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.
Yes, I agree … it’s bozo simple. But most bozos don’t do research, they just read press releases with tales of gloom and doom.
If it’s not bio-fuels it’s the new strain of wheat rust which attacks previously rust-resistant wheat crops. Right now it appears to be mainly impacting parts of Africa, but the fungal spores can travel quickly to infest new areas of the globe. While the impact isn’t being seen globally yet, it can be devastating to those parts of Africa where crop losses are major.
Still, there is hope on the horizon in the form of new varieties of wheat that are not only resistant to the new strains of fungus, but also promise a 10% to 15% improvement in crop yields.
So, what’ll it be … government studies and grants to give us another useless computer model, which feeds no one, or studies and grants to keep improving food crop varieties and yields? Again, it’s bozo simple.
There are many reasons why commodity prices fluctuate, weather being only one of them. The futures market and a desire to make a profit is a big part of it. Here’s a bit of info from Ag Online that discusses recent stocks of the big 3. http://www.agriculture.com/news/crops/watch-out-f-falling-cn-stocks_2-ar17068 .
As others have commented, food prices are being increased by climate change – climate change policy, that is. European Union directives require that road fuels contain a proportion, up to 10%, of biofuel – ethanol or biodiesel as appropriate. Wheat, corn, and agricultural land are being diverted to make fuel to burn in our engines, which reduces the amount available for food and pushes up food prices – globally.
So we have to pay more for our food. An inconvenience for the comfortably off, a real worry for those on the breadline, life and death for the very poor in developing countries.
What does this crazy policy achieve? About a 1% decrease in CO2 emissions (road transport accounts for 20% of EU emissions, 10% of that is 2%, and a lot of fossil fuel goes into producing and distributing the biofuel, so maybe 1% net). I leave it to others to calculate how many milli (micro?) degrees of warming that may or may not save.
Re: My previous comment.
Here’s a link to the story on wheat rust –
http://www.physorg.com/news/2011-06-super-varieties-wheat-boost-yields.html
The alarmists will simply look at the graph and conclude the doubling of corn and wheat from 2005 to 2008 is due to hitting the tipping point of CAGW coupled with Peak Oil. Their summary statement will be that we are doomed and it is worse than we thought.
News just in Konfacela……………. Now this is what I call climate disruption. /sarc end.
Also
24% of the U.S. corn crop is now mandated to go to ethanol!!!!
Remember Indonesia’s massive deforestation for palm oil based biofuels? Let’s hope this madness stops soon. :>(
Greens are just in the pay of BIG BIOFUELS. /sarc? :O)
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)
Except you’re talking rot.
Firstly the major industrial powers don’t have “massively growing populations”. Many are stable, some are retreating. It’s the poor countries (largely Africa) that have growing populations. The First World just isn’t eating that much more than it used to.
Secondly, fuel prices aren’t rising consistently in line with population or demand. They are high at the moment, but US domestic crude hit a post WWII low in 1998. If the Middle East calms down the price will come down. It has very little to do with demand at all. (I would guess, but couldn’t find that production and distribution costs have lowered, and the quality of petrol has certainly improved greatly.)
In most countries fuel is very expensive because it is heavily taxed. Even then it’s cheaper than bottled water in many places!
Hey, but don’t let facts spoil your Malthusian enthusiasm!
Recent rise in global food prices is due to commodity futures speculators – in short – greed. It is another bubble ponzi scheme that must be burst to protect people at large from predatory economic forces, especially the poor. Even the UN sees this now.
R. Farr
Good catch! It seems the terrible floods had a silver lining.
And……
@ur momisugly A C Osborn says:
June 10, 2011 at 1:44 am
Corn shortages caused by Ethanol production then?
No, but tight corn supply results in higher input costs for ethanol producers, which means the price of ethanol goes up slightly. http://www.dtnprogressivefarmer.com/dtnag/common/link.do;jsessionid=9E613E5D3DAEEE3147E2D66A85295110.agfreejvm2?symbolicName=/free/news/template2&product=/ag/free/news/rightnow&vendorReference=0702E6A8&paneContentId=2002&paneParentId=70104
Well written, thought through, well done! My dog pooped on the wrong side of the lawn this morning, can I attribute that to AGW?
Nice one Tallbloke, I understood he won bets of the price of wheat by watching Sunspots.
Konfacela says:
June 10, 2011 at 1:27 am
Willis has answered you on that point. However, if using a limited start & finish point, of Willis’s choosing, he would only be matching people like the Wet Office’s Dr Vicky Pope on her temperature graphs which, to prove the 21st century was still warming just as the end of the 20th century, chose a finish point of 2007 for her trend line, but of course published in 2009. She chose to ignore the last two years because they didn’t fit her argument! It’s all about where you start & where you finish in the climate game,
Looks like life was good in Kansas in 1919.
Rumour has it that the Phosphorus supply is going to run out within 90-300 years (depending whom you beLIEve) — and without P in abundant and pure supply, modern agriculture is not going to be possible.
