July 07, 2007
Biomass Energy To Drive Up Food Prices In Next 10 Years

Big food price increases are coming in the next 10 years.

The study predicts prices will rise by between 20% and 50% by 2016.

"Growing use of cereals, sugar, oilseeds and vegetable oils to satisfy the needs of a rapidly increasing biofuel industry is one of the main drivers in the outlook," said the report, which was co-written by the UN Food and Agriculture Organisation (FAO).

The OECD-FAO report sees the use of agricultural products to make fossil fuel substitutes as the biggest long term cause of increased food prices.

The OECD-FAO Agricultural Outlook 2007-2016 says temporary factors such as droughts in wheat-growing regions and low stocks explain in large measure the recent hikes in farm commodity prices.  But when the focus turns to the longer term, structural changes are underway which could well maintain relatively high nominal prices for many agricultural products over the coming decade.

Reduced crop surpluses and a decline in export subsidies are also contributing to these long-term changes in markets. But more important is the growing use of cereals, sugar, oilseed and vegetable oils to produce the fossil fuel substitutes, ethanol and bio-diesel. This is underpinning crop prices and, indirectly through higher animal feed costs, also the prices for livestock products.

My guess is this report probably understates the scale of the problem because they are probably still assuming that oil production can keep up with growing demand.

Peter Brabeck, chairman of Nestle, which is the world's largest food company, told the Financial Times that he sees an extended period of high food prices due to the industrialization of India and China, world population growth, and the use of agriculture to make biomass energy.

Peter Brabeck, chairman of the world’s largest food company, said rises in food prices reflected not only temporary factors but also long-term and structural changes in supply and demand.

“They will have a long-lasting impact on food prices,” he told the Financial Times during a visit to China.

The US. Bureau of Labor Statistics also sees rising food prices.

"We are going to see grocery store prices show one of the most rapid increases in the last 15 years or so," said Patrick Jackman, an economist at the U.S. Bureau of Labor Statistics.

....

The Economic Research Service of the U.S. Department of Agriculture expects food prices to go up another 4 percent this year. The average increase over the past decade has been 2.5 percent.

The US Bureau of Labor Statistics says food prices are going up 50% faster than the overall rate of inflation.

The Consumer Price Index for all food has increased 3.9 percent — about 50 percent more than the 2.6 percent rate of inflation — since a year ago, according to the Bureau of Labor Statistics. Egg prices have taken the greatest jump, and have increased 2.9 percent in May and 29.6 percent since May 2006. Milk prices are 7.5 percent above levels a year ago and have jumped 2.2 percent in May. Overall, dairy prices have increased 3.5 percent in the past year and increased 0.8 percent between April and May. Poultry prices are up 0.8 percent in May and 5.7 percent for the year. Pork prices jumped 3.2 percent in May, and 3.9 percent in a year. Beef prices are up 5.8 percent over last year

If you think you've seen big increases in food prices in the last 3 months you are correct.

Retail food prices jumped 5% over the past three months. Tom Thieding with the Wisconsin Farm Bureau Federation says the 20 items in their monthly Market Basket Survey cost $50.33 at the end of June compared to $47.85 at the end of March.

The more developed countries could do themselves and the Third World a big favor if they made a much bigger effort to get birth control tools into the hands of the poor people all over the world. A more rapid rate of decrease of Third World fertility would reduce the demand for food and fuel and also reduce the strain on habitats and other species.

We could reduce ecological footprints of developed country populations by a number of methods and in the process lower food and fuel prices. First off, make bigger efforts to systematically implement measures that increase fuel efficiency. See the McKinsey & Company study from May 2007: Curbing Global Energy Demand Growth: The Energy Productivity Opportunity.

Second, we could accelerate the development of battery technologies that will enable a shift away from liquid fuels for transportation. Reduce the demand and justification for bioethanol and biodiesel by powering cars with electricity from nuclear, wind, and solar power.

Third, adopt policies that will accelerate the technological development of nuclear and solar power to lower their costs and enable them to displace fossil fuels and biomass fuels.

