The Vampire Squid and the Garden

Drought map via NOAA
Yellow is lower level drought, dark red is higher

The Globe and Mail Report on Business (01 August 2014, p B1, B8) ran a report on how rising prices are starting to impact consumer meat choices, and how that's affecting the bottom line of Maple Leaf Meats (who are currently restructuring). The article points out how bacon prices are up by about 26 percent and pork chops are up 18 percent, even though Statistics Canada claims prices are only up 3 percent from a year earlier.

There are a number of reasons offered for the rise in meat prices; the arrival of a piglet-killing virus (porcine epidemic diarrhoea) which has driven up the cost of a pig by 24 percent, the drought of 2012 that drove up the cost of feed and led to herd culls, and a 5 percent depreciation of the Canadian dollar pushing prices higher north of the border. BMO Capital Markets economist Aaron Goertzen takes the “most obvious statement of the year” award by pointing out that consumers are avoiding the now-pricier beef and pork by buying chicken or cheaper kinds of protein.

But one reason for higher prices gets no traction in the article at all—or indeed pretty much anywhere else with the exception of the New England Complex Systems Institute (NECSI). NECSI has been warning about the influence of futures traders in the food system for several years now. As did Matt Taibbi in Griftopia: bubble machines, vampiresquids, and the long con that is breaking America (2010), upon which I'm relying for for describing the system.

In a functioning commodity market, there are three players; buyers, sellers, and speculators called futures traders. Buyers and sellers (farmers and food companies) can arrange contracts with each other to guarantee the price of a commodity like wheat or corn (or pretty much any other physical substance, like platinum or oil). A producer wants to ensure that they get a fair price for their wheat, so they offer a future delivery for an agreed-upon price. This works for a buyer, as they want to have a certain and non-fluctuating price for the commodity they need. Called physical hedging, these contracts allow an amount of certainty in an uncertain world. If the price of a commodity rises unexpectedly, the producer forgoes some profit in exchange for a guaranteed price. If the price drops, the buyer forgoes some profit in exchange for a guaranteed price.

Peasant Agriculture Is Not Enough

via Naomiklein.orghttp://www.naomiklein.org/main

As Naomi Klein has so ably dissected in her book The Shock Doctrine, disaster capitalism has learned how to maximize profit during periods of social crisis. If necessary, these same disaster capitalists (people like Dick Cheney, with his deep ties to Halliburton), will engineer crisis' in order to move additional wealth into their (and their corporation's) pockets. This is one of the reasons that the modern corporation can be seen as psychopathic: what to normal sane human beings seems like horror and destruction (places such as Haiti, Iraq, and Afghanistan) are seen by disaster capital as opportunities to be created and then exploited. Particularly if public money can be funnelled into their private profits.
it is not new thinking that communities in crisis---crisis such as war or natural disaster or other such upheavals--are communities which are vulnerable. Simply imagining or remembering a crisis in your own family and extrapolating out to a city, country or social grouping should display the degree of vulnerability these communities experience. But what happens when the crisis is planetary?

via Mother Jones

Global warming, or global climate change, is such a crisis. But because it is so slow moving (like an avalanche, it starts slow and build up size and power as it continues), we're having trouble recognizing it. And because the initial effects are felt most in the developing world, we in the developed world (by virtue of our institutionalized alienation from the natural world) can choose to avoid and ignore the first overhangs of snow breaking loose and starting down the mountainside.
Currently, farming is in crisis. A recent Bloomberg article remarked:

The global food system will remain “vulnerable” in the years to come as a growing population boosts demand for crops and climate change makes weather disruption more frequent, according to the World Bank. 

Friday Food Link-straveganza

With a warning that Canada should be paying particular attention to--but won't--the Guardian is reporting on the public policy failure around floods.

