Jim Surowiecki wants to turn the agricultural clock back to the days when countries forced their agricultural producers to feed only a national, not an international, consumer base:
When prices spike as they did this spring (for reasons that now seem not entirely obvious), the result is food shortages and malnutrition in poorer countries, since they are far more dependent on imports and have few food reserves to draw on...
That doesn't mean that we need to embrace price controls or collective farms, and there are sensible market reforms, like doing away with import tariffs, that would make developing-country consumers better off. But a few weeks ago Bill Clinton, no enemy of market reform, got it right when he said that we should help countries achieve "maximum agricultural self-sufficiency." Instead of a more efficient system, we should be trying to build a more reliable one.
Firstly, I think that the reasons for this spring's price rises are not as mysterious as all that. Some of it was due to extreme climate events, like the drought in Australia. Some of it was due to stupid WTO rules banning the re-export of imported food. Some of it was due to the fact that countries such Argentina slapped punitive export taxes on agricultural products in a desperate and largely-futile attempt to keep domestic prices down. And the single largest factor, I think, was the fact that the Green Revolution has been largely powered by nitrogen, a/k/a natural gas: when energy prices were statospheric and rising, and Potash Corporation of Saskatchewan (POT) was the most valuable company in Canada, it was reasonable to expect that the cost of food would have to spike upwards just to keep pace with the price of fertilizer.
At the height of the food bubble, Paul Collier delivered an impassioned plea for exactly the opposite of what Clinton and Surowiecki seem to want:
The remedy to high food prices is to increase food supply, something that is entirely feasible. The most realistic way to raise global supply is to replicate the Brazilian model of large, technologically sophisticated agro-companies supplying for the world market.
Collier's argument made sense at the time, and it continues to make sense today. The food crisis didn't repeal Ricardo's law of comparative advantage, and it's still sensible for countries to concentrate their agricultural production on what they're best at, rather than trying to grow every crop necessary to feed themselves -- even if such a thing were practicable, which it isn't. Would Surowiecki really have Ecuador, say, cut back on its bananas in order to start growing corn, if that's what Ecuadoreans need to eat?
The food crisis has driven home two important lessons: firstly, that global agricultural production needs to be increased, significantly, and secondly, that short-sighted agricultural and tariff policies can cause mass starvation. The solution to both of these problems is a bigger, freer market in agricultural goods -- not a reversion to some impossible ideal of self-sufficiency.
This article has 8 comments:
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legmaker
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85 Comments
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Nov 17 05:21 PM-
Robert Nabloid
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252 Comments
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Nov 17 06:07 PMI must also make something clear - There is a byproduct of corn ethanol called DDGS, which results in a superior cattle feed and 17% more meat on a cow, not less. The only thing removed is the starch/sugars - all nutrients/vitamins are still contained in the mash byproduct. But corn is by no means an efficient crop to use for ethanol - and many other crops should be used and make much more sense. The ethanol industry in the US began using corn because there was a surplus that nobody knew what to do with due to the government subsidies that are meant to encourage and help cattle farmers with low corn prices (ironic?).
Yes, you can grow protein (meat) and use a crop for ethanol, due to the byproduct still containing all the good stuff - and less of that starch - which is hard for most animals to digest in large quantities. That is one reason the byproduct is often more efficient and effective than most realize.
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Robert Nabloid
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252 Comments
My Website
Nov 17 06:20 PMJust an example: You can grow Sorghum or fodder beats or buffalo gourd or Jerusalem artichokes, or any crop that will has lots of starches or sugars (even corn if you really want). You can then use the crop to produce ethanol. A byproduct of ethanol production is DDG or DDGS. The byproduct of the crop can still be used to feed cattle and is actually VERY efficient - it still contains all the vitamins/nutrients, just less of the starch which is hard to digest for a cow. Or, if you don't want to grow cattle, you can use the byproduct and feed it to fish, and get 10x more protein than you could with cattle (fish can be grown more efficiently). You can then use aquaponics (aquaculture + hydroponics) in combination with a greenhouse to grow other highly profitable crops. The fish effluent (waste) can be used by plants in a greenhouse system to grow (it's free liquid fertilizer!). The plants clean the water of the waste (effluent) and the water can be recycled back to the fish pond/holding tank and is now safe. You now have cleaned and recycled water for the aquaculture system and reduced the amount of water needed to grow fish. You now have plenty of fish (highly profitable), greenhouse grown vegetables/herbs/fruit (highly profitable) and ethanol, all from a relatively small parcel of land. You can feed more people and answer our energy needs. Plants are solar collectors.
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Canary
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6 Comments
Nov 17 09:53 PMHow much vacuum distillation is used in alcohol plants? This takes less energy . Canary
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Deltaxray7
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21 Comments
Nov 18 03:16 PMto affect stocks of POT, CT, TRA ect....
I'm thinking we'll see $1 a share for POT by christmas....
currently down 70% and falling......
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Chris B
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527 Comments
Nov 18 03:17 PMI also agree that countries should, in general, produce what they produce best to maximize total output. However, the reliability of supplies cannot be ignored. If you lived in a country that was totally dependent on outsiders for food, I doubt that you would accept a deadly famine every 10 years for the sake of increased overall average world production. I read in the newspaper at least once a month about how a recession or currency crisis has resulted in starvation for some dependent group of people somewhere in the world.
I'm not sure how to acheive the optimal mixture between maximizing production and maximizing reliability, but I'm pretty sure that US and EU agricultual subsidies are harmful in that they crush agricultural investment in the same countries that need food reliability most.
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Kunst
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750 Comments
Nov 19 01:56 AM-
derryl
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134 Comments
Nov 19 04:07 PMGood points. Just as the US is now intensely aware of energy insecurity due to import dependance, every country should do what it can to maintain some level of food security. Markets can and do fail so insurance is worth paying a price for.
It's not just Western agricultural subsidies that hurt local farmers in developing countries. How are these farmers supposed to compete with the free food we send by the shipload as "food aid"? We fell virtuous about our charity while destroying the profitability and development hopes of local farmers.
It is because of price spikes during shortages that suppliers can earn windfall profits to invest and increase their productivity. Food aid and Western ag subsidies subvert these economics and keep these farmers permanently poor and low-productive. Consumers suffer short term during price spikes but producers benefit and in the longer term consumers enjoy enhanced food security as well as lower prices from more abundant crops. Unfortunately I think the 24 hour news cycle coupled with our soft hearts and softer heads prevents us from letting markets do their work in developing economies.