Guest Post by Willis Eschenbach
People have short memories. One of the things that I have learned in this game is to start any particular quest by finding the longest continuous records and look at them to understand the situation. This prevents the unjustified exaggerations that result from a short-term view of an issue.
Take the world food supply. People worry that the food supply is being negatively affected by climate change. Or if not, that it will soon be negatively affected, by gosh, and this time they’re not kidding. Really.
The recent radical rise in food prices from 2005 to 2008 is often cited as if it were climate related. People claim that the prices of basic foods doubled in that time period and that climate played a part. To to take a different, long-term look at that, consider the ancient relationship between cost, supply, and demand. Here’s how it works, and it’s bozo simple, first rule of economics:
Scarcity drives up prices.
This basic relationship means that if we want to see if food in the world is getting more scarce or less scarce, we can look at the change in the commodity price over time. Here’s that chart, showing the yearly changes in corn and wheat prices since the mid 19th Century.
Figure 1 from Sumner, “Recent Commodity Price Movement in Historical Perspective”. After the 2008 peak prices subsequently dropped. Recently they have begun rising again, although they are below the 2008 levels. SOURCE: American Journal of Agricultural Economics
Some things are immediately apparent from this graph.
First, the claims are true, the price for the basic foodstuffs corn and wheat did double from 2005 to 2008.
Second, that doubling only returned the price to the 1995 level.
Third, the historical price levels (with excursions for two wars and the great depression) were pretty stable until after WWII. Since then (with the excursion for the 1971 oil shock), things have greatly improved.
Fourth, I see no trace of a climate-related signal in that graph. Might be one, but if so, it’s well hidden.
Fifth, during the period 1866 – 2006 there have been a number of shifts in climate, both PDO related and otherwise. There has also been a general warming. As far as I can tell, there is no sign of either of those in the corn and wheat price record.
SUMMARY
The recent increase of commodity prices is a real issue. And of course it hits the poorest hardest, so it should not be ignored.
However, a look at the historical record shows that we’re doing pretty well, thank you very much.
So while of course we should be concerned by any price increase that strike at the poor, the claims of impending food-related climate doom have no more historical or evidentiary foundation than any of the other, more familiar alarmist claims. Farmers have dealt with the vagaries of weather for centuries. When the climate changes they do what they have always done. They change their farming practices to adapt. The idea that a change of a few degrees will shrink the world’s farm production reflects the naive thinking of someone who has never been a farmer. If a couple degrees of warming over the next century were the farmers’ biggest problem, they’d be overjoyed …
w.
Willis: However, a look at the historical record shows that we’re doing pretty well, thank you very much.
So hard to remember; so easy to forget…
Don’t forget to look at the demand side as well as the supply side if you wish to understand price changes, willis.
The developing major industrial powers with their increasingly affluent and still massively growing populations are influencing world demand in a big way and extra demand necessarily contributes to the price rise of food. (Just as it has contributed to the rise of fuel prices world-wide)
I supect there is a climate related issue. As you say it is a matter of supply and demand. With much of the food crop diverted to biofuels there has been a sudden increased demand. So it is our response to a non existent threat that is the problem. Lots of human diseases are associated with an overactive immune system. Humanity, as a whole, has the same problem.
Willis, thanks for yet another generous helping of rational thinking and for laying out research results that ‘join the dots’ for us. Unlike the young female writer in the Guardian of London who, under the banner headline ‘A Perfect Storm of Stupid’ excoriates American weather forecasters and newspeople for NOT linking what she sees as increasing major weather events with climate change, and caps it all off by having a hack at Sarah Palin’s stupidity for reporting a more historically correct version of the story of Paul Revere’s famous ride. And the MSM wonders why it is becoming increasingly irrelevant!
Add to that the increase in free fertiliser in the atmosphere, and the global food production outlook is even rosier.
I have to wonder how much recent policies of using food for fuel (e.g. corn for ethanol) have contributed to the rise of grain prices. It isn’t climate change that causes higher food prices, it’s climate change scare mongering that’s doing it.
Nice work, Willis. I would have though bio-fuels would be adding significantly to the price pressures on grains.
Once again, resorting to old fashioned facts and logic. Whatever happened to post-normal (lack of) thinking???
Thanks for the 2008 1995 comparison, most useful.
I see the difference between corn and wheat prices has declined as we move along in time. I would attribute that to better market information. Some regions are stuck with planting corn, others stuck with wheat, but the regions able to grow either have the information needed to decide which they’ll plant, and which crop will bring the best return. That tends to level production between the two crops.
Much of the long decline in prices is likely due to our reckless addition of CO2 to the atmosphere goosing up yields. The 2005 price climb is due to the artificial demand created by the gasohol mandate.
One of the main stresses put on the availability and price of these major food staples is the production of bio-fuel.
The monetary return from bio-fuel compared to the return as FOOD will mean that prices are driven upwards.
I am of the opinion that bio-fuels should ONLY be produced from waste or unusable crops and certainly should not take PREFERENCE over food supply, which is what mandated levels of ethanol in fuels is apt to do.
To my eyes it looks like since the warming trend at the end of the Little Ice Age prices have been trending down. This is even clearer during the recent warming.
Anyway, might food to fuel not have had any recent effect on prices?
Brilliant work.. the only thing to fear.. is fear itself.
Absolutely spot on, Willis. People who talk about food supply and AGW have probably never stepped on a farm or talked to a farmer. They are these ivory tower academic types who have no clue to what they are talking about.
This is funny. Did they stop making food price graphs after 2006? Why post an outdated graph except that it makes your argument look better by magicking away the recent price spike? And no, adding this info in the caption does not count.
