Bread And Butter Issues
contributed by Charles Lemos
The above video from my favourite British sit-com, The Vicar of Dibley, provides a moment of levity as well as affords me a perfect introduction to analyze bread and butter issues quite literally. Alice (played by Emma Chambers) in her wonderful round-about manner comes to the conclusion that she believes that "in fact there is a lot more butter around than we all thought there was." She is not wrong, the butter supply is stable but the price of butter has soared some 30%. What is driving the price of butter is that the price of its input, namely grain and feed, are rising.
The bread market is different however. It too is affected by the rise of its inputs but the bread market unlike butter is not global, it is quite local. I can go into my local supermarket and buy butter from California, Oregon, Vermont, Wisconsin, Denmark, Ireland, France, Spain, Bulgaria, India and New Zealand. My bread comes from Oakland and not much farther. Thus the price of bread has risen faster in part because its market is not a global one. The reasons for that are:
It's not durable--even if you could keep the loaves from being crushed, it goes stale too quickly.
It is not compact--a container full of bread isn't worth enough to make it profitable to ship. It certainly isn't worth enough to pay for the sort of fast shipping that would get it to market while it was still fresh.
It is not uniform--ask someone what bread is and you'll get a different answer from someone in the United States than you would in France, and a very different answer from someone in India. Even within the US there are regional differences for example here in San Francisco we have a passion for sourdough dating back to the Gold Rush era.
The result of that is that there hasn't been much in the way of cheap imports to hold down the price of bread. To that is added a general increase in the price of the inputs to bread, especially the price of wheat, but more fundamentally, the price of energy. And in more ways than one. An increase in the price of oil makes everything cost more. Everything takes energy to make, and everything takes energy to ship to your local store. Beyond that, there are second-order effects--the strong price of ethanol made corn so profitable that huge amounts of land that might have grown other crops have been used for corn. Back in late February I wrote an article for One Good Move entitled Let Them Eat Ethanol which covers the surge in wheat prices globally and in the United States. Briefly prices have been driven by rising world consumption for grains, reduced harvests due to drought in Australia and Argentina, increased cost of oil-based fertizilers and pesticides, and conversion of acreage from durum wheat to corn production.
So what has the impact been of all those factors, well here is a review of the impact of rising bread prices is having around the world. The articles date back to late Summer 2007 through the present:
AfghanistanAzerbaijan Egypt
France
The Gambia
Haiti
India
Israel
Swaziland
Uganda
But there is even more going beneath the surface. For example, India, the second biggest consumer of wheat, waded into the global market to try to buy more grain than suppliers were offering. In 2006, India swung dramatically from exporting surplus wheat to importing it.
Elsewhere, Russia is considering curbs on exports to keep a lid on prices at home. Australia, the third-biggest exporter of wheat, warned that its output this year might be less than its previous estimate. This causes disruptions in the spot market. Bread is often subsidized in many countries and global wheat prices rise, countries are not selling excess supply in the global markets for fear that when they need to replenish their stocks prices will only be higher. In effect, they are hoarding. These supply problems thus cause the global markets to tighten and thus global reports indicate that the price of wheat has more than tripled during the past 10 months and doubling since September 2007.
The soaring price of wheat is not an isolated phenomenon. All around the agricultural markets prices are rising. Corn doubled last year, while the price of soybeans is also much higher than it was 12 months ago. In a time-lagged rerun of the explosive growth in the price of energy and metals earlier in this decade, crops are fuelling a surge in food prices that's picked up the ugly, but inevitable, tag "agflation". With food prices really on the move up again, history suggests we should be worried. Prices have tended to move in long cycles driven by extended periods of mismatched supply and demand. And the tendency is not for them to come down.
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Comments
Another reason why the Rev. Wright, 3 AM Phone Calls, Whitewater, Sex or Race will not be the dominate issues for voters this election cycle. Real issues are going to get a lot worse before this election is over.
Posted by: thaddeusphoenix
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April 25, 2008 8:36 AM
Good points, Charles. It underscores why it would be so important for us to wean ourselves off of oil, only of course the Catch-22 here is that the fastest alternative is biofuels, which adds to the problem. Hydrogen is technically feasible, but the infrastructure is a long way off unless major regulatory reforms and possibly even subsidies for pump operators are in the works.
On the upside, this mounting problem (is it too early to say crisis?) could abet the proliferation of urban farming, the likes of which has started to take off in Japan. Done right, urban farming has a number of positive spin-offs:
Posted by: Fierce Pika
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April 25, 2008 8:37 AM
"I don't know what you're talking about but I'm sure a God does and is intrigued by the whole thing*"
Fierce Pika's comments, he reveals himself to be in possession of a Realistocratic mind, of raw leader-material, or, in our set-up, of disqualification-from-leadership material, but farther on down...
"Most of you know who I am in “real life,” and for those of you who don’t, I don’t really [give a fncking sh!t]*." Ach! Barrrrrrrr-fff...
Dis/de-con(/mass)-structive Narcissism is epidemic in our current cultural milieux: this fascination with products, their placement, and our inability to do other than place, it's real-ly... Ayn Rand diagnoses (does diagnose), but can't prescribe.
