I'm not jealous. Oh, and something about food.

Since the Ethicurean is name-dropping, let me just say that I am in no way jealous that a bunch of cool people are hanging out at some fancy-pants conference in Phoenix (well, Chandler, pop. 240,000 or so). Not. At. All. No sir, not me. I would never get upset that I wasn't even invited, because I didn't want to go anyway. I wouldn't mind hanging out with Jim Kleinschmit and Steph Larsen and a few others (but not that Brian DePew, a social-climber if there ever was one), but I'll take care of that another time.

Now that's settled, I'll move on to the slew of articles dealing with food prices over the weekend. I have no doubt my previous blog post inspired them all (probably they were afraid of getting scooped).

In the New York Times, Tyler Cowen argues for more free trade:

The damage that trade restrictions cause is probably most evident in the case of rice. Although rice is the major foodstuff for about half of the world, it is highly protected and regulated. Only about 5 to 7 percent of the world’s rice production is traded across borders; that’s unusually low for an agricultural commodity.

So when the price goes up — indeed, many varieties of rice have roughly doubled in price since 2007 — this highly segmented market means that the trade in rice doesn’t flow to the places of highest demand.

Well, let me just say that the place of highest demand for a commodity is not necessarily the place with the most need. Cowen later goes on to note:

The reality is that many of today’s commodity shortages, including that for oil, occur because ever more production and trade take place in relatively inefficient and inflexible countries. We’re accustomed to the response times of Silicon Valley, but when it comes to commodities production, many of the relevant institutions abroad have only one foot in the modern age. In other words, the world’s commodities table is very far from flat.

I'm not sure how agriculture will ever approach the "response times of Silicon Valley", which is about what it would take to make free trade and agriculture work together, but more on that later.

The Washington Post is running a very good series on food prices, but the trade confusion prevails. Consider this from Sunday's article:

The root cause of price surges varies from crop to crop. But the crisis is being driven in part by an unprecedented linkage of the food chain.

 

A big reason for higher wheat prices, for instance, is the multiyear drought in Australia, something that scientists say may become persistent because of global warming. But wheat prices are also rising because U.S. farmers have been planting less of it, or moving wheat to less fertile ground. That is partly because they are planting more corn to capitalize on the biofuel frenzy...

 

In fact, many economists now say food prices should have climbed much higher much earlier.... If market forces had played a larger role in food trade, some now argue, the world would have had more time to adjust to more gradually rising prices.

"The international food trade didn't undergo the same kind of liberalization as other trade," said Richard Feltes, senior vice president of MF Global, a futures brokerage. "We can see now that the world has largely failed in its attempt to create an integrated food market."

In recent years, there has been a great push to liberalize food markets worldwide -- part of what is known as the "Doha round" of world trade talks -- but resistance has come from both the developed and developing worlds. Perhaps more than any other sector, nations have a visceral desire to protect their farmers, and thusly, their food supply.

Well, that really doesn't sound all that bad to me. Protecting the food supply sounds like a social good to me; in fact, it sounds like exactly the sort of thing governments should do to correct for a classic "market failure". The Post article notes that "global grain reserves plunged after the Cold War"; well I can tell you that establishing a grain reserve- which we're all for- is exactly the sort of anti-free trade measure economists loath.

And just the day before, the New York Times noted:

Food has moved around the world since Europeans brought tea from China, but never at the speed or in the amounts it has over the last few years. Consumers in not only the richest nations but, increasingly, the developing world expect food whenever they crave it, with no concession to season or geography.
But the movable feast comes at a cost: pollution — especially carbon dioxide, the main global warming gas — from transporting the food.

How about that- a classic externality. Suddenly the free market idea of shipping food from one place to another doesn't look quite as good. Or at least you need to start considering this sort of thing, which is discussed later in the article.

Monday, the Post continues its series and lays the blame for the food crisis squarely on the lack of free trade in agriculture:

But it turned out that globalization did not really work for food. Countries, especially rich ones, felt compelled to continue protecting their farmers and their domestic food supply even as they pushed for trade liberalization for manufactured goods. It distorted the market, which didn't adjust as global demand surged and production flagged.

