Why Food Prices are High – Inflation II

To understand why food costs are increasing, it is important to separate the inflation caused by money printing by banks and governments from the real cost increases occurring in the real economy.

Real cost increases in energy production (see “Why Gas Prices are High) make everything more expensive as energy is the prime resource. Food production is quite energy intensive and therefore very sensitive to energy costs. Also, nitrogen chemical fertilizer is largely an energy transformation process while the natural mined potash is a slowly depleting resource. On top of that, Russian supplies of potash may be reduced given the long war on-going in Ukraine.

Soil resources are being depleted and in countries like Canada, where rapid urban expansion is taking place on prime farmland, farmland area is actually declining. How can adding 450,000 mouths to feed in Canada every year while paving over some of the best and MOST RELIABLE farmland in the world do anything but increase food prices?

Climate change is taking its toll on crop potential as floods and droughts, along with extreme temperatures, stress crops and reduce yields. In the graph below, data to 2010 indicates that technological advances are holding their own but dramatic productivity increases have largely stopped.

The golden age of technological advancement and cheap energy in a stable climate, which saw agricultural output soar enough to feed a burgeoning global population on a fairly stable agricultural

area, is over. As the impacts of more expensive energy, soil degradation, loss of farmland to urban sprawl and a warming and more dynamic climate increasingly come to bear, maintaining agricultural output will become ever more challenging.

Food costs reflect all of these factors along with the usual market roiling factors of war, speculation and misplaced subsidies waxing and waning.

Why food prices have gone up.

  • Higher energy and fertilizer prices
  • Urban sprawl over prime farmland displacing food production to more marginal land
  • Desertification in many parts of the world
  • Loss of topsoil due to drought when it blows away and to flood when it is washed away. Flood waters are usually brown with topsoil.
  • Climate change impacts from heat damage to floods to drought.

Understanding the critical relationship between inputs and outputs of our food system is every bit as important as understanding the EROI ratio (Energy Returned for Energy Invested). Africa was late in adopting mechanized and fossil fuel powered and fertilized agriculture and, as we see in the graph below, its energy inputs increase faster than its food energy production.

This trend took place in most of the rest of the world before the 1970s – the start of our graph. Only Europe appears to be somewhat increasing the ratio of food output per energy input but the data is only available to 2010 so far.

What will the numbers look like once climate change begins to clear her throat?

Edible energy production and energy return on investment – long-term analysis of Global changes
Bartomiej Bajan et al (2021)

The graph shows clearly that agricultural technology is maturing and the dramatic increases in output prior to 2010 are unlikely to be experienced going forward unless driven by much higher inputs; meaning much higher food costs.

Yes, there is a “Putin Bump” in food costs, just as there is in gas prices, but the fundamental trend is one of long-term real cost increases as a depleting Earth and a more extreme climate make harvests less reliable and food more difficult to produce.

Pedal-to-the-metal continued growth isn’t the smart strategy here. Food security and resilience should be the top priorities or increased food costs and less reliable supplies will be felt in households around the world as well as seen on the streets of capitals everywhere.

A superb and easy to read analysis of the recent disintegration of Syria lays out the societal dangers of food and energy inflation very clearly:

Failing States, Collapsing Systems; BioPhysical Triggers of Political Violence
Author: Nafeez Mosaddeq Ahmed

Tell your local politicians that you want them to concentrate on food security, not urban growth and let your media source know you want to read about real world, biophysical economics -based reporting rather than money manipulation and Ponzi schemes.

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