Could I really vote for some one with purple lips? Spittle raining like formerly-known-as-Prince, mass-(turb-)baiting his guitar (trickle on down, hedge-stock)?
Yes I can!
But I can vote for Nader as well, or weller.
.
.
*care to share information that you can’t already glean from [his]site content. Allah Who?
Posted by: devil tone ticks as 1.4142...
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April 25, 2008 9:56 AM
Fierce Pika,
I don't understand why people (including my scientific colleagues) keep referring to 'hydrogen' as if it were a source of energy. You seem to be an informed person, so I assume that you are well aware that it isn't (I know that my colleagues know that it isn't.)
What we need is massive investments in renewable sources energy. Many of same farms on which the corn/wheat are grown should be dotted with wind turbines that produce the electricity (at an already competitive cost) that can be used, via water electrolysis to produce hydrogen - or used directly.
Posted by: Tim
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April 25, 2008 11:07 AM
Kudos to Charles for bringing up a critical issue. If I may add to the list of worries-
http://wcbstv.com/topstories/rice.prices.costco.2.707121.html
Headline: Rice Prices Going Through Roof Worldwide
Cost Nearly Doubles Since February; Industry Experts: Part Of Problem Is China Ceasing Exports Due To Weak Dollar
Not only is rice delicious, it is the staple food of most of Asia and Latin America. You know things are getting bad when rice is scarce.
Posted by: Zaphod for President
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April 25, 2008 11:53 AM
McCain on ethanol
Posted by: Syngas
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April 25, 2008 12:20 PM
Good point Syngas. Interesting how no one has responded to your link.
McCain didn't pander to the voters in Iowa.
Posted by: JoAnn
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April 25, 2008 2:03 PM
I'm studying for my finals right now but I like to check in every now and then to see what everyone is talking about.
About the whole corn being used as a biofuel, I thought I had read in one of my Environment classes that switchgrass was more than twice as efficient as corn, but that corn was the preferred crop of farmers because it was heavily subsidized. So if the rapidly increasing price of grain and feed, such as corn, is having such a profound ripple effect on the rest of the world, why don't we just start using switchgrass?
Correct me if I'm wrong, this was nearly a year ago.
Posted by: w00b
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April 25, 2008 2:18 PM
I think that was based on some hopeful development in cellulosic ethanol. While it may be possible on a commercial scale someday, we aren't there yet.
Switch grass would be an excellent source of syngas - the ideal biofuel.
Posted by: Syngas
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April 25, 2008 3:05 PM
Wood gas powered car (syngas)
If this guy can build it in his back yard, think of what some of Tim's liberal friends could do if they put their minds to it ;)
Maybe if they changed the name 'gasifier' to 'flux capacitor' it would catch on with the global warming enthusiasts!
Posted by: Syngas
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April 25, 2008 3:16 PM
Yeah, someday we could all hav e wood fires in our trunks.
Posted by: RedSeven | April 25, 2008 3:39 PM
Hey, most of you all don't mind using crappy light bulbs filled with mercury to save the polar bears. Is it too much to ask for you to give up your trunk to keep Cubans from drowning?
Posted by: Syngas
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April 25, 2008 3:53 PM
Ethanol can be produced from a wide variety of plant-based feedstocks, most commonly grain or sugar crops. It is then blended with gasoline as an oxygenate or fuel extender for use in gasoline vehicles, or it can be used alone in “flexible-fuel vehicles” that run on any blend of ethanol and gasoline. >
McCain stated this morning that, "we must reduce barriers to imports, to things like ethanol from Brazil, and we've got to stop subsidizing ethanol in my view."
Posted by: JoAnn
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April 25, 2008 6:00 PM
From McCain's website
Posted by: JoAnn
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April 25, 2008 6:06 PM
Do you have any comments regarding McCain's position JoAnn?
Posted by: Syngas
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April 25, 2008 6:34 PM
Syngas,
McCain has taken the high road on this issue. Obama and Hillary have taken the load road. I thought that was obvious by what I posted.
Posted by: JoAnn
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April 26, 2008 2:27 PM
Oh, and Syngas. You have a lot of nerve to ask me this question when all you ever do is post a link. Why don't you hardly ever have any comments? If you are going to push me to comment, then step up to the plate and make comments yourself instead of just cowardly posting a link.
k?
Posted by: JoAnn
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April 26, 2008 2:29 PM
the "low" road...
Posted by: JoAnn
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April 26, 2008 2:30 PM
ouch!
Posted by: Syngas
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April 26, 2008 3:07 PM
Interesting column. I was coincidently having just the same discussion with a friend on the significant increase in the price of milk in the last 12 months (30% in Ireland). Same original points as bread..."It's not durable--, It's not compact--" however milk is not linked to the global price of wheat which is the main factor in your argument on the price of bread. In Ireland, the increase in the price of milk has outstripped the increase in the price of bread. http://www.rte.ie/news/2008/0410/inflation.html
I'd be curious to hear your comments on why.
Posted by: innocent bystander | April 27, 2008 3:16 PM
Dairy cows eat a lot of grain including corn.
Posted by: Syngas
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April 28, 2008 12:29 PM
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