Cheap Food

I wrote this long ago, and it's probably gotten your attention through more traditional media by now, but no point in keeping it in draft mode. It probably needs an update given the news with the farm bill, but I have to make sure I know what's going on there before updating.

Maybe you've noticed... the price of food went up drastically this year for the first time since the early 70's. An article in The Economist highlighted the issues and I've summarized them below.

Ethanol, the way we make it from corn, is not much (or maybe any) better than burning fossil fuel as far as net environmental impact is concerned. The one thing it does do is reduce our dependence on foreign oil and potentially reduce our lust after the Arctic oil, which would be a good thing to deter. However, other ethanol, particularly the sugar-based ethanol being produced in Brazil is much cleaner. But that wouldn't reduce our dependence on foreign energy, so the US slapped a whopping 54 cents per gallon tariff on it.

What does this mean? Well, the prices for corn went way up because corn became more valuable when it was used for SUVs instead of for feeding people. (The amount of corn you would use to fill up the tank on an SUV could feed a person for a year. (Not that you'd want to eat corn everyday, but still.))

This means two things: (1) products made with this commodity (like tortillas, and soft drinks, and chicken fingers) went up in price, and (2) farmers changed their plans to plant other crops like wheat and soybeans in order to make corn, since it was commanding a higher price. This reduced the supply of the crops not planted and accordingly raised their price. Net effect? More expensive food.

So expensive food could actually have some positive effects: farmers making more money and therefore able to support themselves without the government subsidies. That would reduce everyone's tax bill and that is generally a nice thing. So the folks on the production end would be doing better. In third-world economies, this is great because over 50% of the population is typically on the producing side. In our economy, that's not the case. The Economist suggests subsidizing the urban poor i.e. the folks on the consumer side rather than the farmers because it is less likely to distort the market value of the food.