Technology Review has a look at the double whammy the US drought and ethanol production are applying to corn exports - Corn Exports Shrivel as U.S. Ethanol Demand Grows.

As an increasing amount of U.S. corn is being used to meet rising ethanol demand, the United States—the world’s dominant producer and exporter of corn—is exporting less.

The first chart shows how the use of U.S. domestic corn has changed over time. The portion of U.S.-grown corn used to make fuel reached 40 percent last year, and will be about the same this year, according to the U.S. Department of Agriculture. At the same time, the worst drought in half a century throughout the Midwest corn belt has led to severely shrunken forecasts for this year’s United States corn crop, raising concerns that exports will further decrease, intensifying the risk of an international food crisis.

The second chart shows the annual U.S. corn exports since 2005. Though the number of U.S. acres planted with corn was the highest since the late 1930s, this year, U.S. exports have been on a steady decline, dropping from over 60 percent of the world’s corn exports in 2005 to less than 40 percent last year.

Crikey has a look at the famine in Yemen, exacerbated by high prices for diesel - Yemen’s multiple proxy wars a recipe for a famine.

For decades throughout the 20th century, the idea of famine had two dominant uses in the West.

The first was proof of the Christian ideal that “the poor you will always have with you”, thus re-affirming the eternal need for charity, and the limited usefulness of political struggle — the second was to reaffirm a vaguely or explicitly racialist and Malthusian notion that the dusky-skinned two thirds of the world really couldn’t manage themselves that well, and were doomed to over-breeding and starvation. Before the Second World War, China was the locus for this concern/panic — in various famines until the 1949 revolution, children would be exchanged between families to be eaten, or sold in the marketplace.

After the war, attention switched to India, and then in the 1970s and ’80s, to Ethiopia and the rest of Africa. The story was static, and endlessly repeated — skeletal children, milk powder, guilt, appeals, etc. The global extravaganza of Live Aid in 1985 was probably the acme of this well-meant but bone-headed view of starvation — appropriately enough celebrated by a song in which a phalanx of stars wondered if animist and Muslim peoples even knew it was Christmas time at all.

But by this time another view of famine was beginning to permeate the liberal West, with the 1981 publication of Amartya Sen’s Poverty and Famines, which deployed an array of theories to argue that famines almost always occurred in regions where there was plenty of food — and that even when there was a will to alleviate the famine, the absence of democratic and open political structures made such alleviation impossible.

Sen’s example was the Bengal Famine of 1943 — something that Commonwealth readers rarely hear of in tales of WW2, because 3 million Indians died due to the incompetence, indecision and outright racism of the British authorities. Sen’s argument made an impact where more radical left-wing accounts of the political nature of famine had been dismissed — but many were still unwilling to concede one of his core points, that one of the great barriers to alleviating famine was the market itself.

Sen’s argument has made it impossible for Western news to report famine in the way it once did, but it’s a close run thing. Fragments of reasons a region might suddenly descend into desperate starvation are aired, but there remains a basic inability to tell a connected story. The default position remains the Pieta, the starving child in arms.

Which brings us to the Yemen famine, which has suddenly hit the headlines, after bubbling in the background of the news for months. Ten million people — nearly half of the country’s population — are at risk of starvation, yet the food shortage is not affecting whole regions or areas equally. The burden is falling overwhelmingly on the poor, with people starving while nearby markets are full.

Though there’s been a persistent food shortage since the global food price rise in 2008 — and in fact food has always been short for the poor in the country — the situation has been made urgent by several coincident factors. A drought has persisted for more than three years, and is at its worst this summer, leading to a lack of work for millions of rural labourers. It’s also Ramadan, which, perversely, as a month of daylight fasting, raises food prices — since the fasting is followed by night-time feasting.

Added to these woes, Yemen is starving because it has become a site for multiple proxy wars — the Shia-based Sadah uprising from the north-west, a South Yemen uprising (based around the territory of the old Soviet-era Marxist state), and the Arab Spring general insurgency against the 30-plus-year reign of President Salleh, and last but not least a proxy war between al-Qaeda and US drone attacks.

The result is a country in which substantial networks not merely of trade, but also of inter-family support and charity have broken down, making the usual transfer between rich and poor all the more difficult, such as it occurs. To be fair, it has also been pointed out that the production of the intoxicant herb “khat” dominates agricultural production without providing any nourishment (though it also acts as an appetite suppressant), to the detriment of food production and household budgets.

But above all and beyond all this is the way in which Yemen is trapped in a global commodity system, with steadily rising prices for basic staple foods (of which Yemen imports 90%), and for diesel oil, which is used to pump water. At this point, with diesel oil unaffordable, many families are reliant on charity for a continued supply of water.

This crippling gap has led Oxfam to approach the problem in a simple way — they’re simply giving money to the poor, so that they can shop at market, and also acquire diesel. But the inevitable result of that will be a further bump in prices as the money swims into the system without expanded production, and the cycle begins again.

The Yemen famine then, is something we will begin to see more and more — a situation in which a poor and precarious country has its price signals swamped by global demand and remorselessly rising prices. With several decades of rising crop yields and low oil prices, now curtailed, it will be the nations who have not managed to get on the development ladder — or the poor parts of those who have — that will pay for the prosperity being enjoyed by a booming global urban and industrial class. In that case, the price signal becomes not a carrier of information, but a barrier to it, a la Sen — it tells us nothing about what is really required to be done, within any ethical system worthy of the name.

That story won’t be told in even the most searching reports on this famine, or the next, in the next place. We have come a long way from famine as an act of God, but we are not yet ready to recognise it as a product of global markets, or our role within it.

The Business Spectator has an article wondering if the drought in the US will cause another spike in food prices and social unrest - A soaring food price fear.

Markets are bracing for a surge in global political unrest, as the worst US drought in half a century sent corn and soybean prices soaring to record highs overnight.

The combination of scorching temperatures and a lack of rain has now pushed corn and soybean prices above the peaks they reached during the 2007-08 food crisis. Overnight, the corn futures price climbed above $US8 a bushel for the first time, while that of soybeans hit a record $US17.12 a bushel.

Although the wheat price has not yet hit record highs, it has jumped more than 50 per cent in the past five weeks, and is now above the level it hit after Russia’s crop failure in 2010, which prompted Moscow to impose a ban on grain exports.

Grain traders have been anxiously monitoring the effect of the drought, which is the worst since 1956 in terms of the areas affected. In its weekly crop report, the US government said that only 31 per cent of the corn crop was in “good to excellent condition”, a sharp drop from its estimate of 40 per cent last week. For soybeans, the estimate dropped to 34 per cent from 40 per cent.

But the devastating US drought will have massive global effects. The United States is the world’s largest exporter of corn, soybeans and wheat – supplying around one-third of these staple grains traded on the global market.

Already, some analysts are warning that the world could be in for a period of intense social and political instability similar to that seen in 2007-08 when soaring food prices sparked riots in dozens of countries. They note that last year’s political instability in the Arab world was partly caused by surging grain prices.

The effect of rising grain prices is most pronounced in poor countries, where people can spend up to three-quarters of their income on food. Because food is such an important part of consumer spending, surging food prices are quickly reflected in a jump in official inflation figures.

Rolling Stone has an article by Bill McKibben on the state of play in global warming analysis - Global Warming's Terrifying New Math.

If the pictures of those towering wildfires in Colorado haven't convinced you, or the size of your AC bill this summer, here are some hard numbers about climate change: June broke or tied 3,215 high-temperature records across the United States. That followed the warmest May on record for the Northern Hemisphere – the 327th consecutive month in which the temperature of the entire globe exceeded the 20th-century average, the odds of which occurring by simple chance were 3.7 x 10-99, a number considerably larger than the number of stars in the universe.

Meteorologists reported that this spring was the warmest ever recorded for our nation – in fact, it crushed the old record by so much that it represented the "largest temperature departure from average of any season on record." The same week, Saudi authorities reported that it had rained in Mecca despite a temperature of 109 degrees, the hottest downpour in the planet's history.

Not that our leaders seemed to notice. Last month the world's nations, meeting in Rio for the 20th-anniversary reprise of a massive 1992 environmental summit, accomplished nothing. Unlike George H.W. Bush, who flew in for the first conclave, Barack Obama didn't even attend. It was "a ghost of the glad, confident meeting 20 years ago," the British journalist George Monbiot wrote; no one paid it much attention, footsteps echoing through the halls "once thronged by multitudes." Since I wrote one of the first books for a general audience about global warming way back in 1989, and since I've spent the intervening decades working ineffectively to slow that warming, I can say with some confidence that we're losing the fight, badly and quickly – losing it because, most of all, we remain in denial about the peril that human civilization is in.

When we think about global warming at all, the arguments tend to be ideological, theological and economic. But to grasp the seriousness of our predicament, you just need to do a little math. For the past year, an easy and powerful bit of arithmetical analysis first published by financial analysts in the U.K. has been making the rounds of environmental conferences and journals, but it hasn't yet broken through to the larger public. This analysis upends most of the conventional political thinking about climate change. And it allows us to understand our precarious – our almost-but-not-quite-finally hopeless – position with three simple numbers.

