World food shortages to stay, riots a risk: FAO
BY Mayank Bhardwaj  /   Apr 9, 2008

NEW DELHI (Reuters) – Food riots which have struck several
impoverished countries could spread with shortages and high prices set
to continue for some time, the head of the United Nation’s Food and
Agriculture Organization (FAO) said. A combination of high oil and
fuel prices, rising demand for food in a wealthier Asia, the use of
farmland and crops for biofuels, bad weather and speculation on
futures markets have pushed up food prices, prompting violent protests
in a handful of poor states.

Jacques Diouf, director general of the Rome-based FAO, said on
Wednesday during a trip to India that there was a growing risk of
social instability in countries where families spent more than half
their income on food. “The problem is very serious around the world
due to severe price rises and we have seen riots in Egypt, Cameroon,
Haiti and Burkina Faso,” he told reporters in New Delhi.

Five people have been killed in a week of demonstrations in Haiti over
high food prices in the poorest country in the Americas, while unions
in the West African nation of Burkina Faso called a general strike
over soaring food and fuel costs. “There is a risk that this unrest
will spread in countries where 50 to 60 percent of income goes to
food,” Diouf added.

He said world cereal stocks were enough to meet demand for eight to 12
weeks, while grain supplies were at their lowest since the 1980s.
“This is due to higher demand from countries like India, China, where
GDP grows at 8-10 percent and the increase in income is going to
food,” Diouf said after meeting India’s farm minister, Sharad Pawar.
He said he was advising governments to invest in irrigation, storage
facilities and rural infrastructure and increase productivity to meet
the challenge of food scarcity.

Global food prices, based on United Nations records, rose 35 percent
in the year to the end of January, markedly accelerating an upturn
that began, gently at first, in 2002. Since then, prices have risen 65
percent. In 2007 alone, according to the FAO’s world food index, dairy
prices rose nearly 80 percent and grain 42 percent. Some of the
world’s most populous countries have felt the impact of higher prices
after rice joined a wider rally that has buoyed other grains like
wheat and corn.

Rice prices in Thailand, the world’s biggest rice exporter, have
doubled since the start of this year after India heavily restricted
and then banned the export of non-basmati rice to ensure it had enough
to feed its people. In Manila, President Gloria Macapagal Arroyo
unveiled a series of measures to boost rice production as troops armed
with M-16 rifles supervised the sale of subsidized grain and the
government threatened to jail hoarders for life. Pakistan recently
deployed security personnel to guard its warehouses.

The FAO in a recent report said Burkina Faso, Cameroon, Egypt,
Indonesia, Ivory Coast, Mauritania, Mozambique and Senegal have seen
unrest in the last several weeks related to food and fuel prices. In
India, wholesale price inflation hit its highest in more than three
years in March at 7 percent, posing a headache for the ruling
coalition in Asia’s third-largest economy with elections for local and
national assemblies creeping up.

Price pressures had been building for several weeks, in large part
driven by foodstuffs, and the government has stepped in with a string
of duty cuts and export restrictions. Analysts say fiscal steps were
unlikely to roll back prices, and Indian leaders have said ensuring
food security by boosting domestic production was a priority. “I
welcome economic growth in India and China, but I also hope they will
invest in agriculture because these two countries account for 2.2
billion people out of 6 billion,” Diouf said.

Food price rises threaten global security: UN
Hunger riots will destabilise weak governments, says senior official
BY David Adam  /  April 9 2008

Rising food prices could spark worldwide unrest and threaten political
stability, the UN’s top humanitarian official warned yesterday after
two days of rioting in Egypt over the doubling of prices of basic
foods in a year and protests in other parts of the world. Sir John
Holmes, undersecretary general for humanitarian affairs and the UN’s
emergency relief coordinator, told a conference in Dubai that
escalating prices would trigger protests and riots in vulnerable
nations. He said food scarcity and soaring fuel prices would compound
the damaging effects of global warming. Prices have risen 40% on
average globally since last summer.

“The security implications [of the food crisis] should also not be
underestimated as food riots are already being reported across the
globe,” Holmes said. “Current food price trends are likely to increase
sharply both the incidence and depth of food insecurity.” He added
that the biggest challenge to humanitarian work is climate change,
which has doubled the number of disasters from an average of 200 a
year to 400 a year in the past two decades.

As well as this week’s violence in Egypt, the rising cost and scarcity
of food has been blamed for:

· Riots in Haiti last week that killed four people
· Violent protests in Ivory Coast
· Price riots in Cameroon in February that left 40 people dead
· Heated demonstrations in Mauritania, Mozambique and Senegal
· Protests in Uzbekistan, Yemen, Bolivia and Indonesia

UN staff in Jordan also went on strike for a day this week to demand a
pay rise in the face of a 50% hike in prices, while Asian countries
such as Cambodia, China, Vietnam, India and Pakistan have curbed rice
exports to ensure supplies for their own residents. Officials in the
Philippines have warned that people hoarding rice could face economic
sabotage charges. A moratorium is being considered on converting
agricultural land for housing or golf courses, while fast-food outlets
are being pressed to offer half-portions of rice. The UN Food and
Agriculture Organisation says rice production should rise by 12m
tonnes, or 1.8%, this year, which would help ease the pressure. It
expects “sizable” increases in all the major Asian rice producing
countries, especially Bangladesh, China, India, Indonesia, Burma, the
Philippines and Thailand.

Holmes is the latest senior figure to warn the world is facing a
worsening food crisis. Josette Sheeran, director of the UN World Food
Programme, said last month: “We are seeing a new face of hunger. We
are seeing more urban hunger than ever before. We are seeing food on
the shelves but people being unable to afford it.” The programme has
launched an appeal to boost its aid budget from $2.9bn to $3.4bn
(£1.5bn to £1.7bn) to meet higher prices, which officials say are
jeopardising the programme’s ability to continue feeding 73 million
people worldwide.

