for the Kellogg Foundation, said the criticism of biofuels might be misdirected. Development agencies like the World Bank and many governments did little to support agricultural development in the last two decades, he said. He noted that many of the upheavals over food prices abroad have concerned rice and wheat, neither of which is used as a biofuel. For both those crops, global demand has soared at the same time that droughts suppressed the output from farms. [More]
I think Runge nails it. Because ethanol never made the effort to lose the training wheels (tariff and blender credit), it is one thing that politicians can do something to change. Even if it is the wrong thing. Ethanol has done practically everything except paint concentric red circles on the tanks. And it's a little late to be looking for support from those in agriculture they stomped on politically to get their industry breaks.
This is another reason I doubt the efficacy of subsidies. No recipient will ever deem themselves ready to do without, and the industry supported is forever at the whims of popular sentiment expressed by political will. In short, if you live by the subsidy, you tend to die by the subsidy.
But the much larger problem is the dots are becoming too big and easy to connect, as food shortages, riots and inflation are flooding the news:
- North Korea: North Korea, which suffered from a famine in the 1990s that may have killed three million, faces a ``potential humanitarian crisis'' after harvests fell on poor weather and food prices surged, the World Food Program said.
The country has a grain shortfall of 1.66 million metric tons this year, the United Nations agency said in a statement today, citing figures from the Food and Agriculture Organization. The shortfall was the highest since 2001, it said.
The crisis may undermine stability in the Communist nation following years of economic decline, isolation and chronic food shortages. The United States is seeking to persuade North Korea to abandon its nuclear-weapons program in talks that also include China, Japan, Russia and South Korea. [More]
- Philippines: “Producing biofuels today is a crime against humanity,” Jean Ziegler, UN Special Rapporteur for the Right to Food, was quoted as saying on German radio. A few days earlier here at home, Agriculture Secretary Arthur Yap said one of the reasons for the food crisis was the booming demand for biofuels worldwide. And last Monday, Rep. Roilo Golez was reported on radio calling for a moratorium on Biofuels Act of 2006, precisely because of the crisis. Making things a little more complicated, there are suggestions that the law is being used by some big landowners to evade coverage of the Philippine agrarian reform program, which is expected to boost the country’s food productivity, aside from making tenant-farmers owners of the land they till. [More]
- Pakistan: Karachi - After five years of solid growth, Pakistan's economy is facing an import payment crisis and an acute food shortage to feed its ballooning population of 170 million. The country's newly-elected economic czar, Finance Minister Ishaq Dar, last week revised the country's expected growth rate to 6 per cent from 6.5 per cent.
Pakistan has witnessed phenomenal annual growth rate of around 8 per cent since 2002, thanks in part to billions of dollars in US aid to fight Islamic extremism after 9/11.
According to local reports, Pakistan has received close to 11 billion dollars of such aid since the twin tower attacks in New York in 2001. [More]
- Nigeria: The World Bank has said it is ready to assist Nigeria in solving the problem of rising in food prices that threatening the world.
This is coming on the heels of Federal Government's assurance that it is already taking proactive steps to avert the impending rice shortage in the country. [More]
The argument it's all another problem caused by Big Oil just isn't gaining traction - for reasons I have noted before. Plus the size of the ethanol industry, and its spectacular profits (well, until recently) doesn't make the industry sympathetic. Heaven forbid folks find out what kind of windfalls early ethanol farmer investors took home, although that story too is leaking.
Corn farmers are loath to admit that we can't grow everything for everyone, and offer some backtracking on mandates or subsidies. (Another problem with subsidies - they are addictive). So it looks to me we will push our production capacity to the breaking point.
And this is where we will see the collapse, I believe: the meat/dairy/egg industry.
Beginning this week, Canadian hog producers can receive cash for culling their breeding swine. A $50-million federal program is offering to pay $225 per breeding swine culled after April 14.The point is of all the causes to blame for the food crisis: weather, bad governments, demand for feed, rising diet expectations in poorer nations, and ETHANOL, which one is the easiest to take a stand against? And the easiest to shutdown almost overnight?
“The program is a reaction to what’s been taking place in the market,” says Gary Stordy of the Canadian Pork Council. “The decrease in sow breeding herd should have a good effect on the market.”
Through the program, Canada’s breeding swine inventory should shrink by at least 10%, or roughly 150,000 sows, boars and pregnant gilts. Producers must fill out an application and receive approval to qualify for the program. Reimbursements will be made to the producers for slaughter and carcass-disposal costs. [More]
I'll give you a second to choose.
Hey - the marketplace is working after all!