NCPA - National Center for Policy Analysis


December 13, 2007

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, says columnist Robert J. Samuelson.

But the world food system may now be undergoing a radical break with this past:

  • 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.

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, says Samuelson.  The Economist calls the subsidies "reckless."

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, says Samuelson.  Government subsidies reflect the careless and cynical manipulation of worthy public goals for selfish ends, says Samuelson.  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.

Source: Robert J. Samuelson, "Food vs. Fuel," Washington Post, December 12, 2007.

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