Food and Fuel Myths
By Dr. Mark Edelman and Dr. Barry Flinchbaugh
© Copyright Agri-Pulse Communications, Inc.
Edelman: Professor, I was looking at the Consumer Price Index (CPI) to assess the food versus fuel debate. During the past 12 months, at home and away from home food prices increased 2.9%, however, gasoline prices rose nearly 27.7% during the same period. The most recent Consumer Expenditure Survey says we spend 12.8% of our income on food at home and away from home, but we spend only 5.4% of our income on gasoline.
Flinchbaugh: Your numbers are interesting but they hide the fact that fuel is used to transport intermediate goods and services that are not reflected in the direct gasoline purchases by households. Petroleum is a basic commodity that underpins all stages of production and all sectors of the economy. So when you factor in the 27.7% gasoline price increase on all sectors, the impacts are a lot bigger than the CPI shows. While food prices have increased some, the increase is small compared to gasoline. A review of studies concluded global supply and demand factors and decline in the value of the dollar had more to do with the 2008 food price increases than development of biofuels. Other studies find gasoline prices would be up to $.50 a gallon higher for consumers, if biofuels were not available. Furthermore, protein from the corn used to produce biofuels is returned to the livestock sector in the form of distillers grain used for livestock feed. So the story is more complex than the public is led to believe.
Edelman: Ok, the blindfolds must come off. Here is the big picture. There were 6 billion people in the world in 2000. In 2011, we have 7 billion people. Projections for 2050 show we'll have 9 billion people. Roughly 50% more food is needed to feed everyone in less than 40 years. At the same time, the U.S. has less than 5 percent of the world's population, but our economy accounts for 22% of the world GDP and uses 25% of the world's energy. As the world grows, the global population will also want more energy. Economic growth in China, India, and other developing nations means the U.S. relative share of the world's economy will likely decline, but that does not necessarily mean that the U.S. standard of living will decline. Our living standard depends on how we respond to the challenges of global competition. Among the strategies to sustain our living standard are policies to encourage investment in renewable resources and deployment of technologies that provide opportunities for the world to produce more with less. It can be to our advantage if the rest of the world becomes more renewable, productive, and efficient along with us.
Flinchbaugh: That sounds like a global "Great Society" program. You need to separate out those who have ability to pay for food and fuel from those who won't be able to afford it. For the past 3 decades, about 800 million people have been malnourished. With the added population pressures in the future, there will be additional people facing malnutrition and starvation. Allowing biotechnology to move forward is one of the few strategies that can help to increase our global food and energy production. What anti-biotech extremists fail to realize is that if blanket opposition to biotechnology is successful, the results of their efforts are likely to be more starvation and less energy in the future. It takes money and energy to produce food and to get it to those who can afford it. Getting food to those who cannot afford it often doubles the cost. The policy question regarding those who cannot afford food or energy is: "Who will pay their bill--both domestically and internationally?" Should extra costs and limits be imposed on consumers and producers or will a mix of government, charitable institutions and philanthropists pay the bills for those who cannot afford it?
Edelman: The anti-biotech and environmental movements are not the only areas infected by acrimony and extremists. As energy prices rise, it makes economic sense to grow more food locally. New production systems are being deployed to extend local growing season for fruits and vegetables. Schools and institutions are sourcing more food locally as they try to promote healthy eating habits to combat child obesity. At the same time there are lots of polarizing views on these trends among food and agricultural interests. Barry, it is inconsistent to claim we ought to have a market-oriented policy on one hand, and then later argue against consumer choice on biotech food, on organic food, or on energy at the gas pump. Historically, agriculture has been more effective when it speaks with one voice and breaks bread with environmental, consumer, and rural leaders on basic issues. Bi-partisan tolerance and discussion in the middle help move extremists to the sidelines so broader coalitions can be built.
Flinchbaugh: Your point raises questions about policies that arbitrarily favor the allocation of resources to food production over fuel production or vice-versa. I remember only two periods when government intervened directly to control food prices and impose export embargoes to allocate returns and production across alternative market channels. In both cases the intervention was short term and temporary rather than a long term policy. It is more efficient and often cheaper to provide targeted subsidies to the consumers who cannot afford their food and fuel. Rising food and fuel prices will stimulate more local food and fuel production around the globe. The world isn't creating more natural gas, petroleum, or coal, but we are deploying new technologies to expand our reserves. Natural gas reserves have increased from 30 years to 90 years in less than a decade. Crop yield trends continue to increase here and abroad. With the right incentives, improved food production and renewable energy technologies can be deployed around the globe in developing nations, as well as, higher income countries.
Edelman: So it is not "food versus fuel," but a "food and fuel" issue.