I agree with the general thrust of WIllis’ argument but see more of a climate food price link than he does.
For example, there is a weak correlation between wheat prices and solar activity, first noted by William Herschel in 1801.
The Alarmists have it back to front (as usual). It is lower temperatures that are the problem, not higher ones.
I’ve put up a post with more info.
http://tallbloke.wordpress.com/2011/06/10/food-prices-and-climate-change-was-william-herschel-right/
Corn shortages caused by Ethanol production then?
I live in a rural community. We’ve just gone through the bright yellow phase – fields full of rapeseed. and now we are going through the maize phase. Both of these crops are more prevalent than food crops; wheat, potatoes, greens etc. So you could call the rising prices of food climate related since far too many plantings are to feed the biofuel industry and are not food commodities.
It’s a bloody disgrace.
Resilience is a beautiful thing to behold.
Pakistan has managed to produce a near-record winter wheat harvest in spite of the lingering post-flood hardships.
http://reliefweb.int/sites/reliefweb.int/files/reliefweb_pdf/node-405372.pdf
Food prices are increasing in the shops in the UK and prices are still rising. Climate excuses are poor, when growing conditions are poor somewhere they are good elsewhere. This is weather related and has been the norm since humans started agriculture. There are two things that are causing food prices and one is bio-fuel production the second is stockpiling to make a bigger profit. Now we have technology to safely store food basics in best condition it makes this easier for the big moneyed corporations to do. I am not accusing all food supply corporations of this but some do it.
Petroleum prices also cause price rises but this will be across the board not just basic food staples.
In the recent frenzy of Amazonian rainforest clearing, blamed on the Govt’s policy stalling- the main crop planted was Soya bean. This is happening in AMAZON and INDONESIAN Rain Forest’s,
From this Guardian piece Quote: Officials said the most dramatic situation was in the soy-growing state of Mato Grosso, where farmers are said to be using tractors and giant chains to rip up vast tracts of native forest.
http://www.guardian.co.uk/environment/2011/may/20/brazil-crisis-cabinet-amazon-deforestation
Here the palm oil rush of destruction. SORRY THIS IS PAINFULL.
http://e360.yale.edu/feature/the_cost_of_the_biofuel_boom_destroying_indonesias_forests_/2112/
This report on a published Paper discusses different fuels. Soya Bean is KING.
http://news.mongabay.com/2006/0711-umn.html?fb_comment_id=fbc_10150185261874940_16928488_10150217190359940#f3994df8c5fb714
This details the scale of Brittish firms BIG BUY UP to produce- Bio DIE sal.
http://www.guardian.co.uk/environment/2011/may/31/biofuel-plantations-africa-british-firms
Quote: Crest Global Green Energy has the largest recorded landholding, 900,000ha in Mali, Guinea and Senegal. Tom Stuart, the chief executive, said: “It is true in some cases [that biofuels displace food], but in our projects we ‘inter-crop’, planting as much food as biofuel on the marginal land we have brought into agricultural use.
Quote: “Growing jatropha in a profitable way on dry lands is a myth. It needs water, fertilisers and pesticides to provide high yields,” Auge said. Jamidu Katima, at the University of Dar es Salaam. End quote.
One paradox is that dissplaced local farmers clear more land. Good read.
Thanks. Will Gray.
Rising prices are usually caused by increasing debt and printing money. If the price of food, fuel and precious metals are rising but the amount of money in the system was static, then the price of other goods would either be stalling or falling rapidly, i.e. it would be a zero-sum game. We don’t see that. The global economy is actually growing slightly in GDP terms. Therefore we must come to the conclusion that there is actually more money in the system. Putting more money in the system tends to cause commodity price inflation because the rate at which we produce commodities is fairly fixed or can only grow slowly. Thus the “quantatative easing” (i.e. printing money) in Europe and the US together with banking system bailouts (i.e. transferring bank debt into government, EU or UN debt) has resulted in severe price inflation of commodities.
Generally this isn’t a big issue – rising prices but more money in the system to pay for the rising prices. Meanwhile all the extra cash in the system is helping to effectively write-off all the bad debt with freshly printed bills (not so good if your a creditor mind, like the Chinese and the oil-rich states of the Mid-East who are finding the debts they are holding being written off by bills still warm from the printing press – but now you know why their people are turning against them).
Konfacela says:
June 10, 2011 at 1:27 am
Konfacela, you misread the caption. The graph contains data up to and including the price spike in 2008. Since the paper was written in 2009, that’s all the author had to work with. I would encourage you to update his work to 2010 and report back to us … I considered doing it, but I figured I’d leave it as an exercise for the interested.
w.
tallbloke says:
June 10, 2011 at 1:43 am
For example, there is a weak correlation between wheat prices and solar activity, first noted by William Herschel in 1801.
I was under the impression that Hershel didn’t have data going back far enough (sound familiar) initially and the correlation, although weak, was confirmed later.
Good article Willis, as usual. In economics, it’s a very simple graph. As population keeps rising, the demand curve for food (and housing, clothes, shoes, education, computers,…) shifts to the right. But supply also shifts to the right as people are not just consumers, they are also producers and traders of food (and housing, clothing, shoes,…). If you remove the effects of inflation, by converting nominal prices to real prices, you will most likely end up at the same price level as 100 or 200 years ago, or even at lower real price, while the quantity supplied has expanded a thousand or a million times.
The developing major industrial powers with their increasingly affluent and still massively growing populations are influencing world demand in a big way…. marchesarosa.
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The major developing industrial powers are presumably China, India and (perhaps) Brazil.
All those countries have a fertility rate around or below replacement http://en.wikipedia.org/wiki/File:Countriesbyfertilityrate.svg.