Paris Over Amherst: Food, Energy, and Credit

The latest issue of Gregor.us Monthly, Food, Energy, The Spatial Dimension, and Credit uses the present macroeconomic juncture to pose questions about the coming fate of our Labor, Agriculture, and Credit Systems. Obviously, issues surrounding commodities are much in the news of late. Food, and food inflation, are also starting to bear down again but in an interesting way: despite being on the front page, soaring coffee and grain prices appear not to have pierced the psyche of the financial community, just yet. This may be a testament to the ongoing drama with monetary policy in the United States, as the FED faces down debt-deflation. In the rest of the world, however, food inflation in 2010 is a big story. That’s true especially in developing countries and now, unsurprisingly, in a dysfunctional state like North Korea.

As readers understand, fossil fuels have played an enormous role in the long-cycle upgrading of agricultural yields. And while energy-dense fossils fuels are indeed a miracle, now that oil production globally is no longer increasing (with a new price regime reflecting that change) the cost inputs to food production are rising. To this point, the USDA released quite a thorough report in March, Energy Use in the US Food System, that both illustrates increased costs, and, throttles the notion that energy demand has peaked on a discretionary basis, here in the US. Here is but one, key finding from that report:

During 1997-2002, per capita energy use in the United States declined 1.8 percent, while per capita food-related energy use in the United States increased by 16.4 percent. The population of the United States grew by more than 14 million over the period, pushing total energy use up by 3.3 percent and effecting an increase in total food-related energy use of 22.4 percent. As a share of the national energy budget, food-related energy use grew from 12.2 percent in 1997 to 14.4 percent in 2002.

One way to think about the difference in complexity between fossil-fuel driven economies, and agrarian economies is that fossil-fuel driven economies collapse distance, increase speed of physical goods, and find more effective ways to store capital over longer periods. Agrarian economies are more tied to geography, contend with distance as a significant factor, and are not able to store capital for long periods of time. The effect of these two types of economies on credit, and complexity, are therefore starkly different. Our contemporary, fossil-fuel economy has not only maxed out complexity and credit to a much, much higher multiple than would be allowed by an agrarian cycle–but it has also got itself hooked in to super high agricultural yields, and food from a variety of distances and sources. From my August newsletter, which uses a custom image from BBC Dimensions:

Amherst sits in a portion of the Connecticut River Valley has been a very rich and fertile basin for agriculture for hundreds of years. Whether it was colonials starting farms here in the 18th C, or recent immigrants from China, Russia, and Southeast Asia who come for the same wonderful soil, my area is a very productive region for food production. And over the past 10 years, we have witnessed the same kind of renaissance in organic food and small scale, innovative farming that’s taking place elsewhere in the country. But despite the large plots of land devoted to farming here in Hampshire County, there is not enough food grown here to feed contemporary populations in Amherst, Northampton, and other towns–even though we do not have high populations density. Contemporary Amherst, although rural with country roads and enormous maple trees and a handsome town green, now sports 25-30 thousand people attached to the University of Massachusetts alone. Feeding local populations now requires several big box grocery stores supplying food products manufactured from all over the world. Rice from India, beans from Mexico, fruit from the American Southwest. Consider, in this light, the amount of land required and labor required in 19th C France, to supply Paris when its population was over one million around 1850. Agricultural yields, without the benefit of modern fertilizer and soil management were of course much lower as well. A resident of Amherst, Massachusetts–even one that buys “organic” produce—enjoys the aggregate productivity of modern fertilizers, seed selection, refrigeration, and fast transport. Accordingly, it is useful to think of a withdrawal of energy-dense oil, and to at least imagine a reverse trajectory in which the labor supplied by oil needs to be supplied, instead, by humans.

What’s concerning about the pressures on the global food system that have bubbled up in the past five years is that they are accompanied by the crossing of certain thresholds. Whether that is the Middle East countries now looking for arable land in Africa, or China doing the same, multiple transitions such as these suggest enormous pressure in domestic populations on local carrying capacity. This also comes at a time when rising earth temperatures are clearly starting to  push or kick long-defined growing bands, say, as illustrated by the temperate elevation-level around the world that is conducive to growing coffee. While we cannot know for certain how resilient global agricultural will be in responding to either a rise in temperature volatility, or, demand pressure on yields in a time of higher cost energy inputs, the fact that the world has already positioned itself for highly optimized food production is worrisome. Add to this juncture the fact that regions, at a time when oil is forcing the restoration of distance, are choosing to extend and lengthen distance between themselves and their food supply, and we can start to build a better case for a food problem that is not temporary but structural.

-Gregor

  • Dick

    the incremental oil-related cost of intercontinental shipping and rail distribution of bulk commodities is small. Most of the oil-related costs are from processing and distribution fairly near the points of consumption at the farm gate or the supermarket. What is threatened by oil scarcity and rising prices are the profit margins and business models inherent in these chains, not the actual shipment businesses.

  • TJGodel8

    Retail supermarket operate on very thin margins and there isn't much room for price increase on processed foods, because consumers will substitution with cheaper products. Over time I would expect a shake out of smaller supermarket retailers and higher food prices and reduced selections from the remaining big box stores and supermarkets.

    Local agriculture and food producers will gab a bigger share of the local markets. Ironically this could lead to a healthy diet for consumers providing the staple of available food available meets a balanced dietary need.

  • http://www.facebook.com/profile.php?id=100000114431256 Marianne Grimaldi

    My partner and I stopped using supermarkets except for butter and milk and spices and so forth it seems. All produce and some meat items are purchased from the local farm stands on Saturday and Sunday. But I thought about the “organic fertilizers” some. They are basically hidden ff inputs from discarded livestock bone, blood and feces wastes, which were wasted in the old days. Organic farming may actually be a sign that food is getting expensive and now these wastes are used to grow food. Yikes! It is frightening for sure to contemplate an more mature oil collapse. But in the meantime, I think organic is better in terms of its healthiness, mineral content, and the lack of pesticides and so forth. I like the people at the farm stands, who are the people that grew the food. Where are we headed though with oil and liquids fuel depletion? I hate to ponder it, but I do every single day.

  • off_leash

    I'm wondering whether the start of ethanol's ramp-up as a fuel is causing the increase in food-related energy use. Incorrectly classifying corn produced for ethanol as food could explain a lot.

  • gregor.us

    It's part of it. Corn, that is. But there is a global condition that's

    developed whereby too many large regions or nations are now going afar to

    source food. Additionally, the rising cost of fertilizer, and energy inputs

    more generally, appears to now be having its unfortunate effect.

    G