Technology Review's Arxiv blog has a look at the correlation between food prices and social unrest - The Cause Of Riots And The Price of Food.

What causes riots? That's not a question you would expect to have a simple answer.

But today, Marco Lagi and buddies at the New England Complex Systems Institute in Cambridge, say they've found a single factor that seems to trigger riots around the world.

This single factor is the price of food. Lagi and co say that when it rises above a certain threshold, social unrest sweeps the planet.

The evidence comes from two sources. The first is data gathered by the United Nations that plots the price of food against time, the so-called food price index of the Food and Agriculture Organisation of the UN. The second is the date of riots around the world, whatever their cause. Both these sources are plotted on the same graph above.

This clearly seems to show that when the food price index rises above a certain threshold, the result is trouble around the world.

This isn't rocket science. It stands to reason that people become desperate when food is unobtainable. It's often said that any society is three square meals from anarchy.

But what's interesting about this analysis is that Lagi and co say that high food prices don't necessarily trigger riots themselves, they simply create the conditions in which social unrest can flourish. "These observations are consistent with a hypothesis that high global food prices are a precipitating condition for social unrest," say Lagi and co.

In other words, high food prices lead to a kind of tipping point when almost anything can trigger a riot, like a lighted match in a dry forest.

On 13 December last year, the group wrote to the US government pointing out that global food prices were about to cross the threshold they had identified. Four days later, Mohamed Bouazizi set himself on fire in Tunisia in protest at government policies, an event that triggered a wave of social unrest that continues to spread throughout the middle east today.

That leads to an obvious thought. If high food prices condition the world for social unrest, then reducing the prices should stabilise the planet.

But what can be done to reverse the increases. Lagi and co say that two main factors have driven the increase in the food price index. The first is traders speculating on the price of food, a problem that has been exacerbated in recent years by the deregulation of the commodities markets and the removal of trading limits for buyers and sellers.

The second is the conversion of corn into ethanol, a practice directly encouraged by subsidies.

Those are both factors that the western world and the US in particular could change.

Bloomberg has a report on declining US meat production - Meat Supply’s ‘Precipitous’ Drop to Spur Prices to Records, Rabobank Says.

U.S. meat and poultry production may drop as much as 5 percent next year, sending beef and pork prices to a record amid climbing feed costs and shrinking herds, according to Rabobank International.

Producers are curbing output as tighter feed supplies boost costs, which will lead to a “precipitous fall” in available meat in 2012, David Nelson, a global strategist at Rabobank, said in a report. The drop is compounded by a drought that is forcing ranchers in the Southwest to cull herds and by surging demand for U.S. beef in developing countries, he said.
“There’s going to be less supply, so we’re going to have higher prices,” Nelson said in a telephone interview from Chicago yesterday. “It’s quite a shift.”

By late 2012, U.S. beef production may be running at rate of 7 percent below comparable levels this year, Nelson said. The spot-market price for fed steers sold to slaughterhouses may average a record $1.16 a pound in 2012, up from a projected $1.13 a pound this year, Nelson said in the report. Beef prices also will climb to an all-time high, he said.

U.S. per-capita consumption of beef will continue to drop, so the tightening supply of the meat may impact foreign buyers the most, Nelson said. The “relatively cheap dollar” is boosting demand for U.S. meat, Nelson said. The dollar is down 1.2 percent this year against a basket of six major currencies.

Sustainablog has a look at the latest spike in food prices - Anatomy Of A Food Price Spike.

I have been posting updates on the most recent, global food price spike since February 2011 – most recently in June. Yesterday, the Food and Agriculture Organization of the UN (FAO) released its most recent data on the prices of food in international trade. As seen in the graph above, the overall index and its various components have declined slightly, but remain at very high levels.

People living in the developed world have seen some food price increases, but because we grow so much of our own food and spend a small part of our income on feeding ourselves, the impact is minor. This has the greatest effect on the lives of poor people in import-dependent countries.

What is actually most unsettling about this phenomenon is that nothing like it has occurred for decades, and yet we are in a second such spike. The first was in 2007/8, and the current spike has been in 2010/11.
Source: sustainablog (http://s.tt/13sjc)

Bloomberg reports that radiation fears are pushing up Japanese rice prices - Rice Futures Halted in Tokyo as Radiation Weighs On First Trades Since ’39.

Rice futures in Tokyo surged in their first appearance on the bourse since 1939, triggering a suspension of trade, on concern radiation from the stricken Fukushima nuclear plant may spread to crops and curb supply. ...

The exchange listed rice contracts today for the first time since the start of World War II to boost flagging volumes and profit. The resumption comes as fallout from the Fukushima Dai- Ichi power plant may spread after it was found cattle had been fed cesium-tainted rice straw. Spinach, mushrooms, bamboo shoots, tea, milk, plums and fish have been found to be contaminated with cesium and iodine as far as 360 kilometers (224 miles) from the station operated by Tokyo Electric Power Co.

Technology Review has an article on recent reports on the link between biofuels and food prices - Record Food Prices Linked to Biofuels.

The biofuels industry is being blamed for record food prices and high price volatility. Earlier this month a report from the World Trade Organization and other international agencies recommended that governments cut support for biofuels to ease that volatility. On the heels of that report, the U.S. Department of Agriculture issued its corn forecast; it suggested that corn supplies will be very tight this year because bad weather has limited planting and because the share of corn going to ethanol is increasing. After the report, corn prices shot to record highs, reaching $8 a bushel. Then on Friday, the Organization for Economic Cooperation and Development released a report predicting that food prices will remain high for the next decade.

Many experts say the unprecedented prices are at least partially driven by government subsidies and mandates that have led to fourfold increases in production of ethanol biofuel and tenfold increases in production of biodiesel between 2000 and 2009 worldwide. In the United States, multiple bills and amendments have been introduced to scale back subsidies as a way of trimming the federal budget, and on Thursday the Senate voted to end tax credits for ethanol that amounted to nearly $6 billion. (The program won't be killed unless the House passes its own law ending it.)

The WTO report cited many reasons for the high prices and volatility, including changes in demand for food, bad weather, low stock, and the recent high cost of oil. Oil prices directly affect the production costs of food by raising the price of tractor fuel and fertilizers. If oil is expensive enough, it can also increase demand for biofuels, which drives up the price of crops such as corn and sugarcane.

The WTO report also cited government biofuel mandates as a significant problem. Not only do these requirements drive up demand for crops such as corn, increasing prices, but they limit the ability of markets to respond to price changes, increasing volatility. "We've lost a lot of our ability for our agricultural system to be buffered from price shocks from weather and other things that affect production," says Jason Hill, a professor of bioproducts and biosystems engineering at the University of Minnesota.

Worldwide, 8 percent of corn produced is used for biofuels. In the United States, according to the new USDA report, 35 percent of corn in the growing season ending in 2010 went to the production of biofuels; this growing season it is predicted to be 37 percent; it is expected to be 38 percent in 2012.

Prompted by a post at Early Warning, SP at TOD ANZ has a look at the impact of US ethanol policy on global food prices - Grain$ of truth.

Early Warning had a post recently decrying the proposed emergency policy of the Spanish Govt. to increase the biofuel content in their petrol. One follow up post then used US data for ethanol production to extrapolate the impact of US production to global food prices. Thus linking the unrest in North Africa and around the gulf states with the increased cost of food due to biofuels (as indicated by corn ethanol). But root causes of the increased cost of food are more complex than that.

Stuarts prime beef seems to be with the corn to ethanol conversion: many authors have argued that the conversion efficiency is poor - but it is probably the final act of a greater tragedy. Outside of the Americas, is corn a primary human staple? Even within the US its prime function seems to be as energy source for feed lot produced beef and a major ingredient in the US staple of fast foods (including supermarket ready meals).

While I agree that biofuels may be problematic, lumping all cereal crops together and then assuming that because 40% of US CORN production is going to ethanol that that is the cause of the rise in food prices seems to overly and dramatically simplify the issue.

Various international agencies have pointed out that the rise in GLOBAL food prices is a complex issue, with different causes in different regions. ...

From this we should remember that generally “commodities such as corn or wheat are a small part of the final retail price of most food products”. Not also the effect attributed to the currency situation in the US – the effect of the deflating dollar. ...

So, its complicated, but it’s not all down to biofuels.

Other sources about the more recent price rises also note that speculation has been a significant factor in the increases.

- Speculation behind global commodity price rise (different version at Speculation behind global commodity price rise)
- Food Price Spiral: Causes and Consequences
- High food prices: Cause and Result

Finally, I just want to point out that many of the countries in the Arab World experiencing turmoil (partially) as a result of these increased prices have one other thing in common. They all have currencies that are either:

1. directly pegged (or nearly so) to the US dollar,
2. are neighbors or close trading partners with countries with fixed dollar exchanges, or
3. have currencies that are not traded.