Share |      Randall Parker, 2007 July 07 04:02 PM  Energy Biomass


Comments
Juku said at July 7, 2007 4:16 PM:

"Third World"? What is the "Second World"? Dude, for a futurist, you are about 20 years behind the times.

Plus, don't you know that most of the high fertility rate countries are Muslim countries? It is not poverty that causes a high fertility rate, but rather the decree from Islam, which states Muslims should multiply until they are able to outnumber all other people (the infidels). In Britain, Muslims have a birth rate 3 times higher than non-Muslims. This is how they plan to take over.

Birth control is not allowed.

Juku said at July 7, 2007 4:19 PM:

Most Americans would gladly pay more for food if it means we can destroy the easy money that Muslim nations make off of us from their oil.

You gotta see the big picture, dude. Don't just provide anecdotal complaints.

Then again, you are someone who thinks access to birth control will lower birth rates in Islamic nations, so you probably think poverty is the root cause of terror.

Randall Parker said at July 7, 2007 5:27 PM:

Juku,

I use the term "Third World" because I expect people will understand what I mean by it. I could have said "piss poor countries" or "pathetic backward hellholes". But it seemed a little gentler on readers to use "Third World" where they have an idea of what I mean without my painting a gruesome picture of listless babies hanging onto emaciated mothers while flies land on their eyes.

Yes, I know some of the high fertility rate countries are Muslim. That's a big problem. I favor an end to all Muslim immigration and think paying Muslims in Western countries to buy out their citizenship would provide real benefits.

Poverty as root cause of terror? I've argued for years that is nonsense. Read a post I wrote in 2002 about how poverty is not the cause of Muslim terrorism and read one I wrote about psychological profiles of terrorists. You should hesitate before assuming that you know a person's view on many subjects just after hearing their view on a few subjects.

Sherri said at July 8, 2007 2:49 AM:

I'm a new'ish gardener, and it's been hard to learn for me. But at least I can grow the heck out of greens and green beans. Tomatoes are still hit and miss. I experimented with a few broccoli last fall (too hot here to grow them in spring/summer), and they actually turned out nice (guess I'm learning to improve my soil finally).

The point of the above paragraph: If you don't have gardening experience, start now, because it takes a while to get it going good.

odograph said at July 8, 2007 7:14 AM:

I expect the pendulum to swing back a bit on the biofuels thing. It has happened a bit already amongst the green folk. There are also a series of profit-making companies who are finding themselves injured by higher grain prices. Those companies will find each other. They will hire lobbyists. They will push back for lower food costs.

I'd prefer to see a reduction in subsidies across the board. I'd prefer to see energy policy shaped by a carbon tax (or carbon market), with alternative energies and efficiencies competing naturally.

I don't think I'll get that ... but I think we will roll back from the strong government finance of specific biofuels that we have now.

Mirco said at July 8, 2007 8:26 AM:

I don't know if the "power to be" made scenarious out of linking the biomass market and the oil market.
But I come to this scenario:
1) Rising oil prices will keep food prices high.
2) The biggest oil exporters (muslim nations) usually are bigger importers of commodities like corn, meat, rice, and other foods.
3) The biggest importer of oil (western nations - Japan included) are also the bigger producer of foods and other commodities

If the oil price grow, the western nations will turn more food in fuel, rising the cost of the food for all.
But the western nations have an higher per capita purchase power, so they can keep up with the food prices. The oil exporters (muslim nations mainly) will not be able to keep up with the prices.
They will not be able because:
1) Muslims are poorer than westerns
2) Food is sold at price lower than market prices
3) Farmers are subsided from the government

Hopefully Anonymous said at July 8, 2007 10:08 AM:

Randall, you write "I favor an end to all Muslim immigration". Wow, that's a bit indiscriminate. In my opinion it would be irrational to oppose the immigration of a Muslim (or anyone else) to the United States if the individual's immigration results in a net improvement in our personal odds of persistence. For example, a talented muslim stem cell researcher immigrating to participate in a fellowship program at Harvard's Stem Cell Research Institute.