Robert Zoellick, president of the World Bank, said “many more people
will suffer and starve” unless the US, Europe, Japan and other rich
countries provide funds. He said prices of all staple food had risen
80% in three years, and that 33 countries faced unrest because of the
price rises. In the UK, Professor John Beddington, the new chief
scientific adviser to the government, used his first speech last month
to warn the effects of the food crisis would bite more quickly than
climate change. He said the agriculture industry needed to double its
food production, using less water than today. He said the prospect of
food shortages over the next 20 years was so acute it had to be
tackled immediately: “Climate change is a real issue and is rightly
being dealt with by major global investment. However, I am concerned
there is another major issue along a similar time-scale – that of food
and energy security.”







Corruption Plagues Egypt’s Bread
BY Maggie Michael  /  Apr 10, 2008

CAIRO, Egypt (AP) — It’s a sore point for a country struggling to
contain bread riots: Bakeries that get government-subsidized flour
often sell it on the black market at a huge profit, taking food from
poor people’s mouths. But in Egypt – notorious for low wages and
corruption – bakery workers say they have little choice but to steal
the flour and sell it, both to feed their families and to pay the
crushing bribes demanded by government officials and police.

The bread crisis here in recent days has largely been fueled by the
worldwide increase in food prices, which has pushed more people to
rely on subsidized bread in an impoverished country where 20 percent
of the 76 million population live on less than $1 a day. The result
has been bread shortages and riots by customers waiting in long lines
at subsidized bakeries. But the crisis has also highlighted the
widespread petty corruption pervading Egyptian life – from bakeries to
hospitals to police stations – that many who earn meager paychecks
maintain is the only way to make ends meet.

In one poor district of Cairo, a government official in charge of a
public bakery shows his paycheck: After 20 years in his position, he
earns about $55 a month, including supposed bonuses. “I have to steal
– how would I survive without stealing?” the official, a father of
eight, told The Associated Press. He spoke on condition that he and
the district where his bakery is located not be identified, fearing

He admitted that he regularly sells a portion of his bakery’s
subsidized wheat on the black market. The government provides a ration
of wheat to state-run bakeries at a subsidized price of about $1.50
for each 110-pound sack. The wheat is supposed to produce bread that
sells for less than one cent per loaf. But many bakeries sell some of
it to private bakeries at up to $37 a sack.

Part of the difference, the bakery employees pocket. But part is
needed to pay off the host of government inspectors – from the police,
the Supply Ministry, the city government and local councils – each of
whom demands his own fat bribe. “I just have to give bribes to most of
them or they would file fines or close the bakery,” said the official,
whose bakery receives 68 sacks of subsidized flour every day.

A senior security official involved in government crackdowns on the
black market wheat said public bakeries often sell off up to half the
subsidized wheat they receive. He also acknowledged that many
inspectors pockets bribes from bakers. “Now if I’m an inspector and
you, the baker, give me 1,000 pounds ($180) a month while my salary is
200 pounds ($37) a month, wouldn’t I sell my conscience?” he said.
Unless the government “feeds the people, they will keep on stealing
and receiving bribes,” said the security official, who spoke on
condition of anonymity in exchange for discussing the situation

One baker, Mohammed Abdel-Salam, said he used to work for a private
firm that bought subsidized flour from public sector bakeries. “Very
late at night or in the early hours of the morning, I used to go to
the big public bakery and pick up three or four sacks of flour” for
$37 each, he said. Private bakeries sell bread at market rates, up to
25 times the subsidized price. But Abdel-Salam said he quit his job
when his private bakery was forced to shut down after the government
tightened its control over wheat in recent days.

In response to the bread shortages, the government ordered the
military – which runs its own bakeries to feed troops – to start
selling subsidized bread to the public. It also opened hundreds more
distribution points around the country and sought to crack down on the
black market for wheat. As a result, lines at public bakeries have
eased in the capital Cairo, though they persist in many provinces.

But the bread crisis and rising food prices have deepened the
discontent over low wages. This week, riots broke out in the northern
city of Mahalla al-Kobra, where workers at state textile factories
have staged a series of strikes for higher wages in the past year.
After the rioting, the government gave bonuses to the workers and
promised to meet their demands on raises and health benefits.

Media reports last week said President Hosni Mubarak would order an
increase in minimum salaries for public workers at an upcoming meeting
of the National Council of Salaries, the bureaucratic body overseeing
wages. But few people believe the fatter paychecks will do much to
reduce the corruption that has long been a way of life in Egypt.

Examples are everywhere. At Cairo’s airport, police take bribes from
taxi drivers to limit which cabs can pick up fares. At police
stations, people seeking official paperwork must slip an officer
money. Unless ambulance workers get their obligatory “tips,” patients
might not reach the emergency rooms in public hospitals on time – and
once there, patients must be sure to gave nurses a gratuity – called
“baksheesh” in Arabic – just to get basic care. In schools, nearly all
Egyptian students face pressure from their teachers to pay for
“private lessons” after school hours. Galal Amin, an economist at the
American University in Cairo, said corruption in Egypt is a “law that
cannot be violated.”

“The bribe, big and small, for public employees is not only expected
but obligatory,” Amin wrote in the independent daily Al-Masry Al-Youm.
“Bribes are given and received openly, without embarrassment. An
employee considers it part of his monthly salary.”

Traders who hoard rice face life imprisonment, gov’t warns  /  April
3, 2008

MANILA, Philippines: Traders found hoarding rice while the country
struggles to maintain sufficient stocks of its staple grain could be
charged with economic sabotage, a crime that carries a life sentence,
the justice secretary said Thursday.

Government agents have been raiding warehouses in a hunt for
unscrupulous traders and warehouse owners holding on to rice stocks
amid spiraling prices and fears of a shortage, Justice Secretary Raul
Gonzalez said. The amount of rice hoarded and the resulting effect on
the country’s economy would determine whether economic sabotage
charges could be filed, Gonzalez told The Associated Press. He said
111 warehouses, each holding at least 40,000 sacks of rice, have been
found in northern Bulacan province. A justice department task force
was investigating whether any of those facilities had hoarded grains.

President Gloria Macapagal Arroyo has vowed to crack down on rice
hoarders, ordering the arrest of those who buy subsidized rice from
the government to sell later at a higher price. Rice prices have
jumped 50 percent in the past two months on world markets and at least
doubled since 2004. Experts blame rising fuel and fertilizer costs as
well as the effect of disease, pests and climate change on crops.
Farmers’ groups have warned that prices could rise a further 40
percent in coming months. The higher prices have already sparked
protests in the Philippines, where a government official has asked the
public to save leftover rice and communist rebels have vowed to take
advantage of the situation to stir up public unrest.

