Food Inflation, Riots Spark Worries for World Leaders | Hacker News Reader

Food Inflation, Riots Spark Worries for World Leaders

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12 pointsGoladus11 comments

High food prices, while detrimental to the urban poor, may be the best opportunity to pull subsistence farmers out of poverty and integrate them into the global economy.

That said, biofuel subsidies are really just an excuse for corn belt politicians to score votes at the expense of everybody else. Its corporate welfare that's good for nobody.

How do you mean? Not that I don't believe you, but I don't follow your logic. (About the subsistence farmers, I mean)

Subsistence farmers grow crops using traditional methods mostly. They're insulated from the fuel costs etc. that generally drive up the cost of production for the big producers.

Subsistence farmers also tend to bring to market a small portion of their crop. The hope is that as food prices rise, the amount each farmer receives for the crop sold will go up to the point where he can start to invest in his equipment to improve the efficiency of his methods, grow more and sell it, and integrate himself into the global economy.

Eventually, this turns poor subsistence farmers into wealthier cash crop farmers.

Ah, ok. I missed the assumption that they'd still be farming. I thought you meant they'd go work in factories or something.

Personally I think biofuels are a red herring. Only a fraction of the US agriculture production goes to biofuels, and part of the cost of importing food is transportation anyway.

In any case, this could dwarf credit problems if it keeps getting worse.

"America is easily the world's largest maize exporter—and it now uses more of its maize crop for ethanol than it sells abroad."

http://www.economist.com/displaystory.cfm?story_id=10250420

While the article may contradict his point, your cite doesn't.

"Because this change in diet has been slow and incremental, it cannot explain the dramatic price movements of the past year. The second change can: the rampant demand for ethanol as fuel for American cars. In 2000 around 15m tonnes of America's maize crop was turned into ethanol; this year the quantity is likely to be around 85m tonnes. Ethanol is the dominant reason for this year's increase in grain prices. It accounts for the rise in the price of maize because the federal government has in practice waded into the market to mop up about one-third of America's corn harvest. A big expansion of the ethanol programme in 2005 explains why maize prices started rising in the first place."

But maize is only one grain, and I didn't see it mentioned in the article.

"Producers plan to plant 86 million acres of corn this year. While 7.6 million acres less than 2007, this would still be the second-largest area since 1949." Furthermore, Soybean and Wheat acreage are both increasing.

http://www.nass.usda.gov/Newsroom/2008/03_31_2008.asp

Even if we guess at 150 bushels/acre for 2008, with 86 million acres that's 12.9 billion bushels or 322-328 million tons (not sure which version of the ton the article is using).

So 25% of the corn crop predicted to be diverted to ethanol. While this is a large increase since 2004, this is still just a quarter of a third of the total of Corn, Wheat, Soy, and Cotton crop. That's like 9%.

The article points out that this 9% is more than their rough estimate of the shortage, but that's like blaming Florida for the outcome of the entire US election or for blaming a loss on the basketball player who misses a free throw in the final seconds of a close game. So the US magically switches off its ethanol production-- what then? Demand increases by that same level again and this time there's no ethanol scapegoat.

Has anyone done the analysis to see the cumulative result of the current global crises?

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