Pester your friends about corn!

As part of this project, we created a powerpoint presentation that we hope will stimulate discussion about this really complex issue in not so complex language. Feel free to share it with friends, family and fellow students. Click here. to send us an email.

Vitamin T

“’Yesterday these cost me six pesos. Today, it’s eight. Tomorrow, who knows, ten?’ complained Rodrigo, pointing at the three greasy tacos on his paper plate. ‘Vitamin T is rich man’s food now,’ he adds. Vitamin T, a staple of urban diet [in Mexico], includes tacos, tostadas, tamales, tortillas, and most any kind of street food concocted from corn.” -The Plot Against Mexican Maíz

The corn crisis may not be the fastest vehicle towards global hunger, but it is definitely at the front of the caravan – or funeral procession. The North American Free Trade Agreement (NAFTA) could be argued as the imperialist autobahn towards an already dire issue.

Our blog and powerpoint presentation are meant to bring awareness and education on ethanol and the inadvertent effects on world hunger. I don’t think any of my group mates suspect any level of the feds locked themselves up in a cellar, twisted their fu manchus and inked out a treaty that has also served as an obituary to so many. I seriously think it just happened that way. We can’t be too shocked that our nation found a quick fix and didn’t think of how others would be affected by our actions in the long term. Something like the corn crisis in Latin America could have easily been cast by the wayside since the lack of corn doesn’t affect us so drastically as much as it has hurt them. Not having such a painful and adverse effect on our own nation, can we discount the theory that the continuing such laws may invoke genocide?

NAFTA, enacted by the Clinton administration, was implemented through Canada, the United States of America and Mexico on January 1, 1994. It was the first agreement that gave equal agreements between two developed countries and a developing country. It immediately eliminated many tariffs and ended all non-tariff barriers to agricultural trade between the USA and Mexico. There was a phase out period of 5 to 15 years making full implementation on January 1, 2008. Compared to USA and Canadian agricultural sectors, Mexico’s developing technologies, economics and policies are not as equal and therefore not equally utilized or served in such a pact.

“We are the corn! If it is poisoned, then so are we!”
-Zapatista Anti-NAFTA Chant

There is an uprising in our neighboring country and they are decrying a pact we authored and sold throughout North America by promising economic surges of capitalist proportions. Seventeen Mexican non-governmental organizations have brought allegations to NAFTA biotech scientists that genetically modified corn, which is being pushed by USA monopolies in answer to the Latin American corn shortage, is threatening Mexico’s 57 indigenous peoples. The Zapatista Army of National Liberation ( Ejército Zapatista de Liberación Nacional, EZLN) is a revolutionary militia out of the state of Chiapas in Mexico, one of the nation’s poorest and southernmost states, bordering Central America. They are no stranger to protests and the very fiber of their being is agriculture. They are Mayans – a people indigenous to Mexico and Central America who claim to be the People of the Corn and whose sacred texts say that the gods created the Mayans from maíz. At a NAFTA meeting addressing the allegations, an indigent farmer echoed the threat Zapatistas say they must rally against – genocide. Seizing the mic, the farmer stated that the NAFTA scientists are guilty of genocide due to their endorsing of transgenics. The Zapatistas have begun freezing their seed corn in an effort to preserve pure Mayan germ plasma and to ensure its – and their own – survival. The farmer screamed at the USA scientist, accusing them of killing first their own native people, and now Mexico’s.

This may all seem like unnecessary drama or foreign rantings to most of us. But we can be assured that it is very real to a nation of millions who are dependent on a food staple that we treat as a commodity and experiment with in an attempt for cheaper gasoline. So what does this mean to us? How are we affected? The answer may be uncomfortable as it makes us the enforcer of something we would not want to be on the receiving side of.

Corn is Only Green in the Field

Corn based ethanol is being promoted as a green solution to America’s dependence on foreign oil. However, it isn’t as green as you might think. Furthermore, it won’t provide so much fuel as we think.

Production of corn ethanol is very resource intensive and a net carbon emitter, creating more pollution than it prevents. Only sugarcane-based ethanol can reduce carbon emissions enough to offset their carbon production.

100% of U.S. grown corn and soybeans (mixed in with petroleum gas) will only meet 20%of our on-road fuel needs. So to meet global demand, corn and soy farmers in Brazil are expanding into pasturelands. Ranchers who are displaced from their pasturelands clear the Amazon rain forest or the Cerrado savanna for grazing.

One of the more common ways to clear forest is burning it, obviously releasing carbons. Because forests, marshes and grasslands help keep air clean by sequestering carbon emissions, destruction of these lands releases carbon even without burning.