The Philippines’ 90 million people consume about 11.9 million metric
tons (13.12 million U.S. tons) of rice annually, most grown
domestically. But dwindling domestic production and corruption in the
rice supply chain have created a recurrent shortfall of about 10
percent. The government has to purchase at least 2 million metric tons
(2.20 million U.S. tons) from the international market every year,
making the Philippines the world’s biggest rice importer.

Grain prices soar globally
BY Daniel Ten Kate  /  March 27, 2008
Rice shortages across Asia; In Egypt, Army is now baking bread to curb
food riots.

Bangkok, Thailand – – Rice farmers here are staying awake in shifts at
night to guard their fields from thieves. In Peru, shortages of wheat
flour are prompting the military to make bread with potato flour, a
native crop. In Egypt, Cameroon, and Burkina Faso food riots have
broken out in the past week. Around the world, governments and aid
groups are grappling with the escalating cost of basic grains. In
December, 37 countries faced a food crisis, reports the UN Food and
Agricultural Organization (FAO), and 20 nations had imposed some form
of food-price controls.

In Asia, where rice is on every plate, prices are shooting up almost
daily. Premium Thai fragrant rice now costs $900 per ton, a nearly 30
percent rise from a month ago. Exporters say the price could eclipse
$1,000 per ton by June. Similarly, prices of white rice have climbed
about 50 percent since January to $600 per ton and are projected to
jump another 40 percent to $800 per ton in April.

The skyrocketing prices have prompted millers to default on rice
supply contracts and bandits to steal rice as they aim to hoard the
crop, and sell it later, as prices continue to rise. “The farmers are
afraid as their fields have been robbed in the nighttime,” says
Sarayouth Phumithon, an official at the Thai government’s Bureau of
Rice Strategy and Supply. “This is just the beginning. The problem
will get worse if the price keeps increasing.”

The reported thefts in five rice-growing provinces in central Thailand
are the first signs of criminal activity in this region stemming from
the sharpest global spike in commodity prices since the oil crisis in
the mid-1970s. Across the world, higher food prices are triggering
thefts and violence – both by people who can’t afford to eat and those
who want to make an easy buck. Three men delivering food for the World
Food Programme (WFP) in Sudan were reported killed Tuesday, the latest
in a surge of attacks that have delayed the arrival of vital supplies
to some 2 million people in the region.

So far this year, the UN agency says 56 trucks have been hijacked in
Sudan; 36 trucks remain missing, and 24 drivers are unaccounted for.
The WFP says that banditry has reduced by half the amount of food
normally transported to the western region of Darfur at this time of
year. “All parties must recognize that the drivers of humanitarian
vehicles and their cargo are serving a neutral purpose,” WFP Sudan
representative Kenro Oshidari said in a statement.

Last year, the Food and Agriculture Organization’s food price index
increased an unprecedented 40 percent from 2006, and this year it is
projected to continue rising. Surging oil prices (in turn, boosting
fertilizer and transport costs) combined with a drop in production due
to droughts in Australia and the Ukraine have helped to drain global
food stocks.

While rice production is rising, consumption is growing faster. The US
Department of Agriculture forecast rice stocks to fall to their lowest
level since the mid-1970s, and wheat stocks are projected to hit their
lowest point since 1946, the year after World War II ended. These
factors, combined with a falling US dollar, steadily rising demand
from developing countries, and biofuel policies that mop up excess
cereal production, have all helped boost world prices.

The FAO expects food prices to stay high for the next three to five
years, presenting a challenge for governments trying to keep domestic
food prices low in order to keep poor citizens properly fed and avoid
mass protests and social unrest. Some countries like Vietnam, India,
and Pakistan have banned grain exports. On Wednesday, Cambodia’s prime
minister ordered a two-month ban on rice exports to neighboring
Thailand and Vietnam “to guarantee food security.” Meanwhile food
importers Indonesia, Korea, and Mongolia have cut or reduced import
tariffs. As Philippine farmers warned that the country was facing a
serious rice shortage, the government signed a deal Wednesday to
import 1.5 million metric tons (1.65 million US tons) of rice from

Analysts note that the current shortage isn’t hitting as many people
as hard as past shortages. As incomes rise worldwide, food is a
smaller portion of the family budget. “Governments have tried to
protect domestic prices from fluctuations in international prices, and
they have succeeded in the past,” says Sumiter Broca, a policy analyst
at the FAO. “The key point is that the proportion of income spent on
food is much lower than it used to be, so that provides a cushion. The
situation is not as serious as it was in 1974.”

Citizens of Nepal and India now spend about 35 to 40 percent of income
on food, down from about 70 to 80 percent in the early 1970s, Mr.
Broca says. In developing countries, food costs eat up only about 7
percent of household incomes. The FAO expects food prices to stabilize
and eventually drop as farmers plant more grains. That’s already
starting to happen with wheat and corn. But the next few years could
be difficult. On Monday, the WFP, a UN agency that distributes food
aid to some 70 million poor people, made an “extraordinary emergency
appeal” to donor countries for $500 million to prevent cutbacks in its
global operations.

In the past two weeks, two rice suppliers in Cambodia defaulted on
contracts with the WFP, claiming the new higher prices would offset
any penalty for reneging on the contract. “That’s extremely worrying,
as it indicates the price of rice, just like the price of wheat, is
now continuing to increase,” says Paul Risley, a WFP spokesman. “That
makes it very difficult for us to find rice at an affordable price.
The ability to end malnutrition is limited when food prices are so
high.” Countries with higher foreign exchange reserves and food
stocks, including China, Japan, and India, can still afford the high
food prices if necessary. But nations with low currency reserves like
the Philippines, Pakistan, Bangladesh, and Nepal may need assistance
from international financial institutions to afford food if prices
continue to spike.