A high proportion of the most valuable agricultural land is at risk of flooding, the MPs said. Photograph: Christopher Furlong/Getty Images  via The Guardian

Ministers are failing to protect the UK's most valuable farmland from flooding, posing a long-term risk to the security of UK food production, according to an influential group of MPs.
A run of poor weather since 2011 has led to extensive flooding of properties but has also severely dented the production of many foods, with the UK now being a net importer of wheat.
The environment select committee's report also said the government's spending by the Department for Environment, Food and Rural Affairs (Defra) to protect homes from flooding is not keeping pace with the rising risk, which is increasing as climate change intensifies downpours, and were also failing to act effectively to block the building of new homes on floodplains.
"Record rainfall in the past two years has led to extensive flooding, cost the economy millions and caused disruption and distress to householders and communities across the UK," said Anne McIntosh, a Conservative MP, and chair of the commons select committee on environment, food and rural affairs.
Extreme weather events are not just a problem for the UK. In a related article, the Guardian reports on the new UN World Meteorological Organization report that points out the unprecedented climate extremes seen around the world over the last decade.

If you think the world is warming and the weather getting nastier, you're right, according to the United Nations agency committed to understanding weather and climate.
The World Meteorological Organization says the planet "experienced unprecedented high-impact climate extremes" in the ten years from 2001 to 2010, the warmest decade since the start of modern measurements in 1850.
Those ten years also continued an extended period of accelerating global warming, with more national temperature records reported broken than in any previous decade. Sea levels rose about twice as fast as the trend in the last century.
A WMO report, The Global Climate 2001-2010, A Decade of Climate Extremes, analyses global and regional temperatures and precipitation, and extreme weather such as the heat waves in Europe and Russia, Hurricane Katrina in the US, tropical cyclone Nargis in Myanmar, droughts in the Amazon basin, Australia and East Africa, and floods in Pakistan.

Looking at something a bit lighter, let's learn how to make an excellent lamb kofte, shall we?  Felicity Cloake writes in the Word of Mouth blog about the process. As an aside, this is part of a series of posts; How to Cook the Perfect. And this is how you present a recipe in a blog post, people. We've really got to up our game. This gives you the information you need, the context to work from, and a sense that maybe the writer has actually tried to make the recipe (I'm reminded of the scene in Julie and Julia where Julia Child discovers that Ms. Rombauer hasn't checked the recipes in Joy of Cooking to see if they even work). It's like linking to source articles when writing an opinion piece--it adds a level of verifiability to your work.

So here's Felicity herself to tell you about the process of making kofte.

There's also a report that world food prices have fallen--not much, but still...

Global food prices fell 1% in June due to improving supply prospects, the United Nations' food agency has said , raising forecasts for wheat and maize output in the new season.
Food prices spiked during the summer of 2012 due to a historic drought in the US but prospects for a rebound in global grain supply and good weather forecasts are now weighing on markets.
The Food and Agriculture Organisation's (FAO) price index that measures price changes for a basket of cereals, oil seeds, dairy, meat and sugar, fell for a second month running to 211.3 points in June – its lowest level since February.

 That puts food prices below the threshold for civil unrest, according to NECSI--the New England Complex Systems Institute, about whom I've blogged before.

If you haven't discovered it yet, there's a lovely interactive map  sponsored by The economist that lets you see where you--and pretty much everyone else, ranks in terms of food security. Click on your country (or the country you're interested in) and pull up the world ranking of food security and what went into generating that rank. Canada, by the way, ranks 8th worldwide. Among the key findings?

Falling national incomes hurt food security in some developed countries over the past year.

Greece recorded the steepest fall among developed nations, dropping six places. Greece’s GDP has plummeted by more than 20% since the 2008-09 global recession. Income per person dropped in most advanced economies in the past year, the result of weak economies. Although this reduced food security in these countries, they remain, for the most part, in the top 20% of the index and thus are not in serious danger of food insecurity.

And, finally, if you're not following the Journal of Peasant Studies, you're missing out. Open source, peer reviewed.

Food Price Deflation / Inflation

Swedish farmer from Wikipedia

A report from Radobank in the Netherlands is being reported on (primarily) in the business press, suggests a rather miserable year or so ahead for consumers. As reported in the Guardian, the American drought of this summer has started off a mass cull of grain-fed stock, due to rising feed prices. This means primarily hog and beef herds are being rapidly reduced, but on can expect poultry to be next if prices continue to rise (chickens are one of the most efficient converters of grain to protein, but even they can become uneconomical if prices rise too far).
In the very short term, this liquidation means lower meat prices as farmers cut their hog herds back (hog herds can be rebuilt much quicker than cattle--six months or so as compared to a year and a half for cattle).
But even with the near term drop in prices, the long term outlook being predicted by Radobank is a 14% rise in the price of the average developed world food basket--primarily because of a rise in meat prices. Meat and dairy account for about 52% of the cost of the standard global food basket, so an increase in meat prices has a greater inflationary effect.