The following have (had?) a direct peg; Eritrea, Lebanon, Qatar, UAE, Suadi Arabia, Jordan, Bahrain. Egypt had periodic revaluations along with Oman, Kuwait and Tunisia had rigid currency controls. That a large number of countries in the region have a pegged or fixed exchange rate to the $US and the major commodity of the region is traded in $US means that other commodities will be more expensive to import in these countries.

So, if you need to buy grain valued in falling US dollars and your currency is pegged to (or otherwise controlled by) that currency, or your own currency is also falling OR you can’t easily convert your currency to buy US dollars AND speculators are playing the market… What then for local food prices?

On the other hand, if your currency was not affected in this way, and appreciated against the $US, then food from the US would have become cheaper.

Which could explain the US sourced apples and oranges in the supermarkets of the provincial Indonesian city in which I currently reside!

However the cost of rice has increased, not becuase of corn feed cows or biofuels, but for the simple reason that the heavy rain (and flooding) in Indonesia has cut production.

Michael Pascoe has an interesting rant in The Age about the G20 and American corn ethanol policies and their impact on global food prices ("willfully burning food is a particular form of obscenity") - US the blind policy giant puts farmers before food.

For a little while there, in the eye of the global financial crisis, it looked like necessity would force the world's leaders into genuine international policy advances. The further we have retreated from the precipice of immediate disaster, the more useless the G20 becomes.

The platitude of the weekend was concern about food prices. For some governments, it's a very genuine concern. For all the nice talk about the appeal of democracy, the escalating price of basic foodstuffs was a bigger factor in Egyptian regime change.

So there was plenty of talk about food prices, with G20 types from the French to the Indians wanting to do something about evil speculators who must be behind the jump in soft commodities. Nice to have a convenient and simple scapegoat for a very complex problem.

The American scapegoat of choice though is China's foreign exchange policy. While the United States' dipsy and inefficient biofuels policy means it is literally burning somewhere between a third and 40 per cent of its massive corn crop as a gift to its farm lobby, Washington wants everyone to focus on the renminbi. ...

The US Treasury Secretary, little Timmy Geithner, used the Paris meeting to demonstrate again that he's as bad as his predecessors. He would have us believe that the cheap RMB means China is growing too fast and that's what's causing food inflation.

Economic growth, a nation of more than 1.3 billion people forging a way out of poverty, does result in increased food consumption, among other things. Effectively, if only more people ate less, were happy to starve for the greater good, food would be cheaper. And this sort of suggestion from the Treasury Secretary of the world's most obese nation.

The US trashing its own dollar has had a much bigger impact on prices as the greenback happens to be the world's currency of trade. And then there's the ethanol policy.

Everyone knows the US has a real estate problem with crashing house prices and shopping centre and office block owners in Chapter 11. What the US also has is a boom in farm prices that's in danger of becoming a bubble. ...

The big driver for US grain farmers has been biofuels policy that effectively links the price of corn to the price of oil while absorbing $US7.7 billion a year in government subsidies.

And the bad news is that it's early days yet. As told in a Goldman Sachs report the current US production of more than 10 billion gallons a year (nearly 9 per cent of America's gasoline supply) is slated to increase to 36 billion gallons by 2022 under the Renewable Fuels Standard of the Energy Independence and Security Act introduced in 2007. And it could get worse:

“Lately there has been a push for raising the ethanol-gasoline blending requirements from 10 per cent all the way to 15 per cent and we would not be surprised if the EPA agrees to something closer to 11-12 per cent. Each percentage increase in ethanol blending is equal to 550 million bushels of corn or approximately the equivalent of 4.5 per cent of total US production.”

There's a lot more to higher global grain prices than just the US preoccupation with gas-guzzling cars and subsidising farmers. Drought in China, floods in Australia, fires in Russia, more people wanting more food, they all play a role. But while natural disasters and human hunger happen, willfully burning food is a particular form of obscenity.

What's more, American corn isn't even an efficient source of ethanol. The scale and productivity of Brazilian sugar cane plantations perhaps makes a case for turning that sweet giant grass into fuel – but tariffs and tax subsidies for the locals keep it out of the US. American corn farmers can't begin to compete with it.

With oil prices back up around $US100 a barrel, there's increased incentive to grow more corn and thus more is being planted at the expense of other crops. Such is the totally interrelated nature of the world economy that dumb US agricultural policy plays a roll in changing third-world governments and improving the lot of Australian wheat farmers as they face less competition from the US.

Meanwhile, China is getting on with it. China has lent more money than the World Bank to developing nations over the past two years – no doubt for its own pragmatic reasons. For all the concentration on China's surplus with the US, it trades much more with its fellow developing nations. On the food front, the very necessary main growth in global food production has to come from developing nations.

And India, in a very different way, also is getting on with it. According to figures included in the latest Australian Bureau of Statistics demographics report, India's population will increase from 1173 million people in 2010 to 1657 million in 2050 – roughly half a billion extra mouths to feed in 40 years.

I somehow doubt that problem is going to be solved by a more expensive renminbi.

The Climate Spectator has an article on global food prices and the impact of Chinese demand on them - Unscrambling the food price spike.

Now, in the latest episode of this gripping global drama, all eyes are turning to China, where the country's northern grain-producing regions have been in the grip of a brutal drought for more than three months, raising fears about its winter wheat crop.

In many areas, the drought is the worst in six decades; in Shandong province, a key grain producer, the drought is the worst in 200 years. The government is spending nearly a billion dollars on emergency measures (extending even to firing anti-aircraft guns at clouds). Media coverage is mushrooming; futures markets are taking fright.

In the back of many minds is the worrying thought that while rice prices may not be spiking yet, there's a school of thought that believes they did so in 2008 in large part because high wheat prices prompted consumers to substitute rice for wheat. And it was when rice spiked that things really started to go haywire in 2008 – with export bans, hoarding and all the rest of it.

So just how bad is it?

Not necessarily as bad as the more lurid media coverage might lead you to think – though it could become that bad, depending on what happens in the next few weeks. That's the key message from the Food and Agriculture Organization, whose Global Information and Early Warning System team published a Special Alert on China on Tuesday this week.

Winter wheat doesn't get harvested until June, and early February in China is still in the dormant phase for winter wheat rather than its active growth phase – so as yet, wheat yields haven't necessarily been affected by the drought. Instead, the impact of low soil moisture and snow cover so far has been to reduce the wheat plants' protection against frost, which hasn't been a serious problem as yet, as temperatures have been pretty mild.

But with wheat plants made vulnerable by the drought so far, a cold snap in the next few weeks would be devastating – as, needless to say, would a continuation of the drought into the active growth period.

In the background is the factor that no-one really knows whether China has large reserves of wheat or not, as commodities journalist Javier Blas noted in the FT recently: “A senior Western official recently told me that his estimates of stocks of wheat, corn and soyabean in China – which are widely followed by the market – are nothing more than ‘informed guesses’. The problem is that many countries see information about agricultural commodities markets, particularly the level of stocks, as state secrets.”

It's uncertainties, maybes and what-ifs like these that have futures markets spooked by the drought in China – that, and a more generalised sense of what a game-changer it would be if China became a net importer of wheat.

As noted above, Chinese demand for corn and soya imports has been a major factor in rising prices for those crops. Wheat, on the other hand, is something that China's long been self-sufficient at producing. But what happens if it has to turn to world markets to meet its needs – in particular, to the world's largest wheat exporter, the United States? Here's Lester Brown's take on it, in his book Plan B:

"This will pose a fascinating geopolitical situation. More than 1.3 billion Chinese consumers, who had an estimated $160 billion trade surplus with the US in 2004 [which is nothing to what it is now, of course] ... will be competing with Americans for US grain, driving up US food prices.

"In such a situation 30 years ago, the United States simply restricted exports. But China is now banker to the United States, underwriting much of the massive US fiscal deficit with monthly purchases of US Treasury bonds."

As Brown implies, the underlying point in all this is that the global food security agenda – like the geopolitics of resource scarcity more broadly – is currently treading a fine line between a zero-sum game of resource nationalism and a non-zero sum game of international cooperation based on clear-eyed recognition of global interdependence.

Moving decisively towards the latter outcome will involve China and other G20 countries agreeing to much greater transparency over their national food reserves, a clear commitment not to impose sudden export restrictions and probably also a multilateral system of food buffer stocks.

It will involve substantial investment in resilience at country level, through scaling up social protection systems and other risk-reduction mechanisms, and a “21st century Green Revolution” in agriculture that not only produces more food, but does it more sustainably and resiliently too.

But above all, the path to a non-zero sum outcome on food security will involve a need for franker discussion about fair shares in a world of limits. It’s already clear that reaching a global deal on climate change will require agreement on how to share out remaining “carbon space”. As global food supplies become tighter, in a world of resource scarcity and climate impacts, similarly charged equity issues will arise over questions about whether the world can afford to use vast amounts of grain, land, water and energy for “western diets” or inefficient biofuels, when 925 million people remain undernourished.

