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4:16 pm
February 22, 2010
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QuotePaul:
The more true something is, the more obvious it will seem in retrospect.
Asclepius:
Thanks for the reference! Manning refers to Tudge a few times: "Neanderthals, Bandits, and Farmers" also looks like an intriguing read. I've added them to the list.
WereBear:
Commoditization is both convenient and profitable for middlemen -- but it sucks for producers and consumers.
The Internet allows us to bypass them, which is great! Over 90% of my books are sold through the Internet, either from Web retailers or directly from my publisher.
Kirk:
That essay, like all cornucopian propaganda, is comprised almost entirely of unsupported, incomplete, misleading, or frankly counterfactual assertions.
For starters, you can bring up historical charts of oil, copper, nickel, and steel prices. And read the links I posted above: topsoil and ocean depletion are catastrophic and ongoing. Did I mention the agricultural productivity curve has flattened out?
Cornucopians are the young-earth creationists of political economics.
Kaa:
The first action we need to take is to stop subsidizing commodity agriculture. It's not my place to dictate what should take its place: the market ought to decide that.
Furthermore, real food isn't expensive: grains appear artificially cheap at the checkout counter due to government subsidies. This cheapness is an illusion -- we're paying the rest in taxes.
Also see my reply to Jen above: in 1900 people plowed their fields with oxen and brought their produce to market via horse and buggy. We've made some changes in the meantime.
JS
4:37 pm
Brilliant,
Here is an EU list for those of us who are European
http://farmsubsidy.org/countries/
I worked in agriculture for years but as it is a small local family (fruit) farm we get absolutely no government help.
6:11 pm
"Furthermore, real food isn't expensive: grains appear artificially cheap at the checkout counter due to government subsidies. This cheapness is an illusion — we're paying the rest in taxes." -- JS
This is an excellent point and bears repeating. Being of a more liberal bent, I don't have an inherent problem with some of my tax dollars subsidizing cheaper food for people of lower incomes--my issue is with the fact that only the crappy food gets subsidized! I would be much happier if there were no grain subsidies and poorer people simply got extra food stamps (or SNAP cards or whatever they're called now), even if it was the same amount of money coming out of my pocket! At least then they would have price signals that are balanced against the actual market value of the food they're buying.
8:54 pm
@Neal,
thanks for that link. Quite interesting.
@JS,
"From what I understand about EU commodity rules, they're often arbitrary and very restrictive, preventing people from selling goods at all."
Yep, that's exactly what I mean with "not fit for trade" and it's for sure not by consumer demand.
9:38 pm
JS,
OK, sorry for economically projecting.
If raw materials like steel (and not food) make excellent commodities, then how did higher quality steel manage to displace lower quality? The "definition" of a commodity and it's behavior in actual practice are two different things.
You are saying that by making wheat a commodity its homogeneousness becomes valued over its quality and it is no longer real food. But wheat and these other cereals you talk about never were real foods.
I don't have a problem with food commodities per se. If I buy NZ grass-fed butter that is a commodity to me. A high quality commodity to be sure, but a fungible one. If I lent you a pound of it, I'd expect a pound of it back, not the same butter molecules, but the same quality stuff. I could also trade in NZGF butter futures without "screwing" the NZ farmer or lowering its quality.
Are you claiming that a significant proportion of commodities trading is farmers hedging their production — not traders and trading houses attempting to profit by outguessing the farmers, or by large firms frankly manipulating commodity prices and front-running their clients?
Traders and trading houses trying to make a profit by outguessing the farmers? You mean like insurance companies trying to make a profit by guessing when people die? Currency speculators trying to guess the future value of a currency? It is also an "indisputable fact" that any profit an insurance company makes comes out of the pocket of the people it insures. The real question is whether or not these pursuits are providing a service or are simply a parasitical drain. When you show a picture of a trading floor with the caption "all this fun doesn't come free", then talk about the "enriched middleman", I somehow got the impression that you think traders are simply parasites.
Come to think of it, it is not an "indisputable fact that any profit made by traders comes out of the pockets of farmers and consumers." It could simply come from making the market more efficient. Again, this comes from the perspective of thinking of traders as providing a service rather than simply being market parasites.
There's no monopoly on transportation nor storage for cereal farmers. Build your own grain silo and hire a truck to ship it. That would make your grain more expensive, but that's not the same thing as a monopoly at all. No one's forcing these farmers to take government handouts nor to even farm grain in the first place.
BTW, writing "clear?" at the end comes across as smug so I'm going to take umbrage with that 😉
I don't think we are arguing except perhaps on the free market aspects which are, of course, heavily clouded by government distortions of all aspects of the food chain from production to regulation to telling us what is allegedly healthy. Ultimately it is simply up to consumers to be more aware and choose higher quality food the market will follow as much as it is allowed.