750,000 acres of Brazilian rain forest were destroyed in the last 6 months of 2007. Not so green huh? For the full story, check out Michael Grunwald’s article in Time.

What do experts say? An Op-Ed round up

Paul Krugman, NY Times editorialist and winner of the Nobel Prize in Economics, identifies bad policy as one of the reasons for the recent increase in food prizes and corresponding food riots. Land is being diverted from the growth of food to the growth of feedstock for ethanol. He boldly says that starvation is increasing because American politicians are so consumed with getting elected, rather than making sound, long-term policy.

Amartya Sen, the renowned scholar on famines, concedes that some of the rise in food prices is caused by natural conditions. But he also points his finger at “misdirected government policy.” Specifically, he believes that corn subsidies and mandated use of ethanol in the United States has created unnecessary competition for what should be food.

Lester Brown and Jonathan Lewis, writing in the Washington Post, argue that the ethanol craze happened for good reason. The ethanol mandates were created for the right reasons (saving the Earth and our national security), but now that evidence is mounting, ethanol is not the best option. The energy answer is not clear, it may actually be harming the environment. The national security issue is false when we are only able to make enough ethanol to cover a small amount of our oil consumption. Finally, they argue that ethanol is contributing to global hunger because of increasing food prices.

Trade Offs

There is an old adage about complicated situations that has been attributed to a 14th century English philosopher, William of Occam. It’s a simple bit of logic that is not much in vogue these days but perhaps a good idea to keep in mind when trying to sort out all the issues that surround the conversion of corn into ethanol. William’s words of wisdom simply put suggest that, “All other things being equal the simplest solution is the best.”

I like to keep this in mind as I sort though the interface between corn production, energy independence and the world’s food supply since each of these topics, by themselves, is the subject of intensive discussion and debate. So following Will’s advice let me try to define the basic facts that we know about each of these topics.

Corn, generally speaking, has been a major crop in American for thousands of years. We now grow more of it, about 65 million metric tons this year, than the rest of the world combined and every year our government pays the corn growers a subsidy. We also export more; about 35% of the world exports are US grain and corn. Most of this corn is feed corn, which is fed to our poultry and livestock industry.

This year it is estimated that the United States Department of Agriculture, USDA, will pay out more than $10 billion dollars to corn growers. How much does it take to fatten up that calf? Well here is a simple comparison of how much corn it takes to make a pound of each animal:
Chicken = 2.6 pounds of feed
Pork = 6.5 pounds of feed
Beef = 7.0 pounds of feed
Source: USDA Economic Research Service

Still confused, well add to this the fact that from 2007 to 2008 the price of corn rose by 60% and that from July of 2008 until now it has fallen by almost 60%. This mirrors almost exactly the same drop in a barrel of oil but here’s the difference… you can’t eat the oil!

When oil was $140 per barrel a bushel of corn rose to almost $8.00. At this price we had food riots in many parts of the world. The same barrel today is less than $60 and corn is selling for $4.50 a bushel. Since there is no direct linkage between these two important commodities why do they track one another so closely?

We asked for William’s help and here’s what he thinks. “It’s the ethanol stupid” he quipped. “When we convert it into fuel you can’t eat it!”

Thanks Will.. but there’s a little more to it than that.

Now that we have stated the basic facts about corn lets talk about oil and energy independence. In July of this year oil was selling for $147/brl. It is now below $60.00. While major oil companies have been through these cyclical troughs before they have never had to blend ethanol into the fuel supply. Although at present ethanol represents less than 1% of our nation’s energy needs it takes about 20% of our annual harvest to produce this much ethanol. In 2005 Congress mandated the introduction of certain volumes of renewable fuels, corn derived ethanol, into retail gasoline. EPA then set goals of 4 billion gallons in 2006, 4.7 in 2007, 5.4 in 2008, 6.1 in 2009. 6.8 in 2010, 7.4 in 2011 and 30 in 2012. These seemed reasonable when a bushel of corn sold for $2.00, a gallon of gas was $2.25 and a barrel of crude oil was $50.00.

Still confused well let’s see if we can take Will’s advice and make it simple.

In America we spend about ten cents of every income dollar on food and about three cents of that on corn based food. In many other parts of the world less fortunate people must spend seventy cents of every dollar on food. They must also spend about 30% of that seventy cents on corn-based foods.

If the price of corn from the worlds major exporter doubles to $8.00 a bushel it will now cost him about forty two cents of every food dollar to get the same amount of corn. Without other food sources “food insecure countries” have no alternatives but to live on less food. And as Will tells us…if you burn it you can’t eat it.
It’s that simple.