I take everything Ambrose Evans-Pritchard writes with a large grain of salt, so with that in mind, here is a new column at the UK Daily Telegraph looking at the Tunisian and Egyptian crises and declaring "the first food revolutions of our Malthusian era have exposed the weak grip of authoritarian regimes in poor countries that import grain, whether in North Africa today or parts of Asia tomorrow" - Egypt and Tunisia usher in the new era of global food revolutions.

Events have moved briskly since a Tunisian fruit vendor with a handcart set fire to himself six weeks ago, and in doing so lit the fuse that has detonated Egypt and threatens to topple the political order of the Maghreb, Yemen, and beyond.

As we sit glued to Al-Jazeera watching authority crumble in the cultural and political capital of the Arab world, exhilaration can turn quickly to foreboding.

This is nothing like the fall of the Berlin Wall. The triumph of secular democracy was hardly in doubt in central Europe. Whatever the mix of aspirations of those on the streets of Cairo, such uprisings are easy prey for tight-knit organizations – known in the revolutionary lexicon as Leninist vanguard parties.

In Egypt this means the Muslim Brotherhood, whether or not Nobel laureate Mohammed El Baradei ever served as figleaf. The Brotherhood is of course a different kettle of fish from Iran’s Ayatollahs; and Turkey shows that an ‘Islamic leaning’ government can be part of the liberal world – though Turkish premier Recep Tayyip Erdogan once let slip that democracy was a tram “you ride until you arrive at your destination, then you step off." ...

The surge in global food prices since the summer – since Ben Bernanke signalled a fresh dollar blitz, as it happens – is not the underlying cause of Arab revolt, any more than bad harvests in 1788 were the cause of the French Revolution.

Yet they are the trigger, and have set off a vicious circle. Vulnerable governments are scrambling to lock up world supplies of grain while they can. Algeria bought 800,000 tonnes of wheat last week, and Indonesia has ordered 800,000 tonnes of rice, both greatly exceeding their normal pace of purchases. Saudi Arabia, Libya, and Bangladesh, are trying to secure extra grain supplies.

The UN’s Food and Agriculture Organization (FAO) said its global food index has surpassed the all-time high of 2008, both in nominal and real terms. The cereals index has risen 39pc in the last year, the oil and fats index 55pc.

The FAO implored goverments to avoid panic responses that “aggravate the situation”. If you are Hosni Mubarak hanging on in Cairo’s presidential palace, do care about such niceties?

France’s Nicolas Sarkozy blames the commodity spike on hedge funds, speculators, and the derivatives market (largely in London). He vowed to use his G20 presidency to smash the racket, but then Mr Sarkozy has a penchant for witchhunts against easy targets.

Energy Bulletin has an article linking the Tunisian and Egyptian unrest to oil depletion, global warming and food prices - The great unravelling: Tunisia, Egypt and the protracted collapse of the American empire.

In many of these countries, certainly in both Tunisia and Egypt, tensions have simmered for years. The trigger, it seems, came in the form of food shortages caused by the record high global prices reported by the FAO in December 2010. The return of high food prices two to three years after the 2008 global food crisis should not be a surprise. For most of the preceding decade, world grain consumption exceeded production – correlating with agricultural land productivity declining almost by half from 1990-2007, compared to 1950-1990.

This year, global food supply chains were again “stretched to the limit” following poor harvests in Canada, Russia and Ukraine; hotter, drier weather in South America cutting soybean production; flooding in Australia, wiping out its wheat crops; not to mention the colder, stormier, snowier winters experienced in the northern hemisphere, damaging harvests.

Climate Change

So much of the current supply shortages have been inflicted by increasingly erratic weather events and natural disasters, which climate scientists have long warned are symptomatic of anthropogenic global warming. Droughts exacerbated by global warming in key food-basket regions have already led to a 10-20 per cent drop in rice yields over the last decade. By mid-century, world crop yields could fall as much as 20-40 per cent due to climate change alone.

But climate change is likely to do more than generate droughts in some regions. It is also linked to the prospect of colder weather in the eastern US, east Asia and northern Europe — as the rate of Arctic summer sea-ice is accelerating, leading to intensifying warming, the change in atmospheric pressure pushes cold Arctic air to the south. Similarly, even the floods in Australia could be linked to climate change. Scientists agree they were caused by a particularly strong El-Nino/La-Nina oscillation in the Tropical Pacific ocean-atmospheric system. But Michael McPhaden, co-author of a recent scientific study on the issue, suggests that recently stronger El-Ninos are “plausibly the result of global warming.”

Energy Depletion

The global food situation has been compounded by the over-dependence of industrial agriculture on fossil fuels, consuming ten calories of fossil fuel energy for every one calorie of food energy produced. The problem is that global conventional oil production has most likely already peaked, having been on an undulating plateau since 2005 — and forecast to steadily and inexorably decline, leading to higher prices. Although oil prices dropped after the 2008 crash due to recession, the resuscitation of economic activity has pushed up demand, leading fuel prices to creep back up to $95 a barrel.

The fuel price hikes, combining with the predatory activities of financial speculators trying to rake-in profits by investing in the commodity markets, have underpinned worldwide inflation. Just as in 2008, the worst effected have been the poorer populations of the South. Thus, the eruption of political unrest in Egypt and elsewhere cannot be fully understood without acknowledging the context of accelerating ecological, energy and economic crises — inherently interconnected problems which are symptomatic of an Empire in overstretch, a global political economy in breach of the natural limits of its environment.

Post-Peak Egypt

Indeed, Egypt is particularly vulnerable. Its oil production peaked in 1996, and since then has declined by around 26 per cent. Since the 1960s, Egypt has moved from complete food self-sufficiency to excessive dependence on imports, subsidized by oil revenues. But as Egypt’s oil revenues have steadily declined due to increasing domestic consumption of steadily declining oil, so have food subsidies, leading to surging food prices. Simultaneously, Egypt’s debt levels are horrendous — about 80.5 per cent of its GDP, far higher than most other countries in the region. Inequality is also high, intensifying over the last decade in the wake of neoliberal “structural adjustment’ reforms — widely implemented throughout the region since the 1980s with debilitating effects, including contraction of social welfare, reduction of wages, and lack of infrastructure investment. Consequently, today forty per cent of Egyptians live below the UN poverty line of less than 2 dollars a day.

Due to such vulnerabilities, Egypt, as with many of the MENA countries, now lies on the fault-lines of the convergence of global ecological, energy and economic crises — and thus, on the frontlines of deepening global system failure. The Empire is uncrumbling. The guarded official statements put out by the Obama administration only illustrate the disingenuous impotence of the U.S. position.

TomDispatch has a new article by Michael Klare dubbing the unrest "Resource Revolts" (as opposed to "Resource Wars") - Resource Revolts.

Get ready for a rocky year. From now on, rising prices, powerful storms, severe droughts and floods, and other unexpected events are likely to play havoc with the fabric of global society, producing chaos and political unrest. Start with a simple fact: the prices of basic food staples are already approaching or exceeding their 2008 peaks, that year when deadly riots erupted in dozens of countries around the world.

It’s not surprising then that food and energy experts are beginning to warn that 2011 could be the year of living dangerously -- and so could 2012, 2013, and on into the future. Add to the soaring cost of the grains that keep so many impoverished people alive a comparable rise in oil prices -- again nearing levels not seen since the peak months of 2008 -- and you can already hear the first rumblings about the tenuous economic recovery being in danger of imminent collapse. Think of those rising energy prices as adding further fuel to global discontent.

Already, combined with staggering levels of youth unemployment and a deep mistrust of autocratic, repressive governments, food prices have sparked riots in Algeria and mass protests in Tunisia that, to the surprise of the world, ousted long-time dictator President Zine al-Abidine Ben Ali and his corrupt extended family. And many of the social stresses evident in those two countries are present across the Middle East and elsewhere. No one can predict where the next explosion will occur, but with food prices still climbing and other economic pressures mounting, more upheavals appear inevitable. These may be the first resource revolts to catch our attention, but they won’t be the last.

Put simply, global consumption patterns are now beginning to challenge the planet’s natural resource limits. Populations are still on the rise, and from Brazil to India, Turkey to China, new powers are rising as well. With them goes an urge for a more American-style life. Not surprisingly, the demand for basic commodities is significantly on the rise, even as supplies in many instances are shrinking. At the same time, climate change, itself a product of unbridled energy use, is adding to the pressure on supplies, and speculators are betting on a situation trending progressively worse. Add these together and the road ahead appears increasingly rocky.

Joe Rom at Climate Progress says "Food prices were driven up by extreme weather and high oil prices" - Egyptian and Tunisian riots were driven in part by the spike in global food prices.

Political unrest has broken out in Tunisia, Yemen, Egypt and other Arab countries. Social media and governmental policies are getting most of the credit for spurring the turmoil, but there’s another factor at play.

