A Real Global Crisis of Our Own Making

The word crisis is much abused in our society with any small inconvenience routinely elevated to crisis status. We dub the absurd notion that people who purchased a home with no money down at a price 8 times their annual income and cannot afford the payments, a mortgage crisis. There is the credit crisis (even with record refinancing going on), the oil shortage crisis, the Global Warming crisis, and many many other pseudo-crises that occupy our attention these days. We are told that we must act now or we may never recover.

But what if a real crisis was brewing and nobody seemed to notice or care? What if there was a problem that could lead to nations failing, economic meltdown, death by the millions, and war? What if their existed a potentially real and immediate crisis such as this, and no one seemed to notice? And what if, what if this real crisis was in large part spawned by reactionary measures meant to cure one of the above pseudo crises?

This is exactly what is happening. Worldwide grain production has failed to meet consumption for six of the last eight years and our reserve stocks have grain have fallen to a mere 60 days worth of consumption, a near record low. This puts much of the world more than one bad harvest away from massive starvation.

In the Bible, Joseph interpreted Pharaoh’s dream inducing Pharaoh to store grain during the years of plenty to be ready for the coming famine. We have had no Joseph read the signs and to warn us off our course of folly.

There are several factors that contribute to this grain deficit, but among them is the rise of grain use for ethanol creation.

[Spiegel Online] The current surge in world grain prices is trend-driven; some of these trends expand demand and others restrict growth in supply. On the demand side, these trends include world population growth of 70 million people a year, a growing number of people consuming more grain-intensive products, and the massive diversion of US grain to ethanol-fuel distilleries. During the last few years, the United States’s use of grain for ethanol has nearly doubled the annual growth in world grain consumption from 19 million metric tons to more than 36 million metric tons.

But this trend is just one factor leading to the shortfall but it is potentially the most alarming

This potential growth in demand for grain [consumption] is huge but it pales next to that for automotive fuel production. The automotive demand for crop-based fuels is insatiable. If the food value of grain is less than its fuel value, the market will move the grain into the energy economy. Thus as the price of oil rises, the price of grain follows it upward. The United States, in a misguided effort to reduce its dependence on foreign oil by substituting grain-based fuels, is generating global food insecurity on a scale not seen before.

With the demand for ethanol crop based fuel increasing rapidly, grain as food is becoming a more scarce and importantly, a more pricey commodity. This is not some future nightmare scenario. The effects of this dramatic change in demand coupled with supply problems adversely impacted by falling water tables, eroding soils, and drought is already having an effect on price and availability.

Signs of food stress are everywhere. After declining for several decades, the number of chronically hungry and malnourished people in developing countries bottomed out in 1996 at 800 million and has been climbing since. In 2006 it exceeded 850 million and in 2007 it climbed to over 980 million. The US Department of Agriculture projects the number will reach 1.2 billion by 2017. For the first time in several decades this basic social indicator is moving in the wrong direction, and it is doing so at a record rate and with disturbing social consequences.

For all the worrying that we do about fictional crises over which which we have little or no control, this is a real looming crisis about which nobody seems concerned. There are concrete things that we can do to avoid this crisis. Better water table management, technology, and other things can be addressed, not easily, but practically. More pernicious is the demand for ethanol as competitive fuel alternative. The more crops are used for fuel or if farmers choose to grow fuel crops rather than food crops, this problem will continue to worsen. This is the real problem because the the powers that be do not have the political foresight or political will to do what needs to be done. What we need is cheap oil. We need to find it and pump it. If we don’t, millions may eventually starve. Not us of course, we are one of the biggest suppliers of grain to the world, but millions of our brothers in other counties will. The Spiegel article says:

The question — at least for now — is not will the world grain harvest continue to expand, but will it expand fast enough to keep pace with rapidly growing demand. If we continue down the current path it is not likely to do so, which means that food supplies will tighten further. There is a real risk that we could soon face civilization-threatening food shortages.

So there is the dilemma. Do what we can to provide stable and inexpensive fuel through oil, or face civilization threatening food shortages, the collapse of countries, starvation, and war.

Radical environmentalists want high oil prices to spur research into alternative fuels. However, this policy is not without consequences. Research must continue into alternative cost-effective fuels, of course, but it cannot be driven by artificially high oil prices. High taxation and ignoring ready sources of oil in the name of environmentalism distorts the market for fuel making ethanol an attractive substitute for those who can afford it. But is the starvation and death of millions worth it just to have a less expensive alternative to artificially expensive oil? The answer is no.

We must pump the oil we have to keep fuel prices stable and moderate. We must also incentivize research into alternatives that do not compete with the food supply. This can be done by direct funding of research and through large prize money for innovation. There are different ways to accomplish this and I am sure that people much smarter than I can figure out the best way to do it. What I do know is that when food competes against fuel, we all lose.