One point worth bringing up is the overhead of extending the food supply chain. If you buy from a local producer he may be subject to a degree of legislation covering the welfare of his animals and their slaughter, but more importantly as you have a personal relationship with him/her, it is in his/her interests to develop that relationship with YOU the consumer, the fundamental basis of which HAS to be honesty. It is also in the interests of the producer to produce sustainably and without excessive commercial pressures, this is likely.
Commoditized agriculture is characterised by middlemen and traders (all of whom require regulating and so you now have to add another layer of beaurocracy). Animals as 'units' are traded and traffiked large distances and so you now have more complicated issues of animal welfare – which are resolved with systems of licences and regulation. When animals are 'pooled' from different regions and so you also have greater issues of health and safety (in the name of disease control and management as transporting animals all over the country encourages the spread of infectious disease such as Foot and Mouth). Disease like BSE resulted in the creation of animal passports and basically added to farming a tragic level of burdonsome paperwork to enhance 'traceability' – which in itself is incredibly complicated when produce can move quickly over distance through several companies and traders. Also, we know we can't go places without vaccinations and the like; the same with animals.
And becuase you'll trade against some guy whose produce is grown in a country where they pay people $1 a day, you'll have to compete with that guy by cutting your costs (a race to the bottom). This normally comes from economies of scale, so you go to the bank for a loan, buy more hardware and rip up your hedgerows to maximise the land available to you. You will probably aim for subsidized produce to maximise profit (as you now have a big debt to service), and quality will fall to the point at which you can still get optimal price.
Crops and meat – once slaughtered, have to be tagged and tracked on the markets. Certain produce has to be carefully stored (and prove to have been carefully stored), to ensure quality. And so it goes on….
Once you allow your food supply chain to extend you lose that personal relationship. Everyone has to make a cut, and it is in the interests for each link in the chain to optimise profits. Without a personal relationship with an end consumer to protect, deviance is often a consequence.
You start to question to true cost of modern agriculture. I'd say that the same number of people are involved in agriculture as ever there was, but instead of them being employed on the farm they have swapped the plough for the pen.
8:37 am
Have to admit, I'm confused. How do 'historical charts of oil, copper, nickel, and steel prices' apply to either your or Ridley's arguments?
9:02 am
you scooped the LA Times!
http://latimesblogs.latimes.com/money_co/2011/09/taxpayers-funding-junk-food-farm-subsidies.html
11:27 am
Great, now more people are going to understand how much they've been duped all these years by this kind of stupidity from higher up, and be all kinds of pissed off. Good job 🙂
8:29 am
Kirk:
they don't i think, using a product which is not a food to show a problem with a product which is a food could be an error i feel?
i don't think there is a food product comparison available though.
also...i was first to comment!
thought i would be as i logged on to see new update, there wasn't one, so i logged onto something else, then came back to see prev update comments and the new one was here!
literally 5-10 seconds later!
1:10 pm
There's a movie called "King Corn" that illustrates this beautifully. It's available on Netflix. It tracks what happens to the corn grown in Iowa, and covers pretty much everything in this post.
10:27 pm
I don't want to depress readers but it may be wise to look at the forces we are up against.
Apples to Twinkies: Comparing Federal Subsidies of Fresh Produce and Junk Food
9:25 pm
February 22, 2010
Offline
Excellent links. It's stunning how politicians can say "The public shouldn't know what we're doing in their name with their money" with a straight face.
Uncephalized:
Exactly. And pundits talk seriously about taxing soft drinks and other "unhealthy" food...we're supposed to pay agribusiness to grow corn we don't want, and then pay again because it's "too cheap"?
Franco:
I've been surprised more than once by the EU rules for "fit for sale". I can understand protected designations, i.e. you can't call it "Champagne" unless it's from Champagne, but I don't understand not being able to sell a cucumber unless it's of a particular size. I guess they get turned into pickles?
Sean:
Point taken. I apologize for any implications of my phrasing.
I'm pretty sure we're not in substantial disagreement here. We agree that inappropriate intervention in the market is causing these particular issues -- by pushing commoditization on the one hand, and on the other end, by regulating or outright prohibiting food transactions between producer and consumer.
Perhaps I need to clarify what I mean by "commoditization".
Clear expectations are one thing: if I buy butter, I should expect it to be made from cow's milk, and to contain appx. 100% butterfat within reasonable limits of processing technology. Furthermore, I should expect it to be free of adulterants (e.g. margarine), or contaminants (e.g. cleaning agents, excessive bacteria).
