If people can't eat, they can't do much else. One of the great achievements of the past century has been the enormous expansion of food production, which has virtually eliminated starvation in advanced countries and has made huge gains against it in poor countries. Since 1961, world population has increased 112 percent; meanwhile, global production is up 164 percent for grains and almost 700 percent for meats. We owe this mainly to better seed varieties, more fertilizer, more mechanization and better farm practices. Food in most developed countries is so plentiful and inexpensive that obesity -- partly caused by overeating -- is a major social problem.
But the world food system may now be undergoing a radical break with this past. "The end of cheap food" is how the Economist magazine recently described it. During the past year, prices of basic grains (wheat, corn) and oilseeds (soybeans) have soared. Corn that had been selling at about $2 a bushel is now more than $3; wheat that had been averaging $3 to $4 a bushel has recently hovered around $9. Because feed grains are a major cost in meat, dairy and poultry production, retail prices have also risen. In the United States, dairy prices are up 13 percent in 2007; egg prices have risen 42 percent in the past year. Other countries are also experiencing increases.
The problem is farm subsidies for ethanol:
It's the extra demand for grains to make biofuels, spurred heavily in the United States by government tax subsidies and fuel mandates, that has pushed prices dramatically higher. The Economist rightly calls these U.S. government subsidies "reckless." Since 2000, the share of the U.S. corn crop devoted to ethanol production has increased from about 6 percent to about 25 percent -- and is still headed up.
This is not a case of unintended consequences. A new generation of "cellulosic" fuels (made from grasses, crop residue or wood chips) might deliver benefits, but the adverse effects of corn-based ethanol were widely anticipated. Government subsidies reflect the careless and cynical manipulation of worthy public goals for selfish ends. That the new farm bill may expand the ethanol mandates confirms an old lesson: Having embraced a giveaway, politicians cannot stop it, no matter how dubious.
I've said it before and I'll say it again; free trade is a moral issue. If the cost of producing ethanol from corn is one hungry person, it is too high.
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