Get ready for another food crisis

Monday, August 20, 2012
By Paul Martin

By Charles Sizemore
Aug. 20, 2012

If the definition of insanity is doing the same thing over and over again and expecting different results, then Congress and the Obama administration must both be stark raving mad.

t was just four years ago that the world found itself facing a food crisis. If you are reading this article, you may very well not remember the food crisis of 2007-2008. By virtue of being a MarketWatch reader, chances are very good that your income was sufficient to cover rising food costs without making any major lifestyle adjustments. But in many poorer countries, the spikes in the cost of basic food staples were enough to cause riots and social unrest, not to mention hardship and misery on those struggling to put bread on the tables. Readers may recall the infamous “Tortilla Riots” in Mexico City, which brought more the 70,000 people to the streets.

The causes of the food crisis were varied. Weather conditions were a factor. And taking a long-term macro view, rising incomes in China and other developing countries have led to higher-protein diets (i.e. more meat), which in turn means more demand for grains to be used for animal feed. This is certainly a trend that no one would want to stop; Chinese diners deserve to eat steak too, after all.

But then as now, one of the drivers of high food prices was government policy and specifically the U.S. corn-based ethanol program. The United States is the biggest producer and exporter of corn in the world, and roughly 40% of the crop is used to make ethanol for American cars.

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