The milk & corn prices are stand-in's for the price war between ethanol demand for corn and food. Mothers feeding their children and cheese lovers seem to have won the first battle, in so far as today there are a number of ethanol refiners with nothing to do. It's now making the news, of course, as part of a global food panic, as the poor communities are getting suddenly priced out, disrupting their lives and economies. This is part of what I was referring to last July, in saying why one might use my $Shadow method of whole footprint measurement when I said:
"We've been waiting for 'the big crunch' when the growth economy hits the limits of the earth. I could be off, but think we're likely to look back and see that it started in earnest last month, with that interesting little milk/corn price collision that we had".
Lester Brown's more complete January 2008 commentary on the combination of forces set in motion is below. Why prices change suddenly is a somewhat separate question from what happens when a growing amount of land is taken out of food production for fuel production. The curve now looks like the 'crunch' it displays started in Sept 2006 with the simultaneous sharp combined movement in the prices of Milk and Corn that started apparently in response to the large ethanol crop buy of that time. There's a certain elasticity in things, and the corn buy of that time apparently exceeded the surplus capacity of the agricultural system, setting off a spiral of price challenges. In March when the news started to raise increasing alarms I did this chart from Illinois state data, and also graphed the frequency of articles and blog entries on the New York Times website which contained the words 'corn milk & price'. Those trends show interesting peaks of discussion like my similar studies on the article frequency on 'sustainability' and on 'general systems theory' you can find on my site, but I have not yet cleaned up for presentation.
Earth
Policy Institute Plan B Update Embargoed for January 24, 2008, 11:00
AM EST
WHY ETHANOL PRODUCTION WILL DRIVE WORLD FOOD PRICES EVEN HIGHER IN 2008
http://www.earthpol
Lester R. Brown
We are witnessing the beginning of one of the great tragedies of history. The
United States, in a misguided effort to reduce its oil insecurity by converting
grain into fuel for cars, is generating global food insecurity on a scale never
seen before.
The world is facing the most severe food price inflation in history as grain and
soybean prices climb to all-time highs. Wheat trading on the Chicago Board of
Trade on December 17th breached the $10 per bushel level for the first time
ever. In mid-January, corn was trading over $5 per bushel, close to its historic
high. And on January 11th, soybeans traded at $13.42 per bushel, the highest
price ever recorded. All these prices are double those of a year or two ago.
As a result, prices of food products made directly from these commodities such
as bread, pasta, and tortillas, and those made indirectly, such as pork,
poultry, beef, milk, and eggs, are everywhere on the rise. In Mexico, corn meal
prices are up 60 percent. In Pakistan, flour prices have doubled. China is
facing rampant food price inflation, some of the worst in decades.
.... see above link for remainder...