Two views of food supply

My daily observations in this small corner of the planet tell me this article which predicts “increasing food prices, leading to political instability, spreading hunger and, unless governments act, a catastrophic breakdown in food” is 100 per cent bull excrement.

I hope this is  right.

However, I have long worried that the North American food factory could easily break down in which case my daily observations would change quickly.

We tend to forget or ignore things which for us are not an immediate problem.  Agriculture and food are so important we should probably be paying a lot of attention to what is happening on the farm.  It is much too important to leave to those in the industry.

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

Decision making and subsidies for bio fuels

In spite of low prices for shale gas there appear to be increasing concerns about energy availability.

We need energy to keep our bodies alive and we need energy to operate the machines upon which we depend. All energy comes from the sun and we use it in different forms for food and fuel.

The problem comes when the same form of energy can be used for both  as is the case with bio fuels such as corn and sugar.  Who is to decide the balance?

Some people concerned about fuel shortages have sought and been given subsides for bio fuels.

The chairman of Nestle, wanting people to buy more of his processed food products is complaining about the subsidies as they appear to be contributing to high food prices.

So long as the subsidies continue the balance is being determined by some politician and/or bureaucrat.

If there were no subsidies you and I would be making the decision in our shopping  decisions.

As we live a 45-minute drive from the store where we do most of our shopping our decisions would probably be different from yours. If all government subsidies for all products were to be dropped we would probably have to make some major lifestyle changes.

Even so, I repeat that subsidies should be given to consumers rather than producers.

 

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

Farming land degradation

A United Nations report published this week claims 25 percent of the world’s land is “highly degraded” and 44 percent is “moderately degraded,” while only 10 percent was classified as “improving”.

http://www.google.com/hostednews/afp/article/ALeqM5iQy5L4eCxi09FKvEyerBIk6uJOlA?docId=CNG.c82786f82bcfae51b6990ccf05bfd82b.5a1

http://www.cbc.ca/news/technology/story/2011/11/28/un-world-land-report.html

Even if these figures are an exaggeration we should take the report seriously.  No matter how many technical gadgets we have and no matter how much of our economy is based on services,  if we can’t produce enough food for everyone there will be serious economic and social problems.  The less we think about this report and how to deal with its implications the more human suffering there will be.

Almost certainly food prices will rise even more than they already have.

Some people argue there is lots of surplus food and we should have no trouble feeding everyone. But food is not always produced where it is most needed and not everyone has the resources to pay for its transportation.

With higher prices it may become feasible to try new and innovative ways to produce more food such as hydroponic growing in super tall buildings.

As price is equal to the marginal cost of the last items produced those people who can continue to grow food at less cost will find themselves with some windfall profits.

In order to purchase a copy of this report a person will need at least some disposable income. The paperback costs $49.95 and the hardcover costs $140.

http://www.earthscan.co.uk/?tabid=102754

Food prices, speculators and marginal cost

Here’s a link to a rather lengthy article blaming high food costs on speculators and investors in industrial agriculture.  It discusses many of the problems currently facing agricutlure and the human suffering caused by high food prices around the world.

I don’t want to defend either group but here is an alternative theory that  high food prices can be explained by the economic principal that prices are equal to the marginal cost of producing the last item.

This principal can be illustrated with two examples – oil and telecommunications.

As the demand for oil has increased and the easily accesible oil has been extracted oil producers have sought out more difficult deposits. – and the price has gone up. If the price had not gone up or if governments had legislated  a top price,  producers would not extract the more expensive oil.  Therefore the cost of oil is equal to the cost of the last unit extracted.  The result has been windfall profits for all those producers who still have supplies of cheaper oil.

The opposite has happened in telecommunications.  As capacity has increased and costs have fallen the cost of making one more phone call is nearly zero.  In this case we have all benefited.

Agriculture is probably more like oil. As demand has increased farmers are using less productive land and more expensive inputs and costs are going up. As the marginal cost of the the last unit produced goes up so do all the prices and once again their are windfall profits.for somebody.

Food supply and pricing is complex – some people claim there is no shortage of food in the world. and it is hard to believe otherwise when one visits a supermarket or farmers market in British Columbia   But then we can afford to pay the cost of bringing food in from other places which many people on this planet cannot.

Agriculture is of course complicated by subsidies which distort prices and interfere with efficient operation of the market and this may be a big source of problems.

Now back to the article,

I suspect the authors of this article are using speculators and investors in industrial agriculture as scapegoats.  Generally it is easier to identify symptoms than it is problems and it is more satisfying to seek out scapegoats than solutions.

Speculators take the risk. of price movements.  When prices are going up there are fewer risks although generally prices go up and down even if there is a strong trend.   If they weren’t in the market then somebody else would take the risk and make the profits or losses

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