Although higher food prices mean trouble for consumers and
governments, they do increase incomes for farmers – assuming their
crops aren’t stolen. Still, farmers aren’t making as much money as a
middleman with a good-sized warehouse. Rice millers in Thailand are
defaulting on contracts with exporters to capitalize on higher prices,
and speculators are renting warehouses to store paddy. Rice in paddy
form (in the husk) can be stored for about a year and a half before
quality starts to deteriorate, and milled rice can be held for another
six months. “Nobody dares to sell now as we don’t know where the price
is going,” says Chookiat Ophaswongse, president of Thailand’s Rice
Exporters Association. Although Thailand, the world’s largest rice
exporter, has shipped record amounts in January and February, traders
have lost money on futures contracts as prices have jumped more
quickly than anyone expected, he says.

In the Philippines, President Gloria Macapagal Arroyo has vowed to
crack down on rice hoarders. The government has ordered police to
stake out warehouses and follow trucks to see where the rice was
going, she said. Thailand may try to sell off 2.1 million tons of rice
stocks to keep domestic prices low. But as long as prices stay high,
Thai farmers will need to burn the midnight oil keeping watch over
their fields. “Most farmers must sell crops immediately as they don’t
have a good warehouse that can withstand attacks from rats, birds,
chickens – or human thieves,” says Mr. Sarayouth.

High cost of basics fuels global food fights
BY Heather Stewart  /  February 18 2007

Tortilla riots in Mexico, onion protests in India, and Venezuelan
supermarkets threatened with forced nationalisation unless they slash
prices. The soaring cost of basic foods is provoking fury among
consumers around the world. ‘It’s a global trend,’ says Kona Haque,
senior commodities editor at the Economist Intelligence Unit. ‘We are
definitely seeing price increases.’ The price of corn, the key
ingredient of the tortilla, has risen by more than 80 per cent in the
past year and wheat is up by more than 40 per cent. Poor growing
conditions, including a drought in Australia, are one reason for the
price rises. But Haque says another key factor has been Washington’s
drive to reduce America’s dependence on oil, by increasing the use of
corn-based ethanol as a fuel. ‘A lot of land is being devoted to
ethanol, so prices have shot up,’ she said.

Analysts have been warning for some time that corn prices would start
to move in tandem with global oil markets, as demand for ethanol
increased, and farmers turned fields over to filling American fuel
tanks, instead of Mexican tables. There are also likely to be painful
knock-on effects for livestock farmers, who use grains to feed their

Tens of thousands of people have protested in Mexico City at the high
cost of tortillas, forcing president Felipe Calderon to promise a
price freeze. In India, where the economy is growing firmly and
inflation across the board is strong, the agriculture ministry has
suggested that it, too, could step in to cap the cost of food, after
widespread protests over the prohibitive cost of onions. And in
Venezuela, left-wing president Hugo Chavez has accused shop-owners of
hoarding food, and warned that unless they reduce prices, the
government will take them over.

The Biggest Green Mistake / Biofuels and the global food crisis
BY Ronald Bailey  /  April 8, 2008

In the last year, the price of wheat has tripled, corn doubled, and
rice almost doubled. As prices soared, food riots have broken out in
about 20 poor countries including Yemen, Haiti, Egypt, Pakistan,
Indonesia, Ivory Coast, and Mexico. In response some countries, such
as India, Pakistan Egypt and Vietnam, are banning the export of grains
and imposing food price controls.

Are rising food prices the result of the economic dynamism of China
and India, in which newly prosperous consumers are demanding more food–
especially more meat? Perennial doomsters such as the Earth Policy
Institute’s Lester Brown predicted more than a decade ago that China’s
growing food demand would destabilize global markets and signal a
permanent increase in grain prices. But that thesis has so far not
been borne out by the facts. China is a net grain exporter. India is
also largely self-sufficient in grains. At some time in the future,
these countries may become net grain importers, but they are not now
and so cannot be blamed to for today’s higher food prices.

If surging demand is not the problem, what is? In three words: stupid
energy policies. Although they are not perfect substitutes, oil and
natural gas prices tend to move in tandem. So as oil prices rose above
$100 per barrel, the price of gas also went up. Natural gas is the
main feedstock for nitrogen fertilizer. As gas prices soared, so did
fertilizer prices which rose by 200 percent.

As a report from the International Center for Soil Fertility and
Agricultural Development (ICSFAD) notes, applying the fertilizer
derived from 1000 cubic feet of natural gas yields around 480 pounds
of grain. That amount of grain would supply enough calories to feed a
person for one year. Rising oil prices also contribute to higher food
prices because farmers need transport fuel to run their tractors and
to get food to urban markets.

Even worse is the bioethanol craze. Politicians in both the United
States and the European Union are mandating that vast quantities of
food be turned into fuel as they chase the chimera of “energy
independence.” For example, Congress passed and President George W.
Bush signed misbegotten legislation requiring fuel producers to use at
least 36 billion gallons of biofuels by 2022-which equals about 27
percent of the gasoline Americans currently use each year and is about
five times the amount being produced now. And the European Union set a
goal that 10 percent of transport fuels come from biofuels by 2020.

The result of these mandates is that about 100 million tons of grain
will be transformed this year into fuel, drawing down global grain
stocks to their lowest levels in decades. Keep in mind that 100
million tons of grain is enough to feed nearly 450 million people for
a year.

As Dennis Avery from the Hudson Institute’s Center for Global Food
Issues points out, the higher corn prices that result from biofuels
mandates mean that farmers are shifting from producing wheat and
soybeans to producing corn. Less wheat and soybeans means higher
prices for those grains. In the face of higher prices for wheat, corn
and soybeans consumers try to shift to rice which in turns raises that
grain’s price. In addition, higher grain prices encourage farmers in
developing countries to chop down and plow up forests. It also hasn’t
helped that some traditionally strong grain exporters such as
Australia have experienced extreme weather.

So what to do? In the short run, there is some good news. High prices
are encouraging farmers to shift back toward wheat and soybeans which
should relieve some of the pressure on grain prices. Second, the
biofuels mandates must go. If biofuels are such a good idea,
entrepreneurs, inventors and investors will make them into a viable
energy source without any government subsidies. Thirdly, both high and
low technologies are addressing high fertilizer prices. On the high
tech front, Arcadia Biosciences has created biotech rice and corn
varieties that need much less nitrogen fertilizer that conventional
varieties require. In Bangladesh and other poor countries, farmers are
embedding low tech fertilizer-infused briquettes in the soil to
deliver nitrogen to rice. This boosts crop production 25 percent while
cutting fertilizer use by 50 percent.

