Food Rites Rise as U.S. Corn Diverted to Feed Cars: Food Prices Are Rising in Mexico, China, India and the U.S. as a Result of the Huge Diversion of U.S. Corn to Produce Fuel for Cars, Reports Lester R Brown. the Choice Is between a Future of Rising World Food Prices, Increasing Hunger, and Political Instability, or One of Stable Food Prices, Sharply Reduced Dependence on Oil, and Much Lower Carbon Emissions
Brown, Lester R., Pacific Ecologist
21/03/07, EARTH POLICY INSTITUTE--If you think you are spending more each week at the supermarket, you may be right. the escalating share of the U.S. grain harvest going to ethanol distilleries is driving up food prices worldwide. Corn prices have doubled over the last year, wheat futures are trading at their highest level in Io years, and rice prices are rising too. In addition, soybean futures have risen by half. A Bloomberg analysis notes the soaring use of corn as the feedstock for fuel ethanol "is creating unintended consequences throughout the global food chain."
The countries initially hit by rising food prices are those where corn is the staple food.
* In Mexico, one of more than 20 countries with a corn-based diet, the price of tortillas is up by 60 percent. Angry Mexicans in crowds of up to 75,000 have taken to the streets in protest, forcing the government to institute price controls on tortillas.
Food prices are also rising in China, India, and the United States, countries that contain 4o percent of the world's people. While relatively little corn is eaten directly in these countries, vast quantities are consumed indirectly in meat, milk, and eggs in both China and the United States.
* Rising grain and soybean prices are driving up meat and egg prices in China. January pork prices were up 2o percent above a year earlier, eggs were up I6 percent, while beef, which is less dependent on grain, was up 6 percent.
* In India, the overall food price index in January 200 was Io percent higher than a year earlier. the price of wheat, the staple food in northern India, has jumped II percent, moving above the world market price.
* In the United States, the U.S. Department of Agriculture predicts the wholesale price of chicken in 200 will be Io percent higher on average than in 2006, the price of a dozen eggs will be up a whopping 2i percent, and milk will be i4 percent higher. And this is only the beginning.
In the past, food price rises have usually been weather related and always temporary. this situation is different. As more and more fuel ethanol distilleries are built, world grain prices are starting to move up toward their oil-equivalent value in what appears to be the beginning of a long-term rise. the food and energy economies, historically separate, are now merging. In this new economy if the fuel value of grain exceeds its food value, the market will move it into the energy economy. As the price of oil climbs so will the price of food.
In 2006, 16% of the U.S. grain harvest was used to produce ethanol. With 80 or so ethanol distilleries now under construction, enough to more than double existing ethanol production capacity nearly a third of the 2008 grain harvest will be going to ethanol. Since the United States is the leading exporter of grain, shipping more than Canada, Australia, and Argentina combined, what happens to the U.S. grain crop affects the entire world. With the massive diversion of grain to produce fuel for cars, exports will drop. The world's breadbasket is fast becoming the U.S. fuel tank.
The number of hungry people in the world has been declining for several decades, but in the late 1990s the trend reversed and the number began to rise. The United Nations currently lists 34 countries as needing emergency food assistance. Many of these are considered failed and failing states, including Chad, Iraq, Liberia, Haiti, and Zimbabwe. Since food aid programs typically have fixed budgets, if the price of grain doubles, food aid will be reduced by half. Urban food protests in response to rising food prices in low and middle income countries, such as Mexico, could lead to political instability that would add to the growing list of failed and failing states. At some point, spreading political instability could disrupt global economic progress. …