Many of the people protesting are also angry about dramatic price hikes for basic foodstuffs, such as rice, cereals, cooking oil and sugar.

Food priceThat’s from the NPR story today, “Rising Food Prices Can Topple Governments, Too.”

This summer’s extreme global weather raised fears of a “Coming Food Crisis,” as CAP’s John D. Podesta and Jake Caldwell warned in Foreign Policy: “Global food security is stretched to the breaking point, and Russia’s fires and Pakistan’s floods are making a bad situation worse.” Earlier this month I discussed how, in fact, “Extreme weather events helped drive food prices to record highs.” Back then, experts were worried about food riots. Now they are happening.

The anti-science, pro-pollution crowd are going flat-earth over this post because I point out that leading political experts say the Middle East rioting is driven in part by the dramatic rise in food prices, which the agricultural experts say is driven in large part by oil prices and the extreme weather we’ve seen in the last few months. Of course, the climate science experts have been saying for a while now that the extreme weather is driven in large part by human emissions — see Terrific ABC News story: “Raging Waters In Australia and Brazil Product of Global Warming” and Munich Re: “The only plausible explanation for the rise in weather-related catastrophes is climate change.” See also Russian President Medvedev: “What is happening now in our central regions is evidence of this global climate change, because we have never in our history faced such weather conditions in the past.” — NYT: “Russia Bans Grain Exports After Drought Shrivels Crop” I have some more comments on this at the end, but the analysis as written here stands.

The Washington Post reported on the connection between food prices and Tunisian violence in mid-January, in a piece headlined, “Spike in global food prices contributes to Tunisian violence” ...

The question is why specifically now have the Egyptians and Tunisians rioted after decades of anti-democratic rule? Certainly one can ignore the experts and say that it is a complete coincidence that the rioting occurred as food prices hit record levels — in spite of the fact that the last time there was this kind of rioting globally food prices were at record levels, which is precisely why experts were predicting that record hide food prices would lead to riots. Now the question is, why are food prices are at record levels? Again, reality pretty much speaks for itself here. Extreme weather is a major contributing factor — and our top climate scientists say global warming has contributed.

Robert Fisk has a jaundiced look in The Independent at the Tunisian uprising and figures we'll have another dictator in place before too long - The brutal truth about Tunisia.

For I fear this is going to be the same old story. Yes, we would like a democracy in Tunisia – but not too much democracy. Remember how we wanted Algeria to have a democracy back in the early Nineties?

Then when it looked like the Islamists might win the second round of voting, we supported its military-backed government in suspending elections and crushing the Islamists and initiating a civil war in which 150,000 died.

No, in the Arab world, we want law and order and stability. Even in Hosni Mubarak's corrupt and corrupted Egypt, that's what we want. And we will get it.

The truth, of course, is that the Arab world is so dysfunctional, sclerotic, corrupt, humiliated and ruthless – and remember that Mr Ben Ali was calling Tunisian protesters "terrorists" only last week – and so totally incapable of any social or political progress, that the chances of a series of working democracies emerging from the chaos of the Middle East stand at around zero per cent.

The job of the Arab potentates will be what it has always been – to "manage" their people, to control them, to keep the lid on, to love the West and to hate Iran.

Indeed, what was Hillary Clinton doing last week as Tunisia burned? She was telling the corrupted princes of the Gulf that their job was to support sanctions against Iran, to confront the Islamic republic, to prepare for another strike against a Muslim state after the two catastrophes the United States and the UK have already inflicted in the region.

The Muslim world – at least, that bit of it between India and the Mediterranean – is a more than sorry mess. Iraq has a sort-of-government that is now a satrap of Iran, Hamid Karzai is no more than the mayor of Kabul, Pakistan stands on the edge of endless disaster, Egypt has just emerged from another fake election.

And Lebanon... Well, poor old Lebanon hasn't even got a government. Southern Sudan – if the elections are fair – might be a tiny candle, but don't bet on it.

It's the same old problem for us in the West. We mouth the word "democracy" and we are all for fair elections – providing the Arabs vote for whom we want them to vote for.

In Algeria 20 years ago, they didn't. In "Palestine" they didn't. And in Lebanon, because of the so-called Doha accord, they didn't. So we sanction them, threaten them and warn them about Iran and expect them to keep their mouths shut when Israel steals more Palestinian land for its colonies on the West Bank.

There was a fearful irony that the police theft of an ex-student's fruit produce – and his suicide in Tunis – should have started all this off, not least because Mr Ben Ali made a failed attempt to gather public support by visiting the dying youth in hospital.

For years, this wretched man had been talking about a "slow liberalising" of his country. But all dictators know they are in greatest danger when they start freeing their entrapped countrymen from their chains.

And the Arabs behaved accordingly. No sooner had Ben Ali flown off into exile than Arab newspapers which have been stroking his fur and polishing his shoes and receiving his money for so many years were vilifying the man. "Misrule", "corruption", "authoritarian reign", "a total lack of human rights", their journalists are saying now. Rarely have the words of the Lebanese poet Khalil Gibran sounded so painfully accurate: "Pity the nation that welcomes its new ruler with trumpetings, and farewells him with hootings, only to welcome another with trumpetings again." Mohamed Ghannouchi, perhaps?

Of course, everyone is lowering their prices now – or promising to. Cooking oil and bread are the staple of the masses. So prices will come down in Tunisia and Algeria and Egypt. But why should they be so high in the first place?

Algeria should be as rich as Saudi Arabia – it has the oil and gas – but it has one of the worst unemployment rates in the Middle East, no social security, no pensions, nothing for its people because its generals have salted their country's wealth away in Switzerland.

And police brutality. The torture chambers will keep going. We will maintain our good relations with the dictators. We will continue to arm their armies and tell them to seek peace with Israel.

And they will do what we want. Ben Ali has fled. The search is now on for a more pliable dictator in Tunisia – a "benevolent strongman" as the news agencies like to call these ghastly men.

And the shooting will go on – as it did yesterday in Tunisia – until "stability" has been restored.

No, on balance, I don't think the age of the Arab dictators is over. We will see to that.

Kevin at Cryptogon seems to be thinking along the same lines, quoting some Zbigniew Brzezinski for a the big picture - Tunisians Drive Leader from Power in Mass Uprising.

I’m not particularly sure of what actually happened in Tunisia. I’d like to think that the Tunisian people won’t go on to “freely elect” some U.S. puppet in the future, after throwing out the dictator who ran the place for over the last 23 years.

Come on, Kevin, why piss on the parade?

At times like this, it’s generally a good idea to keep a copy of The Grand Chessboard: American Primacy And Its Geostrategic Imperatives by Zbigniew Brzezinski handy:

As the imitation of American ways gradually pervades the world, it creates a more congenial setting for the exercise of the indirect and seemingly consensual American hegemony. And as in the case of the domestic American system, that hegemony involves a complex structure of interlocking institutions and procedures, designed to generate consensus and obscure asymmetries in power and influence. American global supremacy is thus buttressed by an elaborate system of alliances and coalitions that literally span the globe.

…

American supremacy has thus produced a new international order that not only replicates but institutionalizes abroad many of the features of the American system itself.

He writes that two steps are required for the, “Formulation of American geostrategy for the long-term management of America’s Eurasian geopolitical interests.”

First, to identify the geostrategically dynamic Eurasian states that have the power to cause a potentially important shift in the international distribution of power and to decipher the central external goals of their respective political elites and the likely consequences of their seeking to attain them; and to pinpoint the geopolitically critical Eurasian states whose location and/or existence have catalytic effects either on the more active geostrategic players or on regional conditions;

Second, to formulate specific U.S. policies to offset, co-opt, and/or control the above, so as to preserve and promote vital U.S. interests, and to conceptualize a more comprehensive geostrategy that establishes on a global scale the interconnection between the more specific U.S. policies.

In brief, for the United States, Eurasian geostrategy involves the purposeful management of geostrategically dynamic states and the careful handling of geopolitically catalytic states, in keeping with the twin interests of America in the short-term preservation of its unique global power and in the long-run transformation of it into increasingly institutionalized global cooperation. To put it in a terminology that hearkens back to the more brutal age of ancient empires, the three grand imperatives of imperial geostrategy are to prevent collusion and maintain security dependence among the vassals, to keep tributaries pliant and protected, and to keep the barbarians from coming together.

In this context, “democracy” needs to be an insidious sham that serves U.S. national interests. It makes for better public relations than ugly dictatorships.

The SMH has a report on foreign interest in Australian agricultural companies as the wheat price soars - Big wheat bickies to be made in our backyard.

That other resources boom, the one that is sustainable, appears to have caught most Australians by surprise, if indeed they know about it at all.

We've all been too busy backslapping each other and toasting our good fortune about the enormous quarry in the backyard to notice that a looming global food shortage has placed the nation on international investment radar screens and the world is ready to pounce.

The signs have been there for more than a year.

Canadian group Viterra last year took control of grains group ABB, the old Australian Barley Board. Then late last year China's Bright Foods tried to lure CSR's sugar operations to its fold, a bid that failed when a Singaporean group won control a few months back.