Expanding acreage to grow biofuels is bad for biodiversity and may
even boost the carbon dioxide emissions that contribute to man-made
global warming. Avery notes that food production needs to double
because there will be more people who will want to eat better by 2050,
at which point world population begins to slide back downwards.
Turning food into fuel makes that goal much harder to achieve. Avery
is right when he argues, “Biofuels are purely and simply the biggest
Green mistake we’ve ever made and we’re still making it.”



Afghanistan swaps heroin for wheat
BY Con Coughlin  /   08 Apr 2008

“Good news at last from the front line in the war on terror, where I
am spending a few days as the guest of British forces responsible for
security in Helmand province. I’ve just come from a meeting with the
newly appointed Afghan governor Gulab Mangal where it emerged that for
the first time since British forces deployed to the region two years
ago local farmers are not concentrating all their energies on
producing heroin.

Poppy eradication was flagged up as one of the main British priorities
when former defence secretary John Reid first announced Britain’s
deployment two years ago. But this part of the mission has not exactly
been a glorious success. Last year poppy production actually

But now it seems the message is finally getting through. In parts of
Helmand Afghan farmers are this year sowing wheat instead of poppy –
not because they have suddenly been converted to the argument that
producing heroin is not in the national interest. Market forces have
been the deciding factor – with wheat prices doubling in the past
year, and the street price of heroin falling, it is now more cost
effective to grow wheat. At last there are signs of progress being
made amidst Afghanistan’s battle-scarred landscape.”





Food Becoming The New Oil; OPEC Shows Way as Grain Prices Reach New
BY Raymond J. Learsy  /  February 27, 2008

What’s good for the goose is good for the gander. As the world’s
governments acquiesce to the outrage of OPEC’s collusion to manipulate
the price of oil another storm is looming in the near distance. Grain
prices are lurching forward. Wheat prices have reached new records and
soybeans (including soybean oil and soybean meal) and corn are there
as well. The UN is warning on the impact of rising food prices
cautioning many nations may not be able to cope. Argentina, Russia and
Kazakhstan have imposed restrictions on grain exports.

Where are prices going and what is at stake. Yesterday the price of
wheat touched and passed $12 per bushel on the CBE. According to the
USDA the variable cost (seed, fertilizer, energy) to grow plant and
harvest an acre of wheat is $91 per acre. Each acre yields some 42
bushels of wheat (subject to some regional variances of course). Thus
it costs approximately $2.61 to grow a bushel of wheat. Add to this
the annual carrying cost of each acre of land, which can vary
depending on local land values, land taxes etc. A figure of $1.75 per
acre would be a fair estimate. Thus the cost to produce a bushel of
wheat to an American farmer could be reasonably estimated at $4.36 per

At $12 a bushel per the calculations above, this would accord Farmer
Jones a profit of just under $8.00 per bushel, a level as close to
heaven as he has ever been even though it begins to present economic
and social dangers for the rest of the world.

But wait, before one begins to pontificate about our farmers enriching
themselves on the backs of the masses, consider this — the price of
another vital commodity, oil. Let’s compare some profit margins. Here
is our Farmer Jones, hard worker and diligent as he is, enjoying the
fruits of his labor and enjoying a return of 300 percent, margins he
has never seen before. Nothing to sneeze at but still pony league
compared to the giants of finance who have been shown the door at
Citicorp, Merrill Lynch and Countrywide.

Yet when it comes to bonanzas our friends in places like Saudi Arabia
and Kuwait truly take the ring. They and the other charter members of
OPEC have no limits to their rapaciousness. Today they are allocating
oil (as in production quotas) to us and the rest of the world at
prices that now exceed $100 a barrel. And this for the Saudis and
Kuwaitis at production costs that are less than $1.50 (one dollar and
fifty cents) a barrel.

So our Farmer Jones gets dirty looks with his 300 percent margin. This
while our Saudi and Kuwaiti friends are welcomed in the halls of
government and civil society with margins exceeding 6500 percent. The
price of wheat with the same multiple would reach $283 per bushel. Let
me repeat that number, $283 per bushel. At those levels Farmer Jones
would have to build a bunker on his farm spread and stock it with
ample supplies of vintage wines and the best Kentucky bourbon. A lot
of people are going to waiting outside with pitchforks.

If the agricultural sector was doing to us what the OPEC led oil patch
is getting away with, the howls of outrage would be worldwide. Food
riots, rationing would be the order of the day. Yet the oil sector
gets away with the most outrageous market manipulation colluding to
mark up their commodity to the most outrageous levels, and this
outrage is met with barely a beep.

Ah, but you say, these are different commodities. Oil is finite, and
if you believe the peak oil pranksters, in precipitous decline. As I
have posted before, that is a highly questionable perception (see
“Peak Oil is Snake Oil” 06.25.07), used all too willingly by the oil
producers and their flacks to rationalize ever higher prices.

But that is not the point here. You see wheat, corn, soybeans are all
in their way consummately finite. Without such mineral nutrient inputs
as phosphates, potash, nitrates/nitrogen at planting, crop yields
would collapse with crippling famine sweeping large swaths of the
planet. And if oil is finite, then too are these basic minerals, the
building blocks of chemical fertilizer. Not only are they as finite as
oil, but often more limited and more difficult to access. Think the
end of the “Green Revolution”.


WHY THE AMAZON IS ON FIRE,9171,1725975-1,00.html
The Clean Energy Scam
BY Michael Grunwald  /  Mar. 27, 2008

From his Cessna a mile above the southern Amazon, John Carter looks
down on the destruction of the world’s greatest ecological jewel. He
watches men converting rain forest into cattle pastures and soybean
fields with bulldozers and chains. He sees fires wiping out such
gigantic swaths of jungle that scientists now debate the
“savannization” of the Amazon. Brazil just announced that
deforestation is on track to double this year; Carter, a Texas cowboy
with all the subtlety of a chainsaw, says it’s going to get worse
fast. “It gives me goose bumps,” says Carter, who founded a nonprofit
to promote sustainable ranching on the Amazon frontier. “It’s like
witnessing a rape.”