Nicholas Higgins, a Rabobank commodities analyst and author of the report, said: "There will be an initial glut in meat availability as people slaughter their animals to reduce their feed bills. But by next year herds will be so reduced that there won't be enough animals to meet expected demand and prices will soar."

The current liquidation has depressed pork prices, but by mid-2013, demand is expected to outstrip supply, and futures markets are already forward pricing a 31% increase for pork delivered in July 2013.
Rabobank predicts the overall price of the basket will soar to a record 243 on the United Nations Food and Agriculture Organisation (FAO) index next summer, which is well above the numbers the New England Complex Systems Institute suggest bring social unrest.It is not very likely that we will experience food riots in North America, as we have access to food alternatives--we can always switch back to staples if meat prices rise too high, so hunger is less of a factor here. But as I've said before, it's a hell of a way to test a theory.

More Than Enough

So we're facing another global food crisis--this time because of the American drought. Food prices are expected to jump up to 10% by this time next year, millions will starve,and the speculative money men moving in and out of the food system will make out like the bandits they are. One in  six people on the planet are currently food insecure, and we can expect that number to expand appreciably by next year. NECSI is warning about social disruptions, an even wider spread "Arab Spring," and generally its the end of the world.
And yet. And yet. It really is so unnecessary a reaction. Even with the US drought there's more than enough food in the world to feed everyone.  Dana Gunders, over at the National Resources Defense Council, has just released an issue paper on food waste (pdf) in the United States. From her blog:

Food is simply too good to waste. Even the most sustainably farmed food does us no good if the food is never eaten. Getting food to our tables eats up 10 percent of the total U.S. energy budget, uses 50 percent of U.S. land, and swallows 80 percent of freshwater consumed in the United States. Yet, 40 percent of food in the United States today goes uneaten. That is more than 20 pounds of food per person every month. Not only does this mean that Americans are throwing out the equivalent of $165 billion each year, but also 25 percent of all freshwater and huge amounts of unnecessary chemicals, energy, and land. Moreover, almost all of that uneaten food ends up rotting in landfills where it accounts for almost 25 percent of U.S. methane emissions.
Nutrition is also lost in the mix -- food saved by reducing losses by just 15 percent could feed more than 25 million Americans every year at a time when one in six Americans lack a secure supply of food to their tables. Given all the resources demanded for food production, it is critical to make sure that the least amount possible is needlessly squandered on its journey to our plates.

From the NRDC website

The same is true worldwide. Canada is wasting about the same amount of food as the US, according to The Star. And the European Union released a report in 2010 that points up their problems in this area.
And its not something that's easy to do anything about. It may not do farmers or consumers any good, and it certainly does nothing for those of us who are food insecure, but the level of waste is a big profit centre for the food industry.
It is also an untapped resource. Much of what is disposed of in landfills (where it contributes methane to the global climate change problem), is compostable. From farm to garbage, we're tossing away expensive and highly recyclable material. And worse, we pay taxes to get rid of it.
The solutions are pretty straightforward. Composting, of course. But using waste bits to make stock would help. Heck, sending elementary school students out to play for twenty minutes before lunch leads to less waste when they eat their lunch. Schools are well placed to eliminate food waste from the general waste stream. And lowered demand for food will keep prices down. It might impact food industry profits--particularly if we were to make it much more expensive to dispose of food waste. But that's a price I'm willing to pay.

James Hansen

...has been trying to get people to pay attention to the climate change crisis for quite a while now. He's been pretty gosh-darned prescient about it as well. Now, even moneynews.com is running a Thomson/Reuters article about the threat to global food security. And they're hitting the proper notes: big trouble is here. More people on the way. Distribution, not production, is a major problem.
There's even a mention of stockpiling more grain. Now, for 14,000 years, civilizations have known that keeping about five years supply on hand was about right. Famine would come--and it always came, although often for different reasons each time--and five years of grain was about right to cover shortage and ensure seed supplies. When civilizations could not or would not keep stores on hand, when they became reliant on imports to cover shortages, they failed. And usually very quickly. As usual, I point to Empires of Food as essential reading.
But notice, despite NECSI's work trying to bring attention to the role of speculative money in driving food bubbles and crisis, still almost no mention of it in the business press.