Before that, the British private equity group Terra Firma bought the Packer family's extensive cattle operations in the Top End, while the IIFCO group in Dubai took a 20 per cent stake in Australian Agricultural Co when Elders decided to sell down.

Yesterday, the trend took a new and far more serious twist. AWB, once considered the country's peak body when it came to agribusiness and Australia's place in the global trade arena, came under attack from yet another Canadian rural firm, Agrium Inc.

Reuters has a report on the Russian drought and its impact on global wheat prices - Wheat prices soar as Russia curbs exports.

Russia's worst drought in a century prompted one of the world's biggest wheat growers to ban grain exports for the first time in 11 years, sending already red-hot benchmark U.S. wheat prices to a fresh 23-month high.

Prime Minister Vladimir Putin on Thursday announced a temporary ban on grain exports to keep inflation in check, pledging billions of roubles to the farm sector. "I think it is advisable to introduce a temporary ban on the export from Russia of grain and other agriculture products made from grain," Putin told a government meeting.

Putin signed an order banning exports of wheat, barley, rye and maize, as well as wheat and rye flour from Aug. 15 to Dec. 31, the government press office said, adding it planned to ask for a similar ban from customs union partners Belarus and Kazakhstan.

Trading in September wheat WU0 on the Chicago Board of Trade went into overdrive, rising by a limit-up 60 cents to $7.85-3/4 by the close of the electronic session, a high for the contract and a 23-month peak for front-month prices.

Benchmark wheat prices in Chicago and Paris have now added 69 percent and 58 percent respectively since the start of July.

With Russia at the mercy of its worst drought since records began 130 years ago Putin pledged 10 billion roubles ($335 million) in subsidies and another 25 billion roubles in loans to the agricultural sector, adding that grain from the government intervention fund will be distributed to regions.

Last year, buoyed up by bumper harvests in 2008 and 2009, Russia exported 18.3 million tonnes of wheat, a total only exceeded by the United States and the European Union, according to International Grains Council figures.

But Russia's ambitions to take more market share have taken a dent from the drought.

"An export stop by Russia means the cards are reshuffled in the international wheat market. It would open up huge new opportunities for west European and U.S. sales. The implications would be huge," a Europe-based trader said. ...

Fear about a repeat of the 2007/08 food crisis when wheat prices topped $13 a bushel has been a major driver in the wheat rally, but the United Nations Food and Agriculture Organisation said on Wednesday that such concerns were not justified.

The FAO said world stocks, especially those held by major exporters, were enough to cover expected production shortfalls after two consecutive years of record crops. "External factors, including the macroeconomic environment and developments in other food markets, which were major drivers behind the surge in international prices in 2007/08, are not posing a threat so far," the FAO said.

Some market players agreed, taking on board the role of speculators in the current spike. "A (Chicago) market that gains $1 in four days is not a fundamental one," a trader said. "The pullback if it happens will be all the more severe.

The Independent has a look back at the great commodity speculation bubble of a couple of years ago - Johann Hari: How Goldman gambled on starvation.

By now, you probably think your opinion of Goldman Sachs and its swarm of Wall Street allies has rock-bottomed at raw loathing. You're wrong. There's more. It turns out that the most destructive of all their recent acts has barely been discussed at all. Here's the rest. This is the story of how some of the richest people in the world – Goldman, Deutsche Bank, the traders at Merrill Lynch, and more – have caused the starvation of some of the poorest people in the world.

It starts with an apparent mystery. At the end of 2006, food prices across the world started to rise, suddenly and stratospherically. Within a year, the price of wheat had shot up by 80 per cent, maize by 90 per cent, rice by 320 per cent. In a global jolt of hunger, 200 million people – mostly children – couldn't afford to get food any more, and sank into malnutrition or starvation. There were riots in more than 30 countries, and at least one government was violently overthrown. Then, in spring 2008, prices just as mysteriously fell back to their previous level. Jean Ziegler, the UN Special Rapporteur on the Right to Food, calls it "a silent mass murder", entirely due to "man-made actions."

Earlier this year I was in Ethiopia, one of the worst-hit countries, and people there remember the food crisis as if they had been struck by a tsunami. "My children stopped growing," a woman my age called Abiba Getaneh, told me. "I felt like battery acid had been poured into my stomach as I starved. I took my two daughters out of school and got into debt. If it had gone on much longer, I think my baby would have died."

Most of the explanations we were given at the time have turned out to be false. It didn't happen because supply fell: the International Grain Council says global production of wheat actually increased during that period, for example. It isn't because demand grew either: as Professor Jayati Ghosh of the Centre for Economic Studies in New Delhi has shown, demand actually fell by 3 per cent. Other factors – like the rise of biofuels, and the spike in the oil price – made a contribution, but they aren't enough on their own to explain such a violent shift.

To understand the biggest cause, you have to plough through some concepts that will make your head ache – but not half as much as they made the poor world's stomachs ache.

For over a century, farmers in wealthy countries have been able to engage in a process where they protect themselves against risk. Farmer Giles can agree in January to sell his crop to a trader in August at a fixed price. If he has a great summer, he'll lose some cash, but if there's a lousy summer or the global price collapses, he'll do well from the deal. When this process was tightly regulated and only companies with a direct interest in the field could get involved, it worked.

Then, through the 1990s, Goldman Sachs and others lobbied hard and the regulations were abolished. Suddenly, these contracts were turned into "derivatives" that could be bought and sold among traders who had nothing to do with agriculture. A market in "food speculation" was born.

So Farmer Giles still agrees to sell his crop in advance to a trader for £10,000. But now, that contract can be sold on to speculators, who treat the contract itself as an object of potential wealth. Goldman Sachs can buy it and sell it on for £20,000 to Deutsche Bank, who sell it on for £30,000 to Merrill Lynch – and on and on until it seems to bear almost no relationship to Farmer Giles's crop at all.

If this seems mystifying, it is. John Lanchester, in his superb guide to the world of finance, Whoops! Why Everybody Owes Everyone and No One Can Pay, explains: "Finance, like other forms of human behaviour, underwent a change in the 20th century, a shift equivalent to the emergence of modernism in the arts – a break with common sense, a turn towards self-referentiality and abstraction and notions that couldn't be explained in workaday English." Poetry found its break with realism when T S Eliot wrote "The Wasteland". Finance found its Wasteland moment in the 1970s, when it began to be dominated by complex financial instruments that even the people selling them didn't fully understand.

So what has this got to do with the bread on Abiba's plate? Until deregulation, the price for food was set by the forces of supply and demand for food itself. (This was already deeply imperfect: it left a billion people hungry.) But after deregulation, it was no longer just a market in food. It became, at the same time, a market in food contracts based on theoretical future crops – and the speculators drove the price through the roof.

Here's how it happened. In 2006, financial speculators like Goldmans pulled out of the collapsing US real estate market. They reckoned food prices would stay steady or rise while the rest of the economy tanked, so they switched their funds there. Suddenly, the world's frightened investors stampeded on to this ground.

So while the supply and demand of food stayed pretty much the same, the supply and demand for derivatives based on food massively rose – which meant the all-rolled-into-one price shot up, and the starvation began. The bubble only burst in March 2008 when the situation got so bad in the US that the speculators had to slash their spending to cover their losses back home.

When I asked Merrill Lynch's spokesman to comment on the charge of causing mass hunger, he said: "Huh. I didn't know about that." He later emailed to say: "I am going to decline comment." Deutsche Bank also refused to comment. Goldman Sachs were more detailed, saying they sold their index in early 2007 and pointing out that "serious analyses ... have concluded index funds did not cause a bubble in commodity futures prices", offering as evidence a statement by the OECD.

How do we know this is wrong? As Professor Ghosh points out, some vital crops are not traded on the futures markets, including millet, cassava, and potatoes. Their price rose a little during this period – but only a fraction as much as the ones affected by speculation. Her research shows that speculation was "the main cause" of the rise.

So it has come to this. The world's wealthiest speculators set up a casino where the chips were the stomachs of hundreds of millions of innocent people. They gambled on increasing starvation, and won. Their Wasteland moment created a real wasteland. What does it say about our political and economic system that we can so casually inflict so much pain?

The father of the "green revolution" in agriculture, Norman Borlaug, recently passed away due to cancer, at the age of 95.

Borlaug didn't approve of the "green revolution" moniker, dubbing it "a miserable term" (what he would have made of "The Agrichemical Revolutionary" isn't clear) but his work has had a far-reaching impact on the course of human development.

Borlaug received both praise ("More than any other single person of this age, he has helped provide bread for a hungry world. We have made this choice in the hope that providing bread will also give the world peace", said the Nobel peace prize committee, while the UN's Food and Agriculture Organization declared him “A towering scientist” and a “great benefactor of humankind” ) from those impressed by the rise in agricultural productivity he engineered, and condemnation ("Aside from Kissinger, probably the biggest killer of all to have got the peace prize was Norman Borlaug, whose "green revolution" wheat strains led to the death of peasants by the million" is a typical example from Alexander Cockburn at Counterpunch) from those concerned by the impact of the introduction of industrial agriculture around the globe.

