Basic food commodities are following oil’s exponential rise
It hasn’t made much impact on the news lately, but oil has been on a steady upward trend. That would’ve been big news if it hadn’t been for the even higher peak 3 or 4 years ago. It took a massive recession to deal to that.
The current glitch in the recovery has mitigated against the rise but chaos throughout the Middle East and speculation are nudging it up. Notwithstanding the outcome of political strife, growth in Brazil, China and India and the eventual US recovery are bound to force the price up.
OPEC could try pushing it down for their own ends but unless they can find some new substantial oil resources they won’t have much joy. Failing an unlikely agreement on meaningful and rapid action on tackling climate change sky-high oil is inevitable.
Unless the world economy collapses again, expect US$200 a barrel by 2015.
Good job too
Partly because of the cost of oil and partly because of increasing demand, other commodities are following suit. Brenda Cutress, New Zealand’s Food and Grocery Council executive director, estimated that between 25 and 30 percent of New Zealanders make their grocery choices on price alone.
“They are very, very price-driven, so that while you often hear about demands from some sectors for food labeling, or saying ‘do this’ or ‘do that’, there are some people who do not have the luxury of looking at labels. They buy on price, and it’s going to be really tough for them because they’ve cut their costs to the bone already.”
In other fortunate nations where people are affluent enough to buy groceries on a regular basis, I don’t imagine the situation is much different.
Food prices around the world are on the march
In New Zealand, one of the world’s foodbaskets, the painful reality is already starting to bite. It will be much worse for the world’s poor. Many seafood items which were once standard fare for ordinary New Zealand families have been priced out of their reach because affluent Japanese housewives have been prepared to pay through the nose for them. The crayfish (rock lobster), New Zealand snapper (actually a bream), paua (black abalone) and scallops which regularly graced my plate 30 years ago are now a very expensive luxury.
It’s starting to bite now with more mundane foodstuffs. The once dreaded European butter mountain is no more, the Chinese and Indian middle classes are growing faster than affordable mushrooms. They’re rapidly growing the market for dairy products and for corn, chicken, eggs and many other staple food items. The lunatic policy of using corn seed for bio-fuel is compounding the problem. Even allowing for cyclical highs, food prices worldwide are on the march. For the first time since the 1950s, we’re spending a greater proportion of our income on food than did our parents or grandparents.
London-based author and international affairs commentator Gwynne Dyer wrote:
“The price of food relative to average income is heading for levels that have not been seen since the early 19th century and will not come down again in our lifetimes.”
He pointed out that before World War II, most families in developed countries spent a third or more of their income on food. Since then, it’s consumed only a 10th of the household budget. He anticipates:
“It will probably be back up to a quarter within a decade.”
He may be a little optimistic. Here in New Zealand, butter and milk are steadily and significantly increasing in price, although they are still not high compared to real historic prices. Just as fuel prices have a trickle-down effect, so too with dairy.
Trickle-down theory – If one feeds the horse enough oats, some will pass through to the road for the sparrows
John Kenneth Galbraith
As developed countries, particular the United States, become increasingly concerned about fuel supplies and carbon emissions, farmers have been subsidized to raise crops for biofuels rather than crops to feed people or livestock – result, a 90 percent increase in international wheat prices in two years. Keith Woodford (Lincoln University professor of farm management and agribusiness) wrote in 2007:
“Biofuel production now has the potential to change almost everything in regard to agriculture and food. Indeed, it is already occurring,”
“About 25 percent of the US corn crop will go to biofuels this year, and it will be more next year. It is a major reason world grain prices have nearly doubled in the past 18 months. Every 100 litres of ethanol produced from com uses the same amount of grain as would feed a person for a year.”
Stand by for more increases in the price of dairy products, sugar, grain and who knows what else. The laws of supply and demand are inexorable. Factor in rising oil prices and we have a problem. From the Food and Agricultural Organization in 2007:
“To put matters in further perspective, the annual food import basket for Least Developed Countries in 2007 is expected to cost roughly 90 percent more than it did in 2000, which is in stark contrast to the 22 percent growth in Developed Country import bills over the same period.”
Genetic engineering has the potential to partially stem this food price tsunami, but in most developed countries GE is politically dead in the water.
Some countries stand to gain from the unfolding mess. Increased dairy prices should bring Kiwis a lot more gain than pain, although consumers aren’t finding much comfort in that. The same can be said for North American grain farmers. But just like global temperatures, rising real prices for oil and commodities are likely to be the source of much agony, and it’s not far off.
I don’t consider myself a pessimist. I think of a pessimist as someone waiting for it to rain. And I feel soaked to the skin. Leonard Cohen
And then there’s the price of electricity…
Where will it all end?
In tears at best. In blood and tears at worst. The backyard vegetable patch is making a comeback in affluent nations. For those already miserably scratching at the parched dust of Central Africa the outlook is less sanguine.
The Jehovah’s Witnesses are convinced—yet again—that Armageddon is nigh.
They may be less disappointed this time.