A Dangerous Way To Test A Theory

Don't think for a minute that I think the folks over at NECSI (The New England Complex Systems Institute, about whom I've written before) are tenting their fingers and cackling in a Mr. Burns-like way while they manipulate the world's food markets in order to test their theory of food price spikes and social unrest. Rather, it is the rest of us who have embarked on the testing program. The researchers at NECSI have been modelling food prices, ethanol production and the effect of speculative money on the international food system. In their model, once the FAO (Food and Agricultural Organization) food price index hits about 215 (or 190 adjusted for inflation), all hell breaks loose. Food prices have been advanced as the most reasonable explanation why, for instance, unrest in the Middle East went so quickly from regional to widespread, birthing what we now know as the Arab Spring. And the Arab Spring followed one of these price spikes. And it makes sense. Bread riots are a recurring theme throughout history. Hunger is a strong motivating force.

FAO Price Index at current prices (black curve) and corrected for inflation (blue curve) between January 2004 and May 2011. Red dashed lines signify the beginning dates of food riots and unrest in North Africa and the Middle East. Black and blue horizontal lines represent the current-price and inflation-adjusted food price thresholds for riots. Bar-Yam et al/arXiv

 
And the researchers at NECSI, following their noses, noted last year that world food prices were going up (driven by corn-to-fuel programs in the US, but even more so by speculative money), and the food price index looked like it would peak above the magic 215 again in 2012. And then climate change kicked in and drought spread across North America. Big money has already bid prices up, driving another speculative bubble in food. To quote from the NECSI press release:

The worst drought in the American Midwest and the highest temperatures in a half-century are poised to trigger an imminent global food crisis, scientists at the New England Complex Systems Institute said Monday. NECSI has warned for months that misguided food-to-ethanol conversion programs and rampant commodity speculation have created a food price bubble, leading to an inevitable spike in prices by 2013. Now it appears the "crop shock" will arrive even sooner due to drought, unless measures to curb ethanol production and rein in speculators are adopted immediately.

FPI over time From the NECSI website

 Canada and the US are probably going to be relatively insulated from the worst effects. We'll see a rise in food prices of, well, 4% or so is being bandied about. But if the markets actually do get crazy, this will probably rise significantly. Spending more on food is not the worst thing that could happen to us—North America has some of the lowest food prices ever in the history of civilization. But taking money out of discretionary spending and putting it toward food will push us closer to a full-on depression and the potential for major social unrest. It is interesting to me that in all the coverage that the current NA drought is getting, the risk to, and effect on, food prices from speculation has been pretty much ignored. Yet, as NECSI research has shown, “while the behavior [of the food price index] could not be explained by supply and demand economics, it could be parsimoniously and accurately described by a model which included both the conversion of corn into ethanol and speculator trend following.” Like the idea of serious banking reform after the appalling criminality of the past decade among the international banks (as I write this Standard Chartered is taking a hammering after the New York state regulator accused the U.K. bank of being involved in laundering money for Iran), reining in speculation in the international food market has been deemed “off the table” apparently. We are facing a bleak future in which billions of us will starve to death, not because there isn't enough to eat, but rather because of the imperative to maximize profit. We've seen this before: in Ireland during the Great Famine, there was always food in the markets, there just wasn't any money for the poor to buy it. And in many famines since the 1950s, food aid has been used as a way to dump excess production and often to destroy local food production and distribution networks to allow foreign companies into the market (this would be one of the major reasons behind the homogenization of world food culture). So once again we will see why forgoing food sovereignty for reliance in imported foodstuffs is historically a very bad idea. And the message will be delivered on the baked bread scent on the breath of the starving.

Pressure's On

The pressure's indeed on--the World Bank is reporting global food price increases, increases due to global warming and oil price increases.




The April Food Price Watch report says "Global food prices have increased by 8% in the last four months since December 2011, and in March 2012 were only 6% below their February 2011 historical peak. All key food prices have increased, except for rice."