Borlaug's Life

Borlaug grew up on a farm in Iowa and then studied for a Ph.D. in plant pathology and genetics at the University of Minnesota. In 1944, Borlaug took up an agricultural research position in Mexico as part of the Rockefeller Foundation project to help farmers modernise crop production, where he developed semi-dwarf, high-yield, disease-resistant wheat varieties over a period of 16 years. The Foundation's interest may not have been entirely altruistic - the Mexican government had nationalised the country's oil supply in 1939, to the dismay of the family's "Standard Oil" company, and there were concerns that the country may align itself with Germany during the war.

Borlaug's wheat breeding program produced semi-dwarf strains as the shorter stems enabled the plant to grow larger heads of grain without collapsing - with the extra growth prompted by the application of nitrogen fertiliser. The strains developed by Borlaug were very successful - by 1963, 95% of Mexico's wheat crops were products of the program. That year, the country's wheat harvest was 6 times larger than in 1944, the year Borlaug arrived - Mexico had become self-sufficient in wheat production.

In the 1960's, Borlaug shifted to India, working on similar projects there to alleviate famine. While the situation in India and Pakistan at the time was bleak (Biologist and "Population Bomb" author Paul Ehrlich remarking "I have yet to meet anyone familiar with the situation who thinks India will be self-sufficient in food by 1971" and "India couldn't possibly feed two hundred million more people by 1980"), Borlaug's programs were successful - in Pakistan, wheat yields nearly doubled, from 4.6 million tons in 1965 to 7.3 million tons in 1970. In India, yields increased from 12.3 million tons in 1965 to 20.1 million tons in 1970 - by 1974, India was self-sufficient in cereal production.

Borlaug did not appear to be interested in politics - he believed that the problems of hunger and poverty could be solved by increasing crop yields, and set out to do so by applying technology to plant science. He often advocated increasing crop yields as a way of curbing deforestation - a methodology that came to be known as the "Borlaug hypothesis" (increasing the productivity of agriculture on existing farmland can help control deforestation by reducing the demand for new farmland).

Borlaug was worried about the limited availability of farmland to expand food production further to meet increasing global demand - "we will have to double the world food supply by 2050" he noted. With around 85% of future growth in food production having to come from land already in use, he recommended a multidisciplinary research approach - mainly through increasing crop immunity to large-scale diseases such as the rust fungus.

While Borlaug became ever more optimistic about further increasing crop yields, he did occasionally sound Malthusian style warnings about population growth, particularly in the 1970's - "future food-production increases will have to come from higher yields. And though I have no doubt yields will keep going up, whether they can go up enough to feed the population monster is another matter. Unless progress with agricultural yields remains very strong, the next century will experience sheer human misery that, on a numerical scale, will exceed the worst of everything that has come before".

Over time Borlaug became convinced that we could feed the world adequately (given projections that global population will eventually plateau at around 9.5 billion people), as long as the methods he recommended were adopted universally, stating in 2000 : "I now say that the world has the technology — either available or well advanced in the research pipeline — to feed on a sustainable basis a population of 10 billion people. The more pertinent question today is whether farmers and ranchers will be permitted to use this new technology ? While the affluent nations can certainly afford to adopt ultra low-risk positions, and pay more for food produced by the so-called 'organic' methods, the one billion chronically undernourished people of the low income, food-deficit nations cannot."

Borlaug's work earned him the Nobel Peace Prize in 1970 and (amongst numerous other awards) the 1977 US Presidential Medal of Freedom and the US Congressional Gold Medal in 2006.

Criticisms of the Green Revolution

Borlaug's "green revolution" has been criticised for decades by a wide variety of different groups for all sorts of reasons - ranging from making farmers dependent on a range of industrial products to soil and aquifer depletion to creating a food production system that is dependent on a finite supply of fossil fuel based inputs. One memorable description of this combined school of thought came from Zaid Hassan, who noted "there are so many criticisms around the current global food system that for a while I started wondering if in fact it had already collapsed and I was studying a post-apocalyptic food system".

Input-intensive monoculture farming - The primary criticism of "green revolution" style industrial agriculture is that it results in farmers becoming dependent on a range of industrial inputs - farming machinery, fertiliser, pesticides, irrigation equipment, seeds and even capital (debt) to purchase these inputs - often resulting in small scale farmers being pushed off the land (particularly if they are unable to repay their debts during a bad season) and resulting in large scale agribusinesses that produce monoculture crops that are prone to pests and diseases unless large amounts of pesicide are applied. Critics from the developing world often note that the profits from this transformation seem to be reaped by multinational corporations like Monsanto, Dupont, Cargill and Archers Daniels Midland rather than the farmers growing the crops (who often saw crop prices fall as yields increased) - and that their national food security was now dependent on foreign suppliers.

Side effects of fertilisers and pesticides - The side effects of large scale fertiliser and pesticide use are also pointed to by Borlaug's critics, noting increased rates of cancer and other health problems in rural areas and damage to the ecosystems that these inputs drain into (for example, the "dead zone" in the Gulf of Mexico).

Water and soil depletion - As a result of modern irrigation practices, aquifers in places like India (once Borlaug's greatest triumph) and the US midwest have become depleted. Soil depletion is also a problem - since the 1880s almost half of the topsoil of the Great Plains of North America has disappeared.



Genetically modified crops - The risks associated with genetically modified crops - the next frontier for increasing crop yields in the wake of the first green revolution, which Borlaug dubbed "The Gene Revolution" - remain hotly debated, with critics raising objections based on food safety issues, ecological concerns and economic concerns (centering on the application of patents and intellectual property rights to engineered seeds).

Fossil fuel dependence - The inputs for green revolution style industrial agriculture are almost entirely derived from fossil fuels. Production of nitrogen fertiliser via the Haber process (mostly in the form of anhydrous ammonia, ammonium nitrate, and urea) consumes between 3 and 5% of world natural gas production. Farm machinery like tractors and irrigation pumps consume fuel, and tractor tyres and plastic irrigation pipes are made from petrochemicals, as are pesticides. Writers like Richard Manning (The Oil We Eat), Dale Allen Pfeiffer (Eating Fossil Fuels) and Glenn Morton (The Connection Between Food Supply and Energy: What Is the Role of Oil Price?) have argued that the green revolution will prove unsustainable once we have passed their peak production point for fossil fuels.

Borlaug dismissed the claims of most critics. Of environmental lobbyists he said, "some of the environmental lobbyists of the Western nations are the salt of the earth, but many of them are elitists. They've never experienced the physical sensation of hunger. They do their lobbying from comfortable office suites in Washington or Brussels. If they lived just one month amid the misery of the developing world, as I have for fifty years, they'd be crying out for tractors and fertilizer and irrigation canals and be outraged that fashionable elitists back home were trying to deny them these things".

Borlaug was also indignant about arguments in favour of natural fertilisers like cow manure rather than inorganic fertilisers. Using manure would require a massive expansion of the lands required for grazing the cattle, he said, and consume much of the extra grain that would be produced. He claimed that such techniques could support no more than 4 billion people worldwide, well under the current global population of almost 7 billion.

This point is still being debated, with researchers at the University of Michigan and University of California claiming that organic farming techniques can indeed feed the world. We can also increase food production by making better use of urban land (something "guerilla gardeners" are fond of - and similar ideas are being put into practice by large scale tree planting programs in India).

Even if we don't fully take the organic agriculture path, some of the objections based on fossil fuel depletion would seem to be solvable. If we shift completely to renewable energy sources for power production, we can eliminate a large proportion of our natural gas and coal usage, freeing the remaining reserves for agricultural applications and extending the lifespan of green revolution techniques far out into the future. Whether or not we choose to do so quickly enough remains to be seen.

Related Articles :

Peak Energy - The Fat Man, The Population Bomb And The Green Revolution

Grist - Thoughts on the legacy of Norman Borlaug

Wall Street Journal - Borlaug's Revolution

Reason - Billions Served

Worldchanging - Postcards from the Global Food System (Part 1, Part 2, Part 3)

National Geographic has an article on the "global food crisis" and the "end of plenty" - Cheap Food.

It is the simplest, most natural of acts, akin to breathing and walking upright. We sit down at the dinner table, pick up a fork, and take a juicy bite, obliv­ious to the double helping of global ramifications on our plate. Our beef comes from Iowa, fed by Nebraska corn. Our grapes come from Chile, our bananas from Honduras, our olive oil from Sicily, our apple juice—not from Washington State but all the way from China. Modern society has relieved us of the burden of growing, harvesting, even preparing our daily bread, in exchange for the burden of simply paying for it. Only when prices rise do we take notice. And the consequences of our inattention are profound.