The Amazon was the chic eco-cause of the 1990s, revered as an
incomparable storehouse of biodiversity. It’s been overshadowed lately
by global warming, but the Amazon rain forest happens also to be an
incomparable storehouse of carbon, the very carbon that heats up the
planet when it’s released into the atmosphere. Brazil now ranks fourth
in the world in carbon emissions, and most of its emissions come from
deforestation. Carter is not a man who gets easily spooked–he led a
reconnaissance unit in Desert Storm, and I watched him grab a small
anaconda with his bare hands in Brazil–but he can sound downright
panicky about the future of the forest. “You can’t protect it. There’s
too much money to be made tearing it down,” he says. “Out here on the
frontier, you really see the market at work.”

This land rush is being accelerated by an unlikely source: biofuels.
An explosion in demand for farm-grown fuels has raised global crop
prices to record highs, which is spurring a dramatic expansion of
Brazilian agriculture, which is invading the Amazon at an increasingly
alarming rate.

Propelled by mounting anxieties over soaring oil costs and climate
change, biofuels have become the vanguard of the green-tech
revolution, the trendy way for politicians and corporations to show
they’re serious about finding alternative sources of energy and in the
process slowing global warming. The U.S. quintupled its production of
ethanol–ethyl alcohol, a fuel distilled from plant matter–in the
past decade, and Washington has just mandated another fivefold
increase in renewable fuels over the next decade. Europe has similarly
aggressive biofuel mandates and subsidies, and Brazil’s filling
stations no longer even offer plain gasoline. Worldwide investment in
biofuels rose from $5 billion in 1995 to $38 billion in 2005 and is
expected to top $100 billion by 2010, thanks to investors like Richard
Branson and George Soros, GE and BP, Ford and Shell, Cargill and the
Carlyle Group. Renewable fuels has become one of those motherhood-and-
apple-pie catchphrases, as unobjectionable as the troops or the middle

But several new studies show the biofuel boom is doing exactly the
opposite of what its proponents intended: it’s dramatically
accelerating global warming, imperiling the planet in the name of
saving it. Corn ethanol, always environmentally suspect, turns out to
be environmentally disastrous. Even cellulosic ethanol made from
switchgrass, which has been promoted by eco-activists and eco-
investors as well as by President Bush as the fuel of the future,
looks less green than oil-derived gasoline.

Meanwhile, by diverting grain and oilseed crops from dinner plates to
fuel tanks, biofuels are jacking up world food prices and endangering
the hungry. The grain it takes to fill an SUV tank with ethanol could
feed a person for a year. Harvests are being plucked to fuel our cars
instead of ourselves. The U.N.’s World Food Program says it needs $500
million in additional funding and supplies, calling the rising costs
for food nothing less than a global emergency. Soaring corn prices
have sparked tortilla riots in Mexico City, and skyrocketing flour
prices have destabilized Pakistan, which wasn’t exactly tranquil when
flour was affordable.

Biofuels do slightly reduce dependence on imported oil, and the
ethanol boom has created rural jobs while enriching some farmers and
agribusinesses. But the basic problem with most biofuels is amazingly
simple, given that researchers have ignored it until now: using land
to grow fuel leads to the destruction of forests, wetlands and
grasslands that store enormous amounts of carbon.

Backed by billions in investment capital, this alarming phenomenon is
replicating itself around the world. Indonesia has bulldozed and
burned so much wilderness to grow palm oil trees for biodiesel that
its ranking among the world’s top carbon emitters has surged from 21st
to third according to a report by Wetlands International. Malaysia is
converting forests into palm oil farms so rapidly that it’s running
out of uncultivated land. But most of the damage created by biofuels
will be less direct and less obvious. In Brazil, for instance, only a
tiny portion of the Amazon is being torn down to grow the sugarcane
that fuels most Brazilian cars. More deforestation results from a
chain reaction so vast it’s subtle: U.S. farmers are selling one-fifth
of their corn to ethanol production, so U.S. soybean farmers are
switching to corn, so Brazilian soybean farmers are expanding into
cattle pastures, so Brazilian cattlemen are displaced to the Amazon.
It’s the remorseless economics of commodities markets. “The price of
soybeans goes up,” laments Sandro Menezes, a biologist with
Conservation International in Brazil, “and the forest comes down.”

Deforestation accounts for 20% of all current carbon emissions. So
unless the world can eliminate emissions from all other sources–cars,
power plants, factories, even flatulent cows–it needs to reduce
deforestation or risk an environmental catastrophe. That means
limiting the expansion of agriculture, a daunting task as the world’s
population keeps expanding. And saving forests is probably an
impossibility so long as vast expanses of cropland are used to grow
modest amounts of fuel. The biofuels boom, in short, is one that could
haunt the planet for generations–and it’s only getting started.

Why the Amazon Is on Fire

This destructive biofuel dynamic is on vivid display in Brazil, where
a Rhode Island–size chunk of the Amazon was deforested in the second
half of 2007 and even more was degraded by fire. Some scientists
believe fires are now altering the local microclimate and could
eventually reduce the Amazon to a savanna or even a desert. “It’s
approaching a tipping point,” says ecologist Daniel Nepstad of the
Woods Hole Research Center.

I spent a day in the Amazon with the Kamayura tribe, which has been
forced by drought to replant its crops five times this year. The
tribesmen I met all complained about hacking coughs and stinging eyes
from the constant fires and the disappearance of the native plants
they use for food, medicine and rituals. The Kamayura had virtually no
contact with whites until the 1960s; now their forest is collapsing
around them. Their chief, Kotok, a middle-aged man with an easy smile
and Three Stooges hairdo that belie his fierce authority, believes
that’s no coincidence. “We are people of the forest, and the whites
are destroying our home,” says Kotok, who wore a ceremonial beaded
belt, a digital watch, a pair of flip-flops and nothing else. “It’s
all because of money.”

Kotok knows nothing about biofuels. He’s more concerned about his
tribe’s recent tendency to waste its precious diesel-powered generator
watching late-night soap operas. But he’s right. Deforestation can be
a complex process; for example, land reforms enacted by Brazilian
President Luiz Inácio Lula da Silva have attracted slash-and-burn
squatters to the forest, and “use it or lose it” incentives have
spurred some landowners to deforest to avoid redistribution.

