WTF of the Week: Food prices soar

Between stories on NPR and this story online, I’ve been hearing a lot about how food prices jumped 4 percent in the United States in 2007 and how some are predicting a 4.5 percent jump in 2008. How food inflation in the United States is the worst in 17 years.

At first, I just shrugged. I mean, what can we, the average Joe and Jane, do about it? Not much. After all, the economy is in the toilet thanks to the mortgage crisis. The dollar is trading at its lowest rate in 13 years. Inflation is around 4 percent, about twice that of this time last year. Basically, the United States is screwed, at least in the short term.

But then I heard about one of the major causes of the rising food prices, and I nearly lost it. All signs point to ethanol. In the United States, ethanol primarily is made from corn. Ethanol is required by the federal government because it is a “green” alternative to standard fuel (although that has been debated quite a bit lately). And the government subsidizes the bejeezus out of ethanol, which makes corn farmers and fuel makers happy.

But what about cattle and pig farmers, who feed their herds corn? Or dairy farmers, who also feed their cows corn? What about Mexico, where the price of corn is so expensive that many residents can’t afford to purchase tortillas? What about other countries that rely on U.S. corn exports for food, not just for fuel? Well, they are all screwed because as more ethanol is made (and required), less is available to eat. So corn prices rise, and all other food prices rise with it. Here’s an interesting statistic from NPR to put it into perspective: The corn used to fill a 25-gallon tank of ethanol in an SUV will feed one person for a year.

The results are sky-high food costs and, this past weekend, food riots in Bangladesh, Egypt, Mozambique and Haiti. In poor countries, food costs have soared 75 percent or more in the past few months. In Haiti, the riots led to the removal of the prime minister. 

So there are two logical options: Corn farmers should plant more corn to feed the demand, and/or the federal government should at least temporarily relax the ethanol requirements. I assume farmers are going to try to plant more corn, but that’s not an immediate fix. So we have to rely on the government to do the right thing, but they aren’t. Big shock, I know.

Surrounded by all of this bad news, I can only latch on to three bits of good news:

• First, we Americans on average spend only 7 percent of our money on food. That is the lowest in the world. So we still have plenty of money for other expenses; we just need to be smarter about how we manage our money.

• Second, we can always plant more food. I have no doubt that farmers everywhere are working on that.

• Third, NPR reported in the same food prices story that the United States accounts for 40 percent of the world’s food donations. That is incredible, even for this nation of abundance. Good job, America. Keep up the good work.

~ by amarvin on Tuesday, April 15, 2008.

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