Last year the skyrocketing cost of food was a wake-up call for the planet. Between 2005 and the summer of 2008, the price of wheat and corn tripled, and the price of rice climbed fivefold, spurring food riots in nearly two dozen countries and pushing 75 million more people into poverty. But unlike previous shocks driven by short-term food shortages, this price spike came in a year when the world's farmers reaped a record grain crop. This time, the high prices were a symptom of a larger problem tugging at the strands of our worldwide food web, one that's not going away anytime soon. Simply put: For most of the past decade, the world has been consuming more food than it has been producing. After years of drawing down stockpiles, in 2007 the world saw global carryover stocks fall to 61 days of global consumption, the second lowest on record.

"Agricultural productivity growth is only one to two percent a year," warned Joachim von Braun, director general of the International Food Policy Research Institute in Washington, D.C., at the height of the crisis. "This is too low to meet population growth and increased demand."

High prices are the ultimate signal that demand is outstripping supply, that there is simply not enough food to go around. Such agflation hits the poorest billion people on the planet the hardest, since they typically spend 50 to 70 percent of their income on food. Even though prices have fallen with the imploding world economy, they are still near record highs, and the underlying problems of low stockpiles, rising population, and flattening yield growth remain. Climate change—with its hotter growing seasons and increasing water scarcity—is projected to reduce future harvests in much of the world, raising the specter of what some scientists are now calling a perpetual food crisis.

So what is a hot, crowded, and hungry world to do? ...

Neal at DailyKos has an article on problems facing farmers in North Dakota. The "great famine" headline might be overdoing it, but it certainly sounds like corn and soy production will be under pressure next year - The Famine Of 2009 (via Idleworm).

The fall nitrogen fertilizer application has been 10% of the norm. A typical year would see 50% put on in the fall and 50% in the spring. During fertilizer application season the 3,100 mile national ammonia pipeline network runs flat out and the far points on the network experience low flow both fall and spring. If they try to jam 90% of the fertilization into a period of time when the system can only flow a little more than half of the need much of our cropland will go without in the spring of 2009.

Finances as much as weather are the issue with regards to fertilization this fall. Crop prices have fallen to half of what they were, ammonia prices have dropped but ammonia suppliers here, receiving 75% of their supply from overseas, still have product in their storage tanks purchase at the historical highs last spring and summer.

When farmers plant they record the acreage and they purchase crop insurance - $20 to $40 an acre depending on the crop. If they have a failure they file a claim, an adjustor contacts them, and they get a check to cover the deficit. Some of this runs through the U.S. Department of Agriculture and some of it is through private insurers.

My conversations with farmers earlier this week lead me to believe that the largest private insurer, Des Moines Iowa’s Rain and Hail Agricultural Insurance may be insolvent. Flooding claims from this spring were filed and payments would have typically been received by the end of June or beginning of July. It’s now the end of November and payments are not being dispersed. Individual farmers are told there was something wrong with their paperwork, but this is nonsense – some of these guys have been farming thirty years and they all didn’t forget how to fill out a simple form all at the same time. Iowa did have its second five hundred year flood in a decade and a half this spring which certainly has something to do with the situation, but I suspect Wall Street’s sticky fingers got hold of Rain & Hail’s assets, just as they’ve done to every pension fund and state run municipal investment pool.

So, we’re already facing what Bryan Lutter calls “the mother of all fertilizer shortages” next spring and on top of that local banks won’t lend to farmers.

The local bank was quite willing to lend to a farmer on a crop despite the weather related risks just like they’d lend on a car despite the driving risks. So long as the asset was insured the risk was deemed manageable. There were sure to be losses here and there, but they’d be administrative hassles associated with well known risks. If the auto insurance companies were viewed as untrustworthy no one would be getting a car without 100% down at the dealership and the same rule is now in effect for farmers.

Farmers without financing can’t afford nitrogen fertilizer at $1,000 a ton, which translates to $100 an acre at current application rates. They won’t be paying $300 for a bag of 80,000 hybrid corn kernels, again a $100 per acre expense. The average farm size in Iowa is four hundred acres and planting to harvesting would run about $120,000.

This looks incredibly bad. Bryan and I are both puzzled as to why the mainstream media isn’t covering this. Perhaps the need to sell Christmas season advertising trumps the need for the public to know about the troubles that are brewing.

Michale Pollan has a long (the excerpt below is just a small portion) article in The New York Times on the importance of food policy and how it relates to energy, global warming and a host of other problems - Farmer In Chief.

It may surprise you to learn that among the issues that will occupy much of your time in the coming years is one you barely mentioned during the campaign: food. Food policy is not something American presidents have had to give much thought to, at least since the Nixon administration — the last time high food prices presented a serious political peril. Since then, federal policies to promote maximum production of the commodity crops (corn, soybeans, wheat and rice) from which most of our supermarket foods are derived have succeeded impressively in keeping prices low and food more or less off the national political agenda. But with a suddenness that has taken us all by surprise, the era of cheap and abundant food appears to be drawing to a close. What this means is that you, like so many other leaders through history, will find yourself confronting the fact — so easy to overlook these past few years — that the health of a nation’s food system is a critical issue of national security. Food is about to demand your attention.

Complicating matters is the fact that the price and abundance of food are not the only problems we face; if they were, you could simply follow Nixon’s example, appoint a latter-day Earl Butz as your secretary of agriculture and instruct him or her to do whatever it takes to boost production. But there are reasons to think that the old approach won’t work this time around; for one thing, it depends on cheap energy that we can no longer count on. For another, expanding production of industrial agriculture today would require you to sacrifice important values on which you did campaign. Which brings me to the deeper reason you will need not simply to address food prices but to make the reform of the entire food system one of the highest priorities of your administration: unless you do, you will not be able to make significant progress on the health care crisis, energy independence or climate change. Unlike food, these are issues you did campaign on — but as you try to address them you will quickly discover that the way we currently grow, process and eat food in America goes to the heart of all three problems and will have to change if we hope to solve them. Let me explain.

After cars, the food system uses more fossil fuel than any other sector of the economy — 19 percent. And while the experts disagree about the exact amount, the way we feed ourselves contributes more greenhouse gases to the atmosphere than anything else we do — as much as 37 percent, according to one study. Whenever farmers clear land for crops and till the soil, large quantities of carbon are released into the air. But the 20th-century industrialization of agriculture has increased the amount of greenhouse gases emitted by the food system by an order of magnitude; chemical fertilizers (made from natural gas), pesticides (made from petroleum), farm machinery, modern food processing and packaging and transportation have together transformed a system that in 1940 produced 2.3 calories of food energy for every calorie of fossil-fuel energy it used into one that now takes 10 calories of fossil-fuel energy to produce a single calorie of modern supermarket food. Put another way, when we eat from the industrial-food system, we are eating oil and spewing greenhouse gases. This state of affairs appears all the more absurd when you recall that every calorie we eat is ultimately the product of photosynthesis — a process based on making food energy from sunshine. There is hope and possibility in that simple fact.

In addition to the problems of climate change and America’s oil addiction, you have spoken at length on the campaign trail of the health care crisis. Spending on health care has risen from 5 percent of national income in 1960 to 16 percent today, putting a significant drag on the economy. The goal of ensuring the health of all Americans depends on getting those costs under control. There are several reasons health care has gotten so expensive, but one of the biggest, and perhaps most tractable, is the cost to the system of preventable chronic diseases. Four of the top 10 killers in America today are chronic diseases linked to diet: heart disease, stroke, Type 2 diabetes and cancer. It is no coincidence that in the years national spending on health care went from 5 percent to 16 percent of national income, spending on food has fallen by a comparable amount — from 18 percent of household income to less than 10 percent. While the surfeit of cheap calories that the U.S. food system has produced since the late 1970s may have taken food prices off the political agenda, this has come at a steep cost to public health. You cannot expect to reform the health care system, much less expand coverage, without confronting the public-health catastrophe that is the modern American diet.

The impact of the American food system on the rest of the world will have implications for your foreign and trade policies as well. In the past several months more than 30 nations have experienced food riots, and so far one government has fallen. Should high grain prices persist and shortages develop, you can expect to see the pendulum shift decisively away from free trade, at least in food. Nations that opened their markets to the global flood of cheap grain (under pressure from previous administrations as well as the World Bank and the I.M.F.) lost so many farmers that they now find their ability to feed their own populations hinges on decisions made in Washington (like your predecessor’s precipitous embrace of biofuels) and on Wall Street. They will now rush to rebuild their own agricultural sectors and then seek to protect them by erecting trade barriers. Expect to hear the phrases “food sovereignty” and “food security” on the lips of every foreign leader you meet. Not only the Doha round, but the whole cause of free trade in agriculture is probably dead, the casualty of a cheap food policy that a scant two years ago seemed like a boon for everyone. It is one of the larger paradoxes of our time that the very same food policies that have contributed to overnutrition in the first world are now contributing to undernutrition in the third. But it turns out that too much food can be nearly as big a problem as too little — a lesson we should keep in mind as we set about designing a new approach to food policy.