Most importantly, I have a choice of origins and brand names, and "butter" as a product is not itself fungible. A stick of Kerrygold is not equal to a stick of Wal-Mart house brand butter, and there are no butter futures on the COMEX. This is because consumers like you and me understand that there is a difference and are willing to pay for it, and because government policy doesn't enforce uniformity of butter. (Dairy price supports are based on milk production AFAIK, not on downstream products like butter.) In other words, butter has not been fully commoditized.
Steel is similar to butter in that it is a downstream product, not a true commodity. Iron is the fungible raw material, and it is indeed traded on commodity exchanges. Steel, like butter, is not completely fungible, because (as you correctly note) quality varies between producers. Indeed, steel is purchased in a specific form from a particular foundry, not on a commodity market, though since there are only so many producers of steel it is possible to come up with average "market prices" for it. (See: metalprices.com)
Moving on to the function of markets and trading: commoditization indeed allows the farmer the security of selling his crop forward -- at the cost that he can no longer differentiate the quality of his product from anyone else's, and must compete purely on price and volume.
My contention is that this is a bad tradeoff, and that the profit from farming has consequently shifted from the farmer to middlemen and processors, as evidenced by the relative profit I mentioned from eggs (58 cents per consumer dollar) vs. corn syrup (4 cents per consumer dollar).
I don't blame traders for profiting via trading! I blame the government for inappropriately forcing farmers into the commodity system via price supports -- and the fact that 36 percent of all American farms disappeared between 1970 and 1992 supports my argument. The tradeoffs you mention, of predictability and efficiency vs. profit for the middlemen, make a lot more sense when talking about truly fungible raw materials, i.e. iron, copper, etc.
"Ultimately it is simply up to consumers to be more aware and choose higher quality food the market will follow as much as it is allowed."
Absolutely. By not consuming corn, wheat, or soybeans, we're opting out of the vast majority of this broken system.
Thank you for your thoughts! We'll probably continue to butt heads here and there, but our goal is shared, and I always appreciate your contributions.
Asclepius:
That's an excellent set of points. If you want anonymous, fungible transactions over long distances (i.e. "exchanges"), you're going to require a large infrastructure to enforce the uniformity that makes it possible. What looks like "efficiency" mostly just ends up moving profits from the producer to traders, middlemen, and other functionaries. We see this in the relative cost of food at the supermarket vs. the cost of the agricultural products from which they are produced. (I gave some examples in this article.)
Again, inappropriate commoditization.
Kirk:
The cornucopian argument is that we have plenty of every resource we need to support eleventy-billion people. Continually rising commodity prices show that this is not the case.
Matt:
Unfortunately that report counts grains as healthy! They're only counting as "junk food" the fraction of corn and soy that gets turned into HFCS, seed oil, and cornstarch. It's all environmentally destructive, it's all junk food, and the true numbers are many times worse.
James:
We're spreading the knowledge as best we can. All we can do is make it available for those with eyes to see and ears to hear.
Eddie:
You can look at agricultural commodities and see a similar curve (though less sharply rising).
More importantly, fossil fuels are absolutely necessary to bring you the results of modern commodity agriculture: as I've said many times before, the Haber process alone (by which ammonium nitrate fertilizer is made) consumes 3-5% of world natural gas production.
No more fossil fuels, no more 200 bushels per acre of Iowa corn.
I have charts and maps showing US agricultural productivity previous to the Haber process, and it's perhaps a fourth of where it is now.
Raul:
King Corn is a great film. It moves a bit slowly, but it shows just how disconnected from any sort of rationality our modern system of food production has become.
Ted:
You're correct. And as I said to Matt, the PIRG numbers are vastly understated since they're only counting the HFCS, seed oil, and cornstarch parts as unhealthy. 100% of grain subsidies are unhealthy for Americans.
JS
8:14 am
Commodity prices go up, commodity prices go down. The trend over time is mostly down. Check out the Simon-Ehrlich wager for an example. As for oil, some speculate that the price of gasoline might drop to $2 a gallon by the end of next year. Yes, petroleum products are used to increase food yield. So? There is a world-wide race to create alternate sources of energy. Once these come online, the price of oil will drop. Emerging technologies in agriculture also hold promise to reduce agriculture usage of petroleum. Wikipedia has a good list of emerging technologies.
