“AGFLATION”: The Future of Food?
DEBORAH SCHUMACHER, Staff Writer
Originally published in The Co-op Commons, February/March 2008
In the last 30 years or so we’ve been able to speak of food in terms of how cheap it is. But that time may be nearing its end. In our own store we are learning about global market pressures from suppliers like Bob’s Red Mill, who writes that “droughts, rising fuels costs, and demand from emerging markets around the world [like China]…have caused shortages in the commodities we use to create our natural whole grain foods.” Wildtime Foods, who supplies many of the nuts, grains and dried fruits we stock, is also experiencing a commodity crunch. They report that “almost all commodity prices are up. Oat prices are up 25% in the last two months. Many U.S. acres previously planted in oats, wheat and other grains,” they explain, “are now planted in corn for fuel…[and] the decline in the value of the dollar makes export more attractive and drives domestic prices higher. Yes, it is a global market!”
A slight up-tick in food prices doesn’t register much in this country because most of us spend less than 10% of our incomes on food. But we might want to give pause and reflect for a moment on something new for most of us: record commodities prices resulting in rising food costs, or “agflation,” a term coined by the investment-banking firm Merill Lynch.
Crops as Commodity
In “Cheap No More,” The Economist reports that their “food-price index is now at its highest since it began in 1845, having risen by one-third in the past year.” Much of these food costs come as commodity prices surge: “in early September the world price of wheat rose to over $400 a tonne, the highest ever recorded. Earlier this year the price of maize (corn) exceeded $175 a tonne,” another world record. Writes Christine Stebbins for Reuters, “The CPI (Consumer Price Index) for food, a broadly used gauge for inflation, is up almost 6 percent for the first nine months of 2007, with the food inflation pace at a 25-year high.”
Today farming is big business and many farmers no longer grow food for themselves and their communities. They more often grow food in the form of commodities for the global market, just like other producers build DVDs, iPods, computers, and cars. If that isn’t disconcerting enough (that we ignore the primacy of food—that eating is not an option, you can’t decide you’ll just save up and have some food next month when you can afford it), one of the factors driving rising food prices may be the “fat and rising margins garnered by monopolistic processors and retailers and speculation in futures markets” (Hindu Business Line). In this new global market, it seems everyone but farmers and consumers—processors, retailers, speculators—cash in.
It’s this increase in speculative activity in the agricultural commodity market that sickens me just a little bit. “In addition to agri-businesses, more institutional investors—ranging from hedge funds to pension funds—are investing” write Chandrasekhar and Ghosh in Hindu Business Line. Last year nearly $3 trillion in grain futures was traded on the Chicago Board of Trade. What can be the consequences of a nation’s farmers pushing their land to produce more and more food, not to feed their own people, but to participate in the global economy? Who gets rich and who goes hungry?
Crops as Vehicle Food
We’re also learning that the drive to produce more ethanol in this country and globally is at least partially responsible for “agflation.” Syria has just banned the export of grain (to keep the food for its own people?). Much of the durum wheat that Italy imports to make their pasta comes from Syria, and also from Canada, who had suspended export of their grain as they divert more of it to the production of bio-fuels. Consequently, Italy expects the price of pasta to increase 20%.
Gerrit Buntrock writes in The Economist that ethanol “accounts for some of the rise in the prices of other crops and foods” partly because the federal government “has in practice waded into the market to mop up about one-third of America’s corn harvest.” This loss of grain to fuel has also affected the price of other crops like wheat and soybeans because land that would have been planted in these crops was diverted to corn.
Crops at Risk
But the picture The Economist and other sources paints is much more complex than this year’s rush to grow fuel for America’s fleet of cars. There have been some crop failures in Australia, Canada and Europe that have affected the global food market. By some measures “global warming could cut world farm output by as much as one-sixth by 2020” (The Economist). Bruce Scherr, chief executive of Informa, a Tennessee-based food-industry research firm, predicts that technology will increase world production of food to meet demand and claims that “outlooks for bigger corn yields due to increased seed technology will push world production by 2015 to 2020 to levels that will be better able to keep up with demand” (Reuters). That’s optimistic and ignores the science that suggests increasing our use of GMO technologies is a dangerous experiment we conduct at our peril. And an agriculture that focuses only on increasing yield ignores the fact that we will accelerate the use of finite resources like soil and water.
Cost of Crops
Food prices usually increase when there’s scarcity, but we’re experiencing record food costs in a time of abundance. “According to the International Grains Council” writes Buntrock, “this year’s total cereals crop will be 1.66 billion tonnes, the largest on record.” And although grain stocks are very low, “they are,” according to Chandrasekhar and Ghosh, “still at a comfortable 114.8 million tonnes or 18.8% of global production” (Hindu Business Line). “The sudden and sharp rise in prices,” they say, “seems difficult to explain based on demand and supply alone.”
As I read through several articles about rising food costs what struck me was this new economics of farming. I don’t claim to have a broad knowledge of economics or farm economy, but intuitively, I have to think that the growing of food is fundamentally different than the production of cars and computers, and that buying healthy food comes before other kinds of spending. But connected to a trend towards consumers spending less money on food seems to be a changed attitude towards food. We expect food to be cheap while we forget that food forms the basis of the health of our bodies. Jockeying for our spendable dollars these days is not only food but DVD players, iPods, computers, cars and all the other paraphernalia of modern living.
Crops Close to Home
In a way, paying more for food is a good thing. We’ve been feeding our bodies with pseudo-food for a couple generations and are starting to feel the effects of it. Dedicating more money to healthy food is good for consumers and should also be good for farmers, who would presumably see increased incomes. “Obviously,” writes Gerrit Buntrock, “farmers benefit—if governments allow them to keep the gains.” I think in a local farming economy where farming practices focus on sustainability the partnership between farmer and eater benefits all.
It’s a lot to think about as you drive through the Happy Taco or cruise down the aisles of Safeway or The Food Co-op. But it’s probably time that we stop the car and turn off the radio and give some serious thought to our increasingly complex global food economy. It’s enough to give new passion to the new mantra, “Eat Local!”
Sources:
1. C.P. Chandrasekhar & Jayati Ghosh, “The Cause and Effects of Wheat Inflation,” www.businessline.com (11/12/2007); 2. Christine Stebbins, “Corn Ethanol Not Culprit for Food Inflation, www.reuters.com (12/10/2007); 3. David Willey, “Italians Facing Pasta Price Rice,” BBC News, Rome (7/10/2007); 4. Gerrit Buntrock, “Cheap No More,” The Economist (12/6/2007)
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