Column by John Mattingly
Food – March 2008 – Colorado Central Magazine
Wheat traded at over $10 a bushel last week. It dipped into the mid-nines during the stock market flurries, but rebounded quickly. Farmers are wondering if these high prices are new tops, or new bottoms.
A lot of us sold when wheat hit $5 or $6 a bushel because that was the old top, or the range where prudent growers emptied their bins, knowing the market seldom stayed up there very long, and greed could seduce you up a path that ended at $3 instead of $7.
Wheat isn’t the only crop enjoying record high markets. The same is true of corn, soybeans, cotton, sunflowers, canola. In fact, most ag commodities are in record territory. A cluster of factors are involved.
Many acres are being diverted into corn and canola production for fuel, not food, encouraged by the corn lobby’s PR influence peddling and government subsidies for ethanol production. While it’s easy to point to this as the champion (or culprit) of higher commodity prices, other factors are equally determining.
1. Cheap dollar. When the U.S. dollar is cheap relative to other world currencies, demand for our agricultural commodities increases. For example, when the Euro is worth $1.50 US, it takes only 7 Euros to buy a $10 bushel of wheat. But when the Euro is worth only $1.20 US, it takes 8.3 Euros to buy that same bushel.
This is why the ag economy in the U.S. is often counter-cyclical to the consumer economy. Many of the macro-economic dynamics that cause a recession, also make U.S. commodities attractive on the world market.
2. Green Revolution Stalls. There may be another huge leap in production technology on the horizon, but at the present time, the Green Revolution is over. It started with chemical fertilizers at the end of World War II (notably nitrogen from munitions factories, which, after the War had surplus capacity that met an anxious buyer in the American Farmer). Fertilizer was followed by a host of pesticides that killed weeds, bugs, and diseases. Farmers became chemists.
Then came big, specialized, and sophisticated machines to integrate fertilizer and pesticides into what was commonly called “good management.” Computers showed up at the end of this phase and were attached to the machines to increase efficiency. When global positioning systems tied into computers, the “precision farming” phase of the Green Revolution commenced. Farmers used differential tillage, fertilizing, and pesticide applications in accordance with data relayed from satellites.
Finally, genetic modification of plants promised to bring a new surge to the Green Revolution, and while GMO contributed, it has yet to have the great multiplier effect on production that resulted from fertilizers and pesticides. Too, consumers who weren’t already suspicious of fertilizers, pesticides, and industrial food systems weren’t excited to eat a tomato or strawberry filled with flounder genes.
3. Rising Demand. Even when/if GMO manages to hurdle the scientific and PR obstacles in its way, the potential for this battalion in the Green Revolution to amplify yields doesn’t appear to be enough to meet existing worldwide demand.
Two of the world’s economic workhorses, China and India, have an elevated standard of living, which means they eat more and better. Per capita consumption of meat in the East has tripled in the last two years alone, and is on a J-curve of upward expansion. This means much of the grain stock that was being exported or consumed by humans is being diverted to animals. Many economists are now predicting the “end of cheap food,” the determining rationale being that worldwide demand has finally caught up with the Green Revolution.
OK, but consider the following counters:
1. Calorie surpluses. All species on Earth have natural limits on their food supply, which results in a natural limit on population. Humans have bucked this limitation, first by following or chasing their food supply when necessary, then by inventing tools and traps to out-maneuver their food supply, and finally by developing agriculture to even-out and expand their food supply.
Human ingenuity has consistently expanded the food supply, allowing the population to expand without significant restraint, and in much of the world (issues of mis-distribution, mercantilism, and graft aside) the human species is tipping away from famine and leaning toward obesity. It’s estimated that over half the world’s population consumes twice the number of calories required to meet energy demands. This means that for every two people currently sitting at the world’s table, there is room for one more to eat off the same plates without any of the three suffering from malnutrition.
So, imagine what will happen when food reaches economic parity with the consumer economy. In the U.S., instead of spending 10% of our disposable income on food, we could jump to 20 or 25%. A gallon of milk at $17, a loaf of bread at $13, hamburger $29.99/ pound, you get the idea. If this results in reduced consumption, a surplus of calories will be available.
2. Substitution. As basic foodstuffs become more expensive, it isn’t outrageous to imagine food scientists coming up with a tasty, nutritious sandwich made from recycled cardboard. Some may point out that this has already been achieved at many fast food establishments, so the next stop on the substitution highway would probably be algae, seaweed, moss, phytoplankton, etc.
Anyone who doubts the ingenuity of food scientists should remember that decent milkshakes can be made with no dairy products in them at all. White chicken and turkey meat can be produced with bleached dark meat enhanced with flavoring. A passable apple pie can be with soda crackers instead of fruit. And the list goes on.
3. Artificial Alternatives. The last stop in substitution would likely be a pill or a powder that contains precisely the number of daily calories required by a human of prescribed body weight and energy demand, together with a neuro-chemical that tells the brain that what the human s/he is consuming is delicious, juicy, and tasty. If this sounds far-fetched, look around the average food store at all the “meal replacement” products there are. Better yet, imagine the reaction of a hunter- gatherer human from 10,000 years ago walking through a modern supermarket.
John Mattingly is a recovering farmer, and the author of Melancholy Green Giants, a novel that recently emerged from Mirage Publishing.