The basic problem is that the Amazon is worth more deforested than it
is intact. Carter, who fell in love with the region after marrying a
Brazilian and taking over her father’s ranch, says the rate of
deforestation closely tracks commodity prices on the Chicago Board of
Trade. “It’s just exponential right now because the economics are so
good,” he says. “Everything tillable or grazeable is gouged out and

That the destruction is taking place in Brazil is sadly ironic, given
that the nation is also an exemplar of the allure of biofuels. Sugar
growers here have a greener story to tell than do any other biofuel
producers. They provide 45% of Brazil’s fuel (all cars in the country
are able to run on ethanol) on only 1% of its arable land. They’ve
reduced fertilizer use while increasing yields, and they convert
leftover biomass into electricity. Marcos Jank, the head of their
trade group, urges me not to lump biofuels together: “Grain is good
for bread, not for cars. But sugar is different.” Jank expects
production to double by 2015 with little effect on the Amazon. “You’ll
see the expansion on cattle pastures and the Cerrado,” he says.

So far, he’s right. There isn’t much sugar in the Amazon. But my next
stop was the Cerrado, south of the Amazon, an ecological jewel in its
own right. The Amazon gets the ink, but the Cerrado is the world’s
most biodiverse savanna, with 10,000 species of plants, nearly half of
which are found nowhere else on earth, and more mammals than the
African bush. In the natural Cerrado, I saw toucans and macaws, puma
tracks and a carnivorous flower that lures flies by smelling like
manure. The Cerrado’s trees aren’t as tall or dense as the Amazon’s,
so they don’t store as much carbon, but the region is three times the
size of Texas, so it stores its share.

At least it did, before it was transformed by the march of progress–
first into pastures, then into sugarcane and soybean fields. In one
field I saw an array of ovens cooking trees into charcoal, spewing
Cerrado’s carbon into the atmosphere; those ovens used to be
ubiquitous, but most of the trees are gone. I had to travel hours
through converted Cerrado to see a 96-acre (39 hectare) sliver of
intact Cerrado, where a former shopkeeper named Lauro Barbosa had
spent his life savings for a nature preserve. “The land prices are
going up, up, up,” Barbosa told me. “My friends say I’m a fool, and my
wife almost divorced me. But I wanted to save something before it’s
all gone.”

The environmental cost of this cropland creep is now becoming
apparent. One groundbreaking new study in Science concluded that when
this deforestation effect is taken into account, corn ethanol and soy
biodiesel produce about twice the emissions of gasoline. Sugarcane
ethanol is much cleaner, and biofuels created from waste products that
don’t gobble up land have real potential, but even cellulosic ethanol
increases overall emissions when its plant source is grown on good
cropland. “People don’t want to believe renewable fuels could be bad,”
says the lead author, Tim Searchinger, a Princeton scholar and former
Environmental Defense attorney. “But when you realize we’re tearing
down rain forests that store loads of carbon to grow crops that store
much less carbon, it becomes obvious.”

The growing backlash against biofuels is a product of the law of
unintended consequences. It may seem obvious now that when biofuels
increase demand for crops, prices will rise and farms will expand into
nature. But biofuel technology began on a small scale, and grain
surpluses were common. Any ripples were inconsequential. When the
scale becomes global, the outcome is entirely different, which is
causing cheerleaders for biofuels to recalibrate. “We’re all looking
at the numbers in an entirely new way,” says the Natural Resources
Defense Council’s Nathanael Greene, whose optimistic “Growing Energy”
report in 2004 helped galvanize support for biofuels among green

Several of the most widely cited experts on the environmental benefits
of biofuels are warning about the environmental costs now that they’ve
recognized the deforestation effect. “The situation is a lot more
challenging than a lot of us thought,” says University of California,
Berkeley, professor Alexander Farrell, whose 2006 Science article
calculating the emissions reductions of various ethanols used to be
considered the definitive analysis. The experts haven’t given up on
biofuels; they’re calling for better biofuels that won’t trigger
massive carbon releases by displacing wildland. Robert Watson, the top
scientist at the U.K.’s Department for the Environment, recently
warned that mandating more biofuel usage–as the European Union is
proposing–would be “insane” if it increases greenhouse gases. But the
forces that biofuels have unleashed–political, economic, social–may
now be too powerful to constrain.

America the Bio-Foolish

The best place to see this is America’s biofuel mecca: Iowa. Last year
fewer than 2% of U.S. gas stations offered ethanol, and the country
produced 7 billion gal. (26.5 billion L) of biofuel, which cost
taxpayers at least $8 billion in subsidies. But on Nov. 6, at a
biodiesel plant in Newton, Iowa, Hillary Rodham Clinton unveiled an
eye-popping plan that would require all stations to offer ethanol by
2017 while mandating 60 billion gal. (227 billion L) by 2030. “This is
the fuel for a much brighter future!” she declared. Barack Obama
immediately criticized her–not for proposing such an expansive plan
but for failing to support ethanol before she started trolling for
votes in Iowa’s caucuses.

If biofuels are the new dotcoms, Iowa is Silicon Valley, with 53,000
jobs and $1.8 billion in income dependent on the industry. The state
has so many ethanol distilleries under construction that it’s poised
to become a net importer of corn. That’s why biofuel-pandering has
become virtually mandatory for presidential contenders. John McCain
was the rare candidate who vehemently opposed ethanol as an outrageous
agribusiness boondoggle, which is why he skipped Iowa in 2000. But
McCain learned his lesson in time for this year’s caucuses. By 2006 he
was calling ethanol a “vital alternative energy source.”

Members of Congress love biofuels too, not only because so many dream
about future Iowa caucuses but also because so few want to offend the
farm lobby, the most powerful force behind biofuels on Capitol Hill.
Ethanol isn’t about just Iowa or even the Midwest anymore. Plants are
under construction in New York, Georgia, Oregon and Texas, and the
ethanol boom’s effect on prices has helped lift farm incomes to record
levels nationwide.

Someone is paying to support these environmentally questionable
industries: you. In December, President Bush signed a bipartisan
energy bill that will dramatically increase support to the industry
while mandating 36 billion gal. (136 billion L) of biofuel by 2022.
This will provide a huge boost to grain markets.

