This link has been bookmarked by 1 people . It was first bookmarked on 20 May 2008, by Wisely.
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20 May 08
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Virtually all these people are protesting sharp rises in the prices of rice and wheat, which is what they eat. (Mexico is an exception, because Mexicans use corn to make tortillas.) Since no one has ever converted a rice paddy to a cornfield, the simple notion that rice now costs more because we've converted land from growing food to growing fuel cannot possibly be correct. As for those rising wheat prices, there may be some acreage that had been used to grow wheat that's now being used to grow corn (or soybeans) for biofuels. But the real reason wheat prices are up is that production is lower than it otherwise might have been, because of new strains of fungi that are cutting yields and because of a six-year drought in Australia, which is among the world's major wheat suppliers.
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The answer lies in the biggest, most under-reported story of our lives: Today, more human beings are emerging from poverty than at any time in history. If the present trend continues, within our lifetimes -- or certainly within our children's lifetimes -- the majority of human beings will have emerged from poverty and joined the middle class.
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Of course, the first thing people do as they emerge from poverty is improve their diets. They can afford to buy food now, so they do. That's what's really driving up the price of rice.
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In short, although the supply of food is actually increasing, the demand for food is rising even faster. And that's pushed prices up around the world.
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Obviously, if you convert even one acre from growing food to growing fuel you reduce supply. That's basic economics. But as we've seen, the notion that ethanol production is the driving cause of rising food prices simply isn't true. The underlying cause is the emergence of this global middle class and the inevitable glitches in supply and demand that happen along the way.
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There are two additional reasons why food prices are soaring: First, the cost of oil has been skyrocketing, and as the price of oil rises, so too does the price of everything else -- including food. Second, there's a lot of market speculation going on right now. If you were wondering what those greedy imbeciles who wrecked the housing market with their sub-prime mortgage gimmicks and funds are up to these days -- well, they're speculating in commodities futures including wheat and corn. Among grown-ups in both the agriculture and financial communities, there's a spreading queasiness that this speculation is helping drive commodities futures prices through the roof -- and a growing consensus that Congress should start looking into this speculation, fast.
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All of us in the biofuels industry understand two things: In the long run, for our industry to survive we've got to produce ethanol and other biofuels at prices that don't require subsidies -- and that don't depend on crops that could otherwise be used for food. Cellulosic ethanol, which could be made from wood chips or switch grass, looks to be the future here in the US.
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