To use a hackneyed phrase (which I like): what’s up with that?
Adding to Ryan’s comment – we should not assume the denominator ($) as an uninvolved and constant measure of value, especially since Nixon’s closing of the gold window. Measured against gold, I think food prices would be pretty level over the past few years – the spike was in the decline in value of that very special paper, not the increase in food price.
We have decided that corn, even at $7.80/bu is plentiful enough to burn in our cars for fuel. Consequently, the price OPEC sets for oil has a substantial influence on the price of corn, and to the extent there is substitution, on the price of other grain crops. And since percent mandates exist, companies that sell gasoline must pay whatever the the market demands for the corn to make the ethanol they must purchase in order to blend with the gasoline they want to sell. So, by this linkage in law and regulations having the effect of law, government has pushed food out of the way as the primary price driver for corn. Or to put it another way, we now grow corn first for fuel and if there is any left over, it is used for food purposes. This is so wrong.
It should be observed that we have this absurd policy in a vain attempt to have “sustainable” energy policy. However, we grow a lot of this corn on land that sits atop an ocean of coal that we cannot mine because to do so is not “sustainable”, But we draw read lines around vast areas of offshore oil and gas deposits because that is not “sustainable” either even as we give several billion dollars in loans to a Brazilian oil company to drill for oil off their shores, but we must not drill off our own shores. Go figure.
Willis, Why not look at it this way:
http://www.geoffstuff.com/Willis.jpg
Maybe you have uncovered another inverted proxy.
Intersting summary. There is, however, a climate signal there at the end of the graph. It is called government subsidies and programs diverting food to produce biofuel! There is also a federal reserve/treasury signal there with all the printing of money and devaluing the USD that is going on.
Climate disruption is here. All around us there are agricultural calamities caused not by the weather but by disruption.
Australia is suffering with record harvests following the climate change caused floods. :O(
Record harvest powers GrainCorp to 66pc profit leap
Record harvest in eastern states despite floods and cyclone
Victoria’s flood-defying record harvest
Blaming climate change on rising food prices is a red herring. It is used to further the green agenda but at the same time hide the problems the green agenda causes. Example: Farms today use tractors. Tractors need fuel. If fuel prices rise, it costs farmer more money to grow crops. Fuel prices rise because of many reason, one of which is because the greens won’t let us drill. So while the greens blame AGW for higher prices, they are one of the ones to blame. Then this green fantasy of ethanol from a food crop is also hurting food prices. If it costs more to feed a cow, it raises the cost of beef and dairy products. And milk is used for a lot of things. Of course we already know that a cow on a farm is 1,000 times as deadly to the earth than a non-domesticated cow because of methane. (At least, that is the way the greenies act.)
The rise in food prices is affected by many things. Although climate change does not affect food prices, climate change hysteria does affect food prices.
Recent food and commodity price increase has more to do with excessive money printing in the US than any other causes. More dollars chasing the same quantity of goods and services bid the price up. Nothing to do with climate!
The Russian wheat harvest is worse than previously thought! This is more evidence of global warming calamity for you. :>(
I re-did the graph to have it up to date, and corn prices adusted for inflation are back to 1984 levels (not 1995). Prices since 2005 tripled (3.3X), not doubled. The last two peaks (2008 and 2011) reflect the increase from competition from energy use. Reasons for this are most probably related to climate change policy rather than climate change. If you need any graphs on commodities (or financial or economic), just let me know, it only takes me a second to do.
The recent rise is all speculation, nothing else. From 1934 to 1999, sane laws restricted agricultural hedging to the actual players in agriculture, which meant hedging was a damper on market swings. In 1999, Congress repealed those restrictions (along with the similar Glass-Steagall restrictions on banking) and the speculators took over. It wasn’t until 2006 that Goldman Sachs found it profitable to move into agriculture in a big way. When they did, all hell broke loose.
Full story here:
http://www.independent.co.uk/opinion/commentators/johann-hari/johann-hari-how-goldman-gambled-on-starvation-2016088.html
Wheat prices go back further than the graph lists, though as you go further back, transportation time and expense must make a mess of the data.
While writing http://wermenh.com/1816.html and before that, reading Brian Fagan’s The Little Ice Age, I came across something that said wheat prices fluctuated around $1 per bushel between the 1700s, and the US double digit inflation in the 1970s. I can’t find that now, sigh. One excursion was in 1816, where Fagan noted seed corn in New England reached $4 per bushel, the regional crop having been destroyed in multiple frosts. Of course, the constant price is due to the extreme productivity improvements driven by mechanization, fertilizers, and plant husbandry.
(1816, the Year Without a Summer, provided some impetus for the Erie canal, which opened in 1823, and was soon superseded by railroads.)
Worth reading: Influence of Solar Activity on State of Wheat Market in Medieval England which refers to prices between 1259 and 1702. Lead author Lev A. Pustilnik is with the Israel Cosmic Ray Center and they used 10Be data to track solar activity.