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.
Here are the population growth rates from the World Bank indicators for these very “developing major industrial powers with their increasingly affluent and still massively growing populations” – the data shows their population growth rates have been in decline.
According to the Warmists at GRIST
The problem facing us for the rest of this century might not be overpopulation but a stagnant / ageing population.
“Overpopulation: The Making of a Myth”
http://www.overpopulationisamyth.com/overpopulation-the-making-of-a-myth
Curiousgeorge says:
June 10, 2011 at 3:58 am
Guess what caused the tight corn supply in the US? Cold, wet weather. Yes weather and not climate.
http://www.reuters.com/article/2011/06/10/us-ethanol-prices-idUSTRE7591E320110610
24% of the U.S. corn crop is now mandated to go to ethanol.
http://www.usatoday.com/money/industries/food/2011-02-09-corn-low_N.htm
sandyinderby says:
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.
William Stanley Jevons was the guy who studied records of grains from India (and elsewhere in The Empire) and confirmed it. He also is known for “Jevons’ Paradox” which demonstrated that more efficient use of coal resulted in MORE coal use, not less. (It becomes cheaper for each individual use, so folks have more uses…)
http://chiefio.wordpress.com/2009/05/12/jevons-paradox-coal-oil-conservation/
This is also why we all went to more efficient cars and now consume more motor fuel than ever before… That 35 mph makes it economical top buy a home 40 miles from work and commute longer… Thus the rush to the suburbs…. The “conservation uber alles” folks hate that, so have sprouted a variety of post normal economics to try to erase Jevon’s Paradox … It isn’t working, IMHO…
Per Corn Prices
Major impacts:
40% of USA Corn now goes to bio-fuel. We have LOTS of corn. Enough to burn, it seems.
Oil Prices. Lots of fuel is used in agriculture. Put an oil price chart on a grain price chart and you can see the fuel price spikes. Oil spiked to about $120/bbl and food prices rose… Gee… Like in both WWars, and in the ’70s.
China is becoming wealth. As folks get some money, they eat more meat. You can eat a pound of grain (takes a couple of days…) or feed 10 pounds to a cow to get a nice 1 pound steak that is gone in 30 minutes 😉 For pork and chicken it’s more like 3 pounds of grain / lb of meat. China is buying a lot of grains now. They will buy even more as they have more steaks and KFC ….
Weather has resulted in some minor price moves as the cold and wet has caused delayed planting. This ought to resolve in the next couple of seasons (as things tend to even out, or farmer adjust). It’s not hot that’s being the big deal, it’s the wet…
There are other less pervasive impacts as well (noted by others). One thing I would note, though, is that “speculation” does not set the price. It can “discover” it faster, but the price is set by supply and demand. If a speculator buys a 100,000 ton wheat futures contract and then can’t sell it, he has 100,000 tons of wheat dumped on him.
From the wiki:
So any speculator that “guesses wrong” and can’t sell the contract by settlement is going to be eating a lot of corn and wheat….
A batch of speculators can only drive up the “price of wheat” to the point where the demand and supply curves are in balance. They can make that happen much faster than the process of waiting for all the harvest to be in and auctioned at market. This is called “price discovery” and happens daily and at high speed. To the extent some speculators buy a lot of wheat and drive prices too high, they need to then sell out those contracts before anyone notices that fact or one of two things will happen. a) Price of their futures contract drops as others short it into the overpriced condition. or b) They are going to have a LOT of wheat delivered…
Basically, speculation can move the price faster, but not further, than it would otherwise go; though there can be wobbles on the way to equilibrium as “news hits” and folks bet on what the news will mean. But bet wrong and you get slaughtered… because the demand / supply curves win in the end.
Summary:
Want cheap porkchops and bread? Stop feeding 40% of the corn to cars and drill baby drill for oil… Oh, and use known Gas To Liquids and Coal To Liquids technology to make those into gasoline and Diesel. Help China plant more crops more efficiently too.
@ur momisugly Jimbo says:
June 10, 2011 at 5:49 am
Curiousgeorge says:
June 10, 2011 at 3:58 am
Guess what caused the tight corn supply in the US? Cold, wet weather. Yes weather and not climate.
I’m quite aware of that distinction. Did you somehow think I was inferring that climate was the cause?
I agree with many of the comments, thanks for the rational approach.
A couple of thoughts come to mind:
– is the chart adjusted for inflation
– the monetary standard changed from gold and silver to script during the time frame
– agricultural production and imports have radically changed over time
– heat tolerant crops and the related alarmist claims
Scarcity Drives Up Prices
Markets and commodity futures are forward looking, typically 6-9 months, and seasonal. The price of corn, wheat, sugar, etc. is heavily influenced by cost of transportation and weather events. The strong La Nina has, as usual, introduced droughts in some regions and flooding in other areas. In addition to the price of oil, flooding in the central midwest, for instance, has delayed planting which in turn has influenced the crop futures price.