Bob Badour said at July 8, 2007 10:43 AM:

Hopefully Anonymous,

As recently demonstrated by Muslim doctors engaging in terrorist bombing campaigns and as earlier demonstrated by Islam's top religious scholars, the more educated a Muslim is, the bigger the threat he presents to us.

I don't find Randall's position at all indiscriminate at this time. I find it appropriately discriminate.

Wolf-Dog said at July 8, 2007 11:25 AM:

If the food industry and the agricultural cartel succeeds in lobbying the government to use food for fuel in order to boost their production and prices, then the law of unintended consequences will once again triumph, and the higher prices will soon lead to new inventions in genetics and bioengineering that will make it possible to grow food in every balcony and kitchen. For instance, if the price of oil had remained at $10 as before, then the current rush to invent electric cars and batteries would not have happened. Had the OPEC been more modest and kept the price of oil around $20, the new movement to invent electric cars would not have happened. In a few years there will be a lot of decent electric cars, and within a decade there will be mass-produced electric cars as good as gasoline cars.

Wolf-Dog said at July 8, 2007 11:35 AM:

Bob Badour: Perhaps "Hopefully Anonymous" is not saying that the immigration of all Muslim doctors should be automatically approved. In the future there will be fool-proof brain-scan-polygraph tests that will literally read all the thoughts of an immigration candidate. It may be illegal to apply these intrusive interrogation methods to ordinary citizens, but for those who apply for immigration, the test will be an essential condition for being considered as a a candidate for immigration.

Randall Parker said at July 8, 2007 12:09 PM:

odograph,

As I've previously reported, the various livestock associations for cattle, pigs, chickens, etc have already joined forces to lobby against biomass energy. I expect we will see a lot more of this.

Randall Parker said at July 8, 2007 12:15 PM:

Sherri,

Speaking as someone who grew up in the Garden State and who grew big gardens as a kid: You offer wise practical advice.

Plus, you'll get much better tomatoes than can be bought in a store.

All of you who aren't living in drought conditions (I am) ought to consider planting a garden. Think of it as an Energy War Victory Garden.

Hey Bob Badour, how's that second year big garden doing? Have you considered that you are saving more money this year with the garden with the higher prices of oil and food?

tvoh said at July 8, 2007 1:00 PM:

Randall,

Even if you are in a drought area, you can still keep a garden. The Israelis have pioneered drip technology that allows them to garden in the desert. They sell it in the US.

Bob Badour said at July 8, 2007 3:14 PM:

The big garden is doing well considering I have not yet finished planting.

The corn is ankle high and the peas and beans higher. I bought a tiller for cultivating, but we have had so much rain since I bought it, I have not had it out in the garden yet.

I expect the garden will run at a net loss again this year, nevertheless. (It's actually 2 gardens this year. I cut a new .3 acre garden in addition to the .5 acre garden.)

TheBaldGuy said at July 12, 2007 1:28 PM:

Bob:

Consider American Intensive Gardening. You'll get a lot more out of your garden, and can do it year round. Planting things the way the commercial guys do is a sure fire way to get less than you could or should.

For those in drought areas who want to garden:
Stop watering the grass, and use it on the food. Look into and use where possible Rainwater storage, and I don't mean a barrel under the drain spout. Use American Intensive Gardening. Also, for the ambitious look into greywater separation for your house.

As far as drip irrigation, you can ge the equipment and any "standard" home store such as Home Base, Home Depot, Lowes, or others I don't have in my area. ;)

Uncle B said at March 16, 2008 6:00 PM:

Go off grid with cottage style industries, solid state fridges, LED lights, microwave ovens, super-insulation, solar cells, windmills, solar heating, triple layer glazing, cell phone communications, solar cell powered computers and TVs, deep charge cycle batteries, solid state radios and stereos, all for less than the price and running costs of a North American motor vehicle? So who needs a shitty boss, rusty Chev, impossible mortgage, demanding style changes, traffic, commuting, cafeteria food, city fumes, industrial pollution, etc., We don't need more oil, or fuel of any sort for that matter, all we really need is better application of the technologies we already have and a change in our values.

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