Americans are going to find their wallets shrinking along with their waistlines. Why? The price of food is exploding, reports the Economist. The price of wheat has gone from $200 a metric ton in May to more than $400 a metric ton in early September. Agflation—escalating food prices—normally results from food shortage. The strange thing about this recent bout of agflation is that we have plenty of food. This year humans will have grown 1.66 billion metric tons of grain—a world record. The reason why food prices are exploding is that we’re eating differently.
The world’s growing population has always demanded more grains. But this new boom in demand comes from another source: wealth. Newly wealthy people in China and India want to toast their success with tasty meat. And growing meat takes a lot of grain. In 1985 the average Chinese person ate 44 pounds of meat a year. This year, the average Chinese person ate 110 pounds a year. That’s the taste of prosperity.
There’s another reason for ballooning food costs. Americans have more mouths to feed than ever. And by mouths I mean gas tanks. America’s bright idea to slake our thirst for oil is to convert one-third of our corn into ethanol. Not only are our bellies paying the price for our ethanol-spree, so are taxpayers. Ethanol is bankrolled by hefty government subsidies. The Economist writes:
America's ethanol program is a product of government subsidies. There are more than 200 different kinds, as well as a 54 cents-a-gallon tariff on imported ethanol. That keeps out greener Brazilian ethanol, which is made from sugar rather than maize. Federal subsidies alone cost $7 billion a year (equal to around $1.90 a gallon).
Why such subsidies? The ethanol lobby plays a strong role here. The Utne Reader reports in its May-June 2007 issue that in the 2004 and 2006 election cycles groups connected to the ethanol industry gave $1.2 million to political candidates. So candidates enjoy the double-boon of reaping industry campaign contributions while touting a popular (but largely misunderstood) salve for our environmental woes.
As for the shift in food prices, the bad news is that these changes are probably permanent. The worse news is that while rising grocery bills may put a strain on American bank accounts, the real losers will be poor countries. The Economist cites Gary Becker, a Nobel Prize winner for economics at the University of Chicago, who has figured that if food prices rise by one third, the standard of living will fall 3 percent in rich countries and more than 20 percent in poor ones.
Photo by tlindenbaum licensed under Creative Commons.