Cost of production and transportation don’t cause scarcity but they do drive the price up.
Related to corn, there’s simply too much of it. So, ADM invented alternative uses for it like high-fructose corn syrup and ethanol in the ’60s. Not the best idea given that corn requires petrochemical fertilizers, returns very little to the soil, and takes a longer time to grow. Corn is a very inefficient crop but farmers like to grow it over other more labor intensive crops.
There are a number of factors that have influenced the price of corn and wheat (1866-2007). Its not just supply and demand.
“Fourth, I see no trace of a climate-related signal in that graph. Might be one, but if so, it’s well hidden.”
Ah, but you forgot all the conditions for all the scenarios! The vulcanos! The aerosols! The hidden heat! The comets!
Willis, any connection to the recent Malthusian-like post by Tom Friedman on the NYT a few days ago?
(http://www.nytimes.com/2011/06/08/opinion/08friedman.html)
Amazing how this theme never dies.
JDN2 says:
“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.”
++++++++++
There seems to be a great deal of speculator activity – enough that President Obama announced a few weeks ago a mildly publicised investigation into price manipulation of the food commodity market. In the same way, the ‘shortage’ of oil is really a shortage of refining capacity, not oil. As it is in no oil company’s interest to increase the total refining capacity (lowers prices!) approximately no capacity has been added since the early ’80’s.
It seems to be that turning maize into ethanol is just a money grab – it involves a subsidy, after all. Having the US toss a few million more tons of subsidised maize onto the world market will only exacerbate the existing problems created for the poor whose local maize vendors sell food below the local cost of production. Some radicals claim that this practise, perpetrated by the EU and the USA in equal measure, is intended to impoverish groups of countries and to prevent the emergence of effective competition from the food industry of those targeted countries. Whatever the case, it is a long-standing policy. One case about which much has been published is the destruction of the South African dairy industry by EU dumping milk products below the cost of hiring a few African labourers to tend their own cows. In Mexico, the same situation prevails only it is small scale maize growers and dumped US maize.
Food prices are similarly being manipulated, subsidised, used as fodder for speculation and the ‘profits’ are retained by middlemen, benefitting neither the farmers nor the consumer not the taxpayers funding the whole shebang. If you see the names of large international accounting firms popping up as beneficiaries, you are closing in on the right stink. It is a sophisticated form of rent-seeking (sophisticated compared with climate change pork-barrelling).
Food prices would probably be a lot higher if not for the natural warming since the LIA, as well as the additional plant food man has added to the atmosphere. Farms have also become more efficient, and that trend will continue as developing countries catch up to developed countries.
On the other hand, Climate Alarmism has probably made food prices somewhat higher, by punishing “carbon”, and, if the catastrophists get their way, food prices will be forced even higher, hurting the poor the most, and resulting in more widespread hunger, malnourishment, disease, and death.
Only if you think that Global Mean Temperature has any meaning. I don’t.
Another issue is the use of farmland in Africa for non-food crops. Europeans are increasingly spending their NDI on flowers for mum which they get not from Holland but from Kenya. The World Bank has encouraged this push for cash crops rather than food crops resulting in huge mega-farms run by European retailers that take all the best irrigated land and leave the poor to scrabble for food amongst the rocks.
It’s OK to worry about the poor when food prices go up, but not a single libtard politician bats an eye when creating policies that either directly or indirectly cause an increase in energy prices, which causes ALL prices to go up. Morons. Damn we need to flush the toilet that is our government (much of the world’s, too.)
Mark
The long postwar slide in real food prices is generally attributed to the technological advances in agriculture, collectively referred to as the Green Revolution. Coincidentally, that is the time that atmospheric CO2 started taking off from a baseline of around 280ppm, to around 310ppm in 1950, to 330ppm in 1975, and 390ppm today. I wonder how much of the increased agricultural abundance of the past 70 years can be attributed to increased CO2. I suspect it is a small, but non-trivial part, based on what we know in general about the effects of increased CO2 on agricultural productivity, drought resistance, etc.
Being seeing ads in the DC Metro that biofuels have helped reduce the cost of gasoline by 89 cents a gallon. How can a fuel that costs more than gasoline reduce the cost of gas when added to gas? Or is such a claim accurate? As is usual, I can find dozens of seemingly reputable reports on the web the report incredible benefits and an equal number that refute the claim. All I know is my “seat of the pants” assessment as a motorcycle racer. I would never run an alcohol blend in my race engine. For performance considerations if nothing else.
UnfrozenCavemanMD says:
“I wonder how much of the increased agricultural abundance of the past 70 years can be attributed to increased CO2.”
The rise in ag productivity closely tracks CO2: click
There is solid evidence that increased CO2 causes rapid plant growth:
click1
click2
click3
Plants don’t grow by using soil for building material. If that was the case, you would have to re-fill your flower pots as your petunias grew. Plants grow by stripping the carbon out of airborne CO2 molecules to build cellulose, and emitting the oxygen as a byproduct. More CO2 is better for plants, as is apparent in the resulting rise in agricultural productivity.