Fungible food is both good and can be real. I like being able to buy half a dozen different brands of decent-tasting tomatoes, year-round, from the many grocery stores within 10 miles of my house. The best-tasting ones cost the most. That's the marketplace at work. My wife and I visited a rural self-sufficient community several years ago; even though it was late summer, the people we stayed with complained about how few fresh vegetables were available, and how far they had to drive to buy them. The book "Potato, a History of the Propitous Esculent" describes how food shortage riots were common in the 16th century, and that France typically responded with 'an invasion of troops, summary trials and gibbets groaning under the weight of corpses.'
Commoditization works for real food. I buy organic potatoes. It doesn't matter to me whether they were grown within fifty miles or 1500 miles of my house. I don't need to know the name of the farmer. I do need to know whether I can trust the store which sells them; if I find a particular store is lying, I will never buy from that store again, and they know that. Meanwhile, the commoditization of organic potatoes reduces the price to me, the consumer.
I think we agree on farm subsidies. I don't understand why my taxes are paid to tractor-driving welfare queens. I don't like the government distorting the marketplace. Ezra Klein has a good column about the issue ( voices.washingtonpost.com/ezra-klein/2011/03/vilsack_i_took_it_as_a_slam_on.html ).
As for all that processed food in the middle of the grocery stores, as long as my tax dollars don't go to support those companies, well, so what? Those of us who buy fresh food and prepare it ourselves will, over time, will be healthier, and our neighbors, friends, and family will notice and follow our lead, and eventually the food system will shift. I went gluten-free 25 years ago. Back then, it was difficult finding anything GF. Now, even normal grocery stores have half-aisles devoted to GF products.
I haven't studied the issue about farmland destruction. I remember reading the same allegations in the early '70s. (One would think the farmland would have been destroyed by now.) It doesn't make much sense from a marketplace perspective (why destroy farmland because there will be no buyers?), but then, as I said before, I haven't studied the issue. Per your recommendation, I have 'Against the Grain' out from the library.
1:35 pm
I disagree. This post is atypical of you as it lacks _nuance_. Commodity grains have saved millions of people from starvation - yeah they are poor food but food nonetheless.
And improving productivity is the FUNDAMENTAL MECHANISM OF ECONOMIC GROWTH. We want productivity to increase - in every single endeavor.
Thirdly, I DONT WANT TO PAY MORE TO THE PRODUCER - in a market, the consumer should be king - I don't want Wagyu beef, thank you very much - i can't afford it.
Fourth, the market makers are a superb resource for the farmer - they help hedge against risk. Yeah I don't want to defend any particular institution, just the role.
I have a severe beef with the government-subsidized, corporatized and regulated agricultural system we have today. That's what should be attacked - subisidies, regulations against consumer self-production, zoning laws against gardening, sanctions against raw dairy, the massive, corrupt food "safety" inspection scheme to name a few. Instead, you end up attacking things like productivity and financial products which are fundamental hallmarks of a market-based society. They will STILL exist when u end Big-Ag.
3:31 pm
June 5, 2011
Offline
Consider Africa, where root flour is king - cassava root. Then, consider the first world where huge expanses of land are given over to grain and corn production. Yes, there will be some who fall foul of a world where real food is produced. For the human species, no big deal.
Of course, if you're one of "them" now ... jump ship ... become one of "us" now and enjoy the future.
We're very adept at striking up deals with real farmers ... real farmers who raise real cattle, not commodity farmers who kill other farmers' cattle. We're very good at making deals with real smallholders who grow real vegetables, not supermarkets who buy other peoples' vegetables. We're very good at growing our own and are getting better at rearing our own.
A future where people who are empowered to live their own lives, live on their own production, co-operative production with like-minded neighbours and communities, grow, protect and share our own produce ... that's a future I strive for; that's a future I live in many respects already and one which I dearly hope I can continue to grow into ... while I do whatevere it is I do for a "job".
There will be casualties.
Breaking elitist selfishness now is largely a perogative of those who can. Once we do that, those who cannot yet afford to do that might well have a chance ... if they decide to come along with us and show their metal, show their worth in a world where every man is as good as what he can offer.
I gather the folks States-side call this Libertarianism - we've been calling it Anarchism for many years this side of the pond. We're of the same mind, whatever the label.
Living in the Ice Age
http://livingintheiceage.pjgh.co.uk
7:57 am
[...] Originally Posted by jfh If something has a long expiration date, I worry about the preservatives. Also cooked foods that are old cause me worry as well. Rancid. But we should be aware that if stuff sold as food has an inordinantly long best before date that should tell us it is so processed NOTHING will degrade it = it isn't food our bodies recognise. Real Food Is Not Fungible: How Commoditization Eliminates Nutrition, Impoverishes Farmers, and Destr... [...]