Wait a minute. I have very distinct memories of the US being accused of overproducing, distorting the market, and screwing farmers in the global South.

Later in the article:

The global competition for food is hitting Mauritania in other ways as well. That can be plainly seen on the Atlantic shores of Nouakchott, where another increasingly scarce food commodity is hauled onto sandy beaches daily in traditional wooden boats: fish... "We see our best-quality fish leaving the country right in front of our eyes every day," said Mame Kato Diop, 36, wrapped in flowing indigo and yellow robes as she and other fishmongers waited for the exporters to finish their deals. They would later buy what was left for resale in town. "They leave us with sardines as they eat juicy fish. We stand no chance against the hunger of richer countries."

So here it appears trade is a bad thing, whereas in grain markets it is good. I'm confused.

But wait! Throughout these articles a few lines jump out and tell the real story:

Cowen in the Times:

Many poor countries, including some in Africa, could be growing much more rice than they do now. The major culprits include corruption in the rice supply chain, poorly conceived irrigation systems, terrible or even nonexistent roads, insecure property rights, ill-considered land reforms, and price controls on rice.

The Post on Sunday:

Investors fleeing Wall Street's mortgage-related strife plowed hundreds of millions of dollars into grain futures, driving prices up even more..

The Post on Monday:

Mauritania, with only 0.2 percent of its land arable, produces scant amounts... That is partly because there are fewer and fewer farmers. In a nation girdled by the encroaching Sahara, the slums of Nouakchott, the capital, are swelled with former tillers of soil who abandoned hard lives growing subsistence crops amid years of drought. City life was comparatively better, but in recent months as food prices have risen, those already living on the smallest of margins have despaired.

So it appears to me that are some more pressing problems to international food security than free trade, and that in certain instances free trade actually made problems worse. We've driven farmers off the land worldwide, and the hundreds of billions of dollars being dumped into commodity markets by investors may actually be increasing food insecurity. Certainly that money is increasing market volatility, which is bad in and of itself.

And how, exactly do all these people expect agriculture to constantly adjust its production to world market demands? If we drive a bunch of farmers off the land in Mexico to the US for a job, it's not like they can run back to their land and start growing corn when the price triples. And even if they could, all of these other problems- infrastructure, credit, political unrest, etc- would probably discourage them from doing so. And if they did, well, then production would go up, prices would crash, and we'd be right back where we were three years ago. Which, by the way, just happens to be the defining economic cycle of agriculture, and that's why we need some decent damn public policy to remedy the ill effects caused by that cycle.

Because, as agriculture economist Darryll Ray writes :

“The dissipation of international food stocks, particularly for grain, is the primary cause of the sudden and sharp increases in the prices of cereals and milk.”

By failing to take the importance of food seriously, policies have been put into place that leave the provision of grain reserves to farmers, speculators, and other commercial enterprises.

 

The problem with that logic is that private enterprise has no incentive to hold stocks of grains and oilseeds in anticipation of a major supply or demand disruption; these disruptions are too unpredictable. In addition, futures markets provide the kind of price protection and profit potential that commercial enterprises need without all of the hassle associated with holding physical quantities of grains and oilseeds over long periods of time.

Huh. How about that. I leave it up to John Nichols at the Philadelphia Inquirer to sum it all up. He writes it better than I could, so go read the entire article.

The current global food system, designed by U.S.-based agribusiness conglomerates like Cargill, Monsanto and ADM and forced into place by the U.S. government and its allies at the World Bank, the International Monetary Fund, and the World Trade Organization, has planted the seeds of disaster by pressuring farmers here and abroad to produce cash crops for export and alternative fuels rather than grow healthy food for local consumption and regional stability...

Congress should also embrace trade and development policies that help developing countries regulate markets with an eye to feeding the hungry rather than feeding corporate profits. This principle, known as "food sovereignty," sees struggling farmers and hungry people and says, as the Oakland Institute's Anuradha Mittal observes, that it is time to "stop worshiping the golden calf of the so-called free market and embrace, instead, the principle [that] every country and every people have a right to food that is affordable." As Mittal says, "When the market deprives them of this, it is the market that has to give."