Weekend Economists Rise Again August 10-12, 2012

[Demeter]

27. How Huge Food Corporations Will Make Upcoming Food Price Hikes Even Worse

http://truth-out.org/news/item/10819-how-huge-food-corporations-will-make-upcoming-food-price-hikes-even-worse

...Now is perhaps a good time to reflect on the extent to which the entire American food system is built on one crop – corn. And within that one crop, we rely on a very narrow range of genetics; although there are more than 250 known genetic races of corn, the U.S. almost exclusively relies on just two of them... In recent years, the already narrow range of corn genes has been impacted by a lack of competition in the seed market. Together, Monsanto and Pioneer control about 70 percent of the corn seed market. Pioneer, now owned by DuPont, has been a giant in the market for decades as it was the first company to commercialize hybrid corn nearly a century ago, but Monsanto is a relative newcomer. As it jumped into the corn seed market, Monsanto bought up major corn seed companies like Holden's and DeKalb. The acquisition of Holden's was especially significant as Holden's produced inbred lines of corn seed and sold them to independent seed companies around the U.S. The independent seed companies then used those inbred lines to produce and sell their own hybrids. Monsanto now not only controls a huge share of the market, it also has the means to deprive independent seed companies of the germplasm they once relied on...Because the U.S. is the world's number-one producer, consumer and exporter of corn, global food prices are also linked to America's ability to grow corn. This year, we are going to find out what happens when the crop fails in many parts of the country. Now is a good time to ask ourselves: is it smart to bet the global food supply on a few varieties of one crop grown in one country?

Globally, the U.S. produces more than 40 percent of the world's corn. Next in line is China, which produces less than half as much corn as the U.S., but we are the world's largest exporter whereas China is the world's largest importer. We export more than five times as much corn as the world's second largest exporter, Argentina. When the U.S. corn crop suffers, the global corn supply suffers – and prices go up around the world...Within the U.S., every state except for one (Alaska) grows corn, but the corn is concentrated geographically in the Midwest. Two states, Iowa and Illinois, grow more than 30 percent of America's corn (measured by acreage). Add in three more states (Nebraska, Minnesota, and Indiana) and you've got nearly 60 percent of U.S. corn. Another six states (South Dakota, Kansas, Ohio, Missouri, Wisconsin, and Michigan) can also be considered major producers. These 11 states grow more than 80 percent of U.S. corn, mostly without irrigation, and right now half of them are severely suffering from the epic drought.

Where does all the corn go? Well, we aren't eating it on the cob. Most of the crop is split between livestock feed and ethanol production with a smaller percentage going to exports and smaller amounts still going to produce foods we actually eat directly like high-fructose corn syrup. Over the past decade, we've seen a dramatic increase in the percent of the crop that goes to produce ethanol. Experts debate how much biofuels impact food prices, but a few trends are clear. As we've devoted more and more of our corn crop to ethanol, corn prices have gone up. Once upon a time, prices hovered around $2.50 per bushel. Now they are well above $7 per bushel. Jeffrey O'Hara, an agricultural economist for the Union of Concerned Scientists, recalls when organic corn sold for $4 per bushel just a few years ago. Now it is going for $16 per bushel. "People are going to start wondering why they don't see organic milk at the grocery store," he says...


The full picture of U.S. farming includes more than just corn, of course. But not much more. Nearly 90 percent of U.S. cropland is comprised of just four crops. This year, the USDA estimates that the nearly 30 percent of U.S. cropland is planted in corn, 23 percent in soybeans, 18 percent in hay, and 17 percent in wheat. Of these, only wheat is significantly different from the others: it mostly goes to feed humans (not livestock), it is less affected by the drought in the U.S., and the U.S. is not the world's top producer (it's fourth). All in all, the U.S. has produced an extremely efficient – but fragile – agricultural system. When all goes well, the U.S. produces massive amounts of incredibly cheap calories. But when something goes wrong, the system can come crashing down like a house of cards....So what can we do to prevent such disasters in the future? Diversify, says O'Hara. The scale of this particular drought is so enormous that we would have suffered consequences no matter what, but we might have reduced them by diversifying the crops we grow, diversifying where we grow them, and diversifying the varieties of each crop grown....When asked, Secretary of Agriculture Tom Vilsack dodged a question about whether the drought was related to the climate crisis and instead used it as an occasion to promote drought tolerant seeds. But Union of Concerned Scientists found that Monsanto's new genetically engineered "drought tolerant" corn provides minimal benefits in the face of drought. So maybe we should take a serious look at diversifying our food system and reducing carbon emissions instead of counting on drought tolerant seeds to bail us out after we break the climate.

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