Cold weather in extreme cold in Europe, the Russian Federation, and other countries is blamed for upward pressure on wheat prices, while hot and dry conditions in South America have affected sugar, maize, and soybeans. There is a little good news in that a slowdown in maize-to-ethanol conversion in the US is helping put a brake on price rises, as is aa lower value for the Euro.Also, record prices in 2010-2011 have encouraged more planting, which should help offset weather/climate induced shortfalls.
The report also points out some dramatic domestic price changes around the world:

Wheat price increases between March 2011 and March 2012  reached 92% in Belarus and 56% in Moldova, while they declined by 30% in El Salvador, 19% in Kyrgyzstan, and 16% in South Africa. The price of maize rose by 82% in Malawi, 80% in Ethiopia, and 71% in Mexico. The largest maize declines occurred in Honduras (31%), Somalia (20%), and El Salvador (19%). Rice prices in the same period rose by 125% in Uganda, 54% in Tanzania, and 38% in Rwanda. In turn, Bolivia saw its rice prices decline by a more modest 21% and Bangladesh's declined by 18%.

So while there have been some declines in prices, the rises have more than outweighed them. But once again, the shortfalls in production, while worrying, and the price increases, while scary, do not mean that there isn't enough food in the world. Famine is not an automatic byproduct of these shortfalls. Starvation will result from a lack of purchasing power, not a lack of food.
And, to repeat:

 Models that just treat supply and demand are not consistent with the actual price dynamics. There is a consistent firm upward pressure on food prices from the increased demand from ethanol conversion programs, but the big driver of food prices is "specifically due to investor speculation."

NECSI Update

The New England Complex Systems Institute and their President, Professor Yaneer Bar-Yam who's study I quoted when writing about debt and food prices, have issued an update to the landmark study done on the relationship between corn ethanol production, food commodity speculation and food prices. And Professor Bar-Yam is pretty convinced we're not done with the madness yet.
The Institute's web site hosts three very interesting short videos (regretfully, not embeddable) about the relationship of corn ethanol production, food commodity speculation, and food prices. The first shows how food prices between 1980 and 2000 fluctuated moderately around a consistent value, where prices neither spiked nor collapsed. Then food prices begin a dramatic upward climb peaking in 2008 and 2011. These two spikes are rather dramatic, and Professor Bar-Yam draws a direct link between the price spikes and social unrest. This is shown in the second video which links social unrest (like the Arab Spring) with food prices between 2004 and 2011.
The third video graphs actual food prices with increases in demand from ethanol production and speculation. To quote the update:

Our analysis shows that dominant causes of price increases are investor speculation and corn to ethanol conversion. Models that just treat supply and demand are not consistent with the actual price dynamics. The two sharp peaks in 2007/2008 and 2010/2011 are specifically due to investor speculation, while an underlying upward trend is due to increasing demand from ethanol conversion.

 Models that just treat supply and demand are not consistent with the actual price dynamics. I thought that bore repeating with emphasis. There is a consistent firm upward pressure on food prices from the increased demand from ethanol conversion programs, but the big driver of food prices is "specifically due to investor speculation."

"The food price bubble of 2011 caused widespread hunger and helped trigger the Arab spring. In 2013 we expect prices to be even higher and may lead to major social disruptions." said Professor Bar-Yam President of NECSI, who has just returned from Davos where he presented his findings on speculation in global commodity markets. His paper "The Food Crises: A Quantitative Model of Food Prices Including Speculators and Ethanol Conversion" was called by Wired magazine one of the top 10 discoveries in science of 2011.
In 2008 and 2011 increases in global food prices triggered hunger, food riots and social unrest in North Africa, the Middle East, and elsewhere, at a cost to global stability which policy makers can no longer ignore. Over the past decade, world unrest has sharply increased at time of peak food prices; now the long-term price trend is getting close to what used to be episodic peaks.
According to the new study, the next food price peak will take place in about a year. The results will be dramatically higher prices than we have encountered thus far. The study warns that should ethanol production continue to grow according to multiyear trends, even the underlying trend will reach social-crisis levels in just one year.

from the update

So get a garden in, build a chicken coop in you backyard, and plan to do a lot less of everything, because you're going to need your $$ for food. Our refusal to find a way to put the brakes on global capitalism means that we're in for a rough few years. A lot more people are going to fall from "working poor" into "destitute poor" and none of it needs to happen. I don't want to go off on a rant here, but really people:

 
 Is it really going to have to take a revolution to get the comfortable to pay attention?