9:41 pm
February 22, 2010
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Kirk:
The Simon-Ehrlich wager ended in 1990. Please refer to current events. As Jeremy Grantham correctly noted:
"If the bet were from 1980 to 2011, Ehrlich would have won:
Simon would have lost posthumously, and by a lot! (Even of the original
five, he is only one for five, having won the least significant of the
five: tin.) So, please “Cornucopians,” let’s not hear any more of the
Ehrlich-Simon bet, which proves, in fact, both that man is mortal and
must make short-term bets, and, more importantly, that Ehrlich’s
argument was right (so far)."
Here are some common commodity indices, and their performance over the last 30 years:
CPI: +360%
http://www.indexmundi.com/commodities/?commodity=commodity-price-index&months=360
Petroleum: +195%...and that includes the tail end of the OPEC shock.
http://www.indexmundi.com/commodities/?commodity=petroleum-price-index&months=360
Metals index: +310%
http://www.indexmundi.com/commodities/?commodity=metals-price-index&months=360
Industrial inputs index: +240%
http://www.indexmundi.com/commodities/?commodity=industrial-inputs-price-index&months=360
Commodity non-fuel index: +215%
http://www.indexmundi.com/commodities/?commodity=non-fuel-price-index&months=360
Agricultural raw materials index: +150%
http://www.indexmundi.com/commodities/?commodity=agricultural-raw-materials-price-index&months=360
I think this qualifies as a robust trend -- one which is far
more than "commodity prices go up, commodity prices go down". Our
population is steadily increasing, and we are coming closer and closer
to the limits of a finite set of resources. Look up our current supply
of rare earths sometime, and realize that 99% of them are in one hole in
China...
"Emerging technologies in agriculture also hold promise to reduce agriculture usage of petroleum."
And how do we plan to replace the minerals and nutrients necessary
for human life? As stated, topsoil is disappearing at roughly 1% per
year, and food is more depleted of trace minerals each year...which is
because we're growing our crops, transporting them to cities and
feedlots, eating them, and flushing the manure into the nearest body of
water instead of returning it to the soil, causing huge fish kills and
dead zones the size of Eastern states. I've covered all of this
already, with links, in the passage quoted above: feel free to read them
at your leisure.
Please note that when I speak of commoditization, I'm speaking of the process that creates a fungible product
traded on major exchanges. Your supermarket offers you a choice of
produce, and you can select from different varieties and vendors.
That's not fungibility. Read my reply to Sean, above, in which I
discuss this at length.
And I believe we fundamentally agree that the driver of inappropriate
commoditization is governmental interference. As I said in my
Conclusion, "The problems of industrial agriculture are primarily caused
by a
combination of commoditization and the broken farm policy that
subsidizes it."
Contemplationist:
"Commodity grains have saved millions of people from starvation – yeah they are poor food but food nonetheless."
I disagree. Commodity grains -- in fact, agriculture in general -- create famines by their very nature.
For example, the introduction of the potato to Ireland produced a population boom -- and a subsequent population bust. The Potato Famine left Ireland's population roughly the same in 1911 as it had been in 1780, before the potato.
From 2500 to 1500 years ago, the Roman Empire recorded at least 35 major famines. Between A.D. 500 and 1500, there were 95 major famines in England and 75 in France. Eastern Europe recorded 150 famines between 1500 and 1700. Russia recorded roughly 100 famines between 971 and 1974. And China has recorded roughly ninety famines per century -- almost one per year, somewhere in the country -- for the last two thousand years.
It's easy to see why: agriculture directs the entire productivity of the land into human mouths, leaving no margin for drought, soil exhaustion or erosion, or simple human error.
"improving productivity is the FUNDAMENTAL MECHANISM OF ECONOMIC GROWTH.
We want productivity to increase – in every single endeavor."
How do we expect that to go on forever on a finite surface with finite resources? Plants are made of dirt, water, and energy from the sun. When we harvest them and take them elsewhere, we're literally trucking away the soil. Increasing the productivity of strip-mining just means we run out of resources faster.
"I have a severe beef with the government-subsidized, corporatized and regulated agricultural system we have today."
So do I! I thought my conclusion was clear in this regard: "The problems of industrial agriculture are primarily caused by a combination of commoditization and the broken farm policy that
subsidizes it."
Paul:
Absolutely. When a system is so far in overshoot, casualties are guaranteed. And no, the definitions of "libertarian" and "anarchist" are the same over here...it's just that we have a lot of libertarians and few anarchists.
I'm glad you're past the delusion of being able to save everyone. People don't need or want saving: they need the opportunity to save themselves. "Saving the world" is how well-meaning people create dietary guidelines that push grain-based vegetarianism and tax saturated fat.
JS
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