Why is so much money still being poured into such a misguided
enterprise? Like the scientists and environmentalists, many
politicians genuinely believe biofuels can help decrease global
warming. It makes intuitive sense: cars emit carbon no matter what
fuel they burn, but the process of growing plants for fuel sucks some
of that carbon out of the atmosphere. For years, the big question was
whether those reductions from carbon sequestration outweighed the
“life cycle” of carbon emissions from farming, converting the crops to
fuel and transporting the fuel to market. Researchers eventually
concluded that yes, biofuels were greener than gasoline. The
improvements were only about 20% for corn ethanol because tractors,
petroleum-based fertilizers and distilleries emitted lots of carbon.
But the gains approached 90% for more efficient fuels, and advocates
were confident that technology would progressively increase benefits.

There was just one flaw in the calculation: the studies all credited
fuel crops for sequestering carbon, but no one checked whether the
crops would ultimately replace vegetation and soils that sucked up
even more carbon. It was as if the science world assumed biofuels
would be grown in parking lots. The deforestation of Indonesia has
shown that’s not the case. It turns out that the carbon lost when
wilderness is razed overwhelms the gains from cleaner-burning fuels. A
study by University of Minnesota ecologist David Tilman concluded that
it will take more than 400 years of biodiesel use to “pay back” the
carbon emitted by directly clearing peat lands to grow palm oil;
clearing grasslands to grow corn for ethanol has a payback period of
93 years. The result is that biofuels increase demand for crops, which
boosts prices, which drives agricultural expansion, which eats
forests. Searchinger’s study concluded that overall, corn ethanol has
a payback period of about 167 years because of the deforestation it

Not every kernel of corn diverted to fuel will be replaced. Diversions
raise food prices, so the poor will eat less. That’s the reason a U.N.
food expert recently called agrofuels a “crime against humanity.”
Lester Brown of the Earth Policy Institute says that biofuels pit the
800 million people with cars against the 800 million people with
hunger problems. Four years ago, two University of Minnesota
researchers predicted the ranks of the hungry would drop to 625
million by 2025; last year, after adjusting for the inflationary
effects of biofuels, they increased their prediction to 1.2 billion.

Industry advocates say that as farms increase crop yields, as has
happened throughout history, they won’t need as much land. They’ll use
less energy, and they’ll use farm waste to generate electricity. To
which Searchinger says: Wonderful! But growing fuel is still an
inefficient use of good cropland. Strange as it sounds, we’re better
off growing food and drilling for oil. Sure, we should conserve fuel
and buy efficient cars, but we should keep filling them with gas if
the alternatives are dirtier.

The lesson behind the math is that on a warming planet, land is an
incredibly precious commodity, and every acre used to generate fuel is
an acre that can’t be used to generate the food needed to feed us or
the carbon storage needed to save us. Searchinger acknowledges that
biofuels can be a godsend if they don’t use arable land. Possible
feedstocks include municipal trash, agricultural waste, algae and even
carbon dioxide, although none of the technologies are yet economical
on a large scale. Tilman even holds out hope for fuel crops–he’s been
experimenting with Midwestern prairie grasses–as long as they’re
grown on “degraded lands” that can no longer support food crops or

Changing the Incentives

That’s certainly not what’s going on in Brazil. There’s a frontier
feel to the southern Amazon right now. Gunmen go by names like Lizard
and Messiah, and Carter tells harrowing stories about decapitations
and castrations and hostages. Brazil has remarkably strict
environmental laws–in the Amazon, landholders are permitted to
deforest only 20% of their property–but there’s not much law
enforcement. I left Kotok to see Blairo Maggi, who is not only the
soybean king of the world, with nearly half a million acres (200,000
hectares) in the province of Mato Grosso, but also the region’s
governor. “It’s like your Wild West right now,” Maggi says. “There’s
no money for enforcement, so people do what they want.”

Maggi has been a leading pioneer on the Brazilian frontier, and it
irks him that critics in the U.S.–which cleared its forests and
settled its frontier 125 years ago but still provides generous
subsidies to its farmers–attack him for doing the same thing except
without subsidies and with severe restrictions on deforestation.
Imagine Iowa farmers agreeing to keep 80%–or even 20%–of their land
in native prairie grass. “You make us sound like bandits,” Maggi tells
me. “But we want to achieve what you achieved in America. We have the
same dreams for our families. Are you afraid of the competition?”

Maggi got in trouble recently for saying he’d rather feed a child than
save a tree, but he’s come to recognize the importance of the forest.
“Now I want to feed a child and save a tree,” he says with a grin. But
can he do all that and grow fuel for the world as well? “Ah, now
you’ve hit the nail on the head.” Maggi says the biofuel boom is
making him richer, but it’s also making it harder to feed children and
save trees. “There are many mouths to feed, and nobody’s invented a
chip to create protein without growing crops,” says his pal Homero
Pereira, a congressman who is also the head of Mato Grosso’s farm
bureau. “If you don’t want us to tear down the forest, you better pay
us to leave it up!”

Everyone I interviewed in Brazil agreed: the market drives behavior,
so without incentives to prevent deforestation, the Amazon is doomed.
It’s unfair to ask developing countries not to develop natural areas
without compensation. Anyway, laws aren’t enough. Carter tried
confronting ranchers who didn’t obey deforestation laws and nearly got
killed; now his nonprofit is developing certification programs to
reward eco-sensitive ranchers. “People see the forest as junk,” he
says. “If you want to save it, you better open your pocketbook. Plus,
you might not get shot.”

The trouble is that even if there were enough financial incentives to
keep the Amazon intact, high commodity prices would encourage
deforestation elsewhere. And government mandates to increase biofuel
production are going to boost commodity prices, which will only
attract more investment. Until someone invents that protein chip, it’s
going to mean the worst of everything: higher food prices, more
deforestation and more emissions.

Advocates are always careful to point out that biofuels are only part
of the solution to global warming, that the world also needs more
energy-efficient lightbulbs and homes and factories and lifestyles.
And the world does need all those things. But the world is still going
to be fighting an uphill battle until it realizes that right now,
biofuels aren’t part of the solution at all. They’re part of the

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