“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 …”
Exactly. Which is why I took issue with the “study” cited on WUWT a couple of weeks ago about a 1C increase in temperatures having a massive impact on (I think it was) wheat production in Canada. There is more than a 1C variance sometimes from year to year already, and yet the food production hasn’t collapsed.
We had a cool wet spring here in the US midwest. However, even though the corn planting was 2-4 weeks late, the corn is taking off like crazy. I expect to see another year of great yields unless we have dry July/August like we sometimes do.
As for ethanol impacting prices … not much in the US. We still have surpluses EVERY year. We’re just producing more corn than before. The corn for food is still sufficient. The real problem is monetary policy. Quantitative Easing is the real cause of the higher prices. It has driven up the price of ALL comdodities not just oil and food. We don’t make ethanol from silver.
As so many of your posts demonstrate, we have lazy ignorant media creating meaningless emotional reports to a population that is increasingly susceptible to such drivel by virtue of their own ignorance and inability to understand rational thought. I’ve long argued (unsuccessfully) that we need to see our failed education systems as central to the long slow decline we are in.
It’s not because of any lack of particular nuggets of imparted knowledge. It’s because we aren’t creating thinkers. We aren’t creating (Wilis type) people who can develop a meaningful context for anything they witness. As a result they’re easily manipulated by emotionally driven arguments. They’re unarmed in the battle of ideas.
As a related thought on supply and demand pricing, if we here in the U.S. were to go strongly into developing our own….shudder….fossil fuel resources, it’s possible that we could control World oil prices to the effect of seriously challenging OPEC’s abilities to do the same – or at least its ability to effect us in particular – as well as its member countries’ income with which to fund Islamofascism’s terrorism and the spread of Sharia’s blatantly supremist Totatitarianism, and even progressively threaten the existence of the Islamic Theocracies themselves via peacefully increasing the forces from within those countries directed towards the evolution of freedom and against Totalitarianism.
Therefore, I also hereby announce my intention to run as a candidate for the Presidency of the United States of America!
Geoff Sherrington says:
June 10, 2011 at 4:23 am
Willis, Why not look at it this way:
http://www.geoffstuff.com/Willis.jpg
Maybe you have uncovered another inverted proxy.
Plus, CO2 = CO2 + warming, is good! But I’m afraid it wouldn’t pass peer-review due to the lack of Catastrophe.
The food supply is being negatively impacted by the following: climatic cooling / drying (it may only be a short wave version but God forbid it’s the long wave version e.g. the end of the interglacial), reversals of human development, economic stress, the carbon markets. As the next Age of Migrations unfolds and the cooling proceeds we’ll be thrown back into a much more primitive, less scientific set of food development methodologies.
Witness it, we are walking in the footsteps of 5th Century Europeans.
David says:
June 10, 2011 at 5:18 am
Thanks, David. Did you do the calculations in constant dollars?
w.
Humans have enjoyed a relatively mild climate during the last 10,000 years or so of the Holocene. Even the 8.2 kyr event and the less dramatic “Little Ice Age” were nothing compared to what the climate has been like for hundreds of thousands of years before the Holocene (i.e. very variable and tending to be cold and dry). A strong case can be made that the mild Holocene allowed the rise of human civilization through the rapid advance of farming the major crops like wheat, rice, corn, etc.
What the Holocene has been (and some would argue it is now coming to and end) is a period where the climate stayed in a nice RANGE, not too cold and not too hot, and more importantly, not too variable. The highest peaks of the Roman warm period down the coolest of the Little Ice Age were nothing compared to the rapid and much larger swings in temperatures during the last glacial.
The price of food this month, or next, month, much like SST’s or the ENSO cycle is pretty unimportant when trying to look at longer term trends. What can be pretty certain in the longer term is that the mildness of the Holocene will end (either to get much cooler or much warmer, it makes no difference) and this will have a huge impact on the ability to grow enough of everything to feed the large human population. Preparing for a change in climate, one way or another, and hardening the food supply through the creation of hardy varieties of crops or changes in agricultural practicies is just smart and prudent.
And of course, in addition to climate changes, the food supply and food prices are now completely dependent on the flow and supply of oil. Any disruption in that, or huge spike in oil prices will complete disrupt and adversely affect the price and availability of food.
Fascinating graph! You can read history by it!
Rising grain prices are not bad news for small grain produces in the 3rd World. In many places, the small farmer has greatly benefited from the increased cash he (and his family) can get for their rice, barley, or wheat crop. It is the urban poor — and the ‘welfare poor’ in many countries — that are adversely affected. And, as many point out, the rising prices are not so much due to the actualities of grain supplies, but due instead to manipulative commodities futures trading. …… that and the senseless turning-food-into-fuel mania.