Rising food prices and food aid

We do know that world food prices have increased in recent years, with the exception of the recent worldwide economic downturn. This is problematic because commodity prices are tied to the amount of humanitarian food aid that can be given to poor countries. One study reported that there is an inverse relationship between food aid shipments from the United States and commodity prices. This means that they move in opposite directions, so when commodity prices go up, the amount of food aid shipments go down.

A recent article in the Economist reported that the world’s poor are the people who are most impacted by the rising price of food. This same article argues that governments need to liberalize their economies even further because the subsidization agriculture, and the biofuel industry, has in part caused the increased food prices.

The World Food Programme has reported that if they want to distribute the same amount of food as last year, they are going to need 700 million more dollars.

Getting Ready for the Presentations

So I enlisted the help of my friends and family to get the popcorn bags together. We spent the evening filling the bags and talking about the issue. It was a great opportunity to practice talking about a subject I don't feel that knowledgable about. I got some great feedback and they became more informed about the food for fuel issue.

--Lori

The High Price of Food: Don't Blame the Free Market, by John Murphy

Around the globe, food prices have soared over the past few years. International prices for the most critical staples -- rice, wheat, and other cereals -- have doubled or tripled. Right on cue, some pundits have been quick to blame the "excesses" of the free market for these price hikes. Are they right?

Let’s first figure out what isn’t behind spiraling food prices.It isn’t farm subsidies, which are so often to blame for the many distortions in world agricultural markets. Widely respected economists Jagdish Bhagwati and Arvind Panagariya, writing in the Financial Times, point out that the farm subsidy reductions contemplated in the global Doha Development Agenda negotiations "would reduce the supply of grains from some countries that subsidize them and increase it from other countries… The net effect on supply would be negative."Subsidies cause overproduction -- and depress prices.

So the recent increase in food prices isn’t caused by subsidies.It’s hard to blame bad weather, let alone climate change. The weather is usually blamed for crop failures that drive up prices, but the UN’s Food and Agriculture Organization is forecasting in its June Food Outlook a bumper crop for cereals. For 2008/2009, the FAO is projecting a 3.8% increase in world cereals production over 2007/2008, which actually set world records. So, there’s more food to go around than ever before…So what is to blame?

Biofuels have been a significant factor, though there’s debate over how much they are affecting food price increases. White House Council of Economic Advisors Chairman Ed Lazear on May 1 explained his view that "ethanol accounts for somewhere between 2 and 3 percent of the overall increase in global food prices. And the reason for that is that ethanol works primarily on corn. It has increased corn prices substantially by about 33 percent.

But corn is only 30 percent of all grain, and grain is only 20 percent of all food. So when you multiply those together and take that into account, you end up with about 2 to 3 percent."But many observers believe this analysis is too sunny. According to an unpublished World Bank report excerpted by Britain’s Guardian newspaper on July 4, the diversion of food crops to create biofuels has caused world food prices to increase by 75%. "Rapid income growth in developing countries has not led to large increases in global grain consumption and was not a major factor responsible for the large price increases," the report said.Even assuming the truth lies somewhere in between 3% and 75%, biofuels appear to be a significant driver of food price increases. Export bans and export taxes are the other main factor.

"To protect domestic consumers from rising world prices, dozens of governments have curbed the export of rice and wheat -- principally Argentina, Brazil, Russia, China, India, Ukraine, Vietnam, Cambodia, Pakistan, Egypt, and Indonesia," explains Swaminathan S. Anklesaria Aiyar of the Cato Institute. Terry Stewart of the law firm Stewart and Stewart recently told the Global Business Dialogue that as many as 31 countries around the globe have imposed export controls on key staples.By prohibiting grain exports or taxing such exports heavily, these governments have caused trade in grains to contract painfully.

"Export controls have reduced the amount of rice and wheat available for world trade," Aiyar explains. "The FAO estimates that world trade in rice will fall from 34.7 million tons in 2007 to 28.7 million tons in 2008, and trade in wheat from 113 million tons to 106 million tons. Actual trade may fall even more, as more and more countries impose export controls. Absent these limitations, it would be inconceivable for trade in grain to contract so sharply after record world harvests."

So the main factors driving food prices higher are trade barriers (export bans and taxes) and ethanol subsidies. It might be nice to just blame the weather, but it’s clear that measures undertaken by governments to mitigate the pain of soaring food prices or diversify energy sources are only making them worse. As Confucius said, bad government is worse than fierce tigers.

July 30, 2008 at 04:38 PM