Article on food & fuel — WSJ weekend interview with Peter Brabeck-Letmathe

“If politicians of this world really want to tackle food security,” Mr. Brabeck-Letmathe says, “there’s only one decision they have to make: No food for fuel. . . . They just have to say ‘No food for fuel,’ and supply and demand would balance again.”

Brabeck-Letmathe is the chairman & former CEO of Nestlé. His interview with Brian M. Carney appears in the September 3 2011 edition of the Wall Street Journal under the title “Can the World Still Feed Itself?”

The article is well worth reading in its entirety. The debate over whether ethanal & biofuel use leads to increased food prices has been going on since at least 2008.

I think Brabeck-Letmathe puts the debate to rest with some figures I hadn’t seen cited before:

“The energy market,” Mr. Brabeck-Letmathe argues, “is 20 times as big, in calories, as the food market.” So “when politicians say, ‘We want to replace 20% of the energy market through the food market,'” this means “we would have to triple food production” to meet that goal—and that’s before we eat the first kernel of what we’ve grown.

That seems fairly conclusive to me. Even if it can still be debated whether the increase in food prices from 2008-2011 was due to ethanol & biofuel use, we’ll rapidly approach a future where the link is inarguable simply because the energy market is so much larger than the food market.

Even as it is,

The U.S. Department of Agriculture’s most recent estimate predicts that this year, for the first time, American farmers will harvest more corn for ethanol than for feed. In Europe some 50% of the rapeseed crop is going into biofuel production, according to Mr. Brabeck-Letmathe, while “world-wide about 18% of sugar is being used for biofuel today.”

Numerous news articles & blog posts over the last few months have argued many of the revolts in the Middle East & northern Africa have been driven by rising food prices in those areas. There are some arguments that increased amounts of U.S. dollars floating around because of the U.S. Federal Reserve’s low interest rates and loose monetary policy of the last few years has increased commodity prices, but clearly even if that wasn’t the case, less food would mean more expensive food.

And as Brabeck-Letmathe points out, there a lot of the world — a lot — where the cost of food as a percentage of disposable income is much higher than in developed countries. For much of the Third World (which encompasses hundreds of millions of human beings) food costs can be 80% of disposable income.

Interestingly, Brabeck-Letmathe looks at both the food and fuel discussions in terms of how to produce the most calories. While I hadn’t encountered that point of view before, in a way it does make the most sense as the ultimate concern in both cases. Whether it’s W amount of beef or X amount of oatmeal, Y amount of ethanol or Z amount of heavy crude oil, it all comes down to the same question: how much use can you get out of it. And that in turn is based on the amount of energy contained in whichever commodity you’re discussing.

The comments about genetically-modified organisms were refreshing to see, so much of the press coverage I’ve seen of the issue dances around the trade-offs of the research versus rejecting the research, ignoring that in favor of talking about how strongly various interest groups feel about GMOs and accusations that GMO supporters only care about profit.

(I’ll be honest, I’ve been skeptical of GMO-haters ever since seeing a student presentation in a college class that sounded like something out of medieval witch trials. The student presenter used “GMO” as both a noun & verb, claiming — and I’m not making this up — if GMOs are ever grown in a patch of land, ever, the ground itself is GMO’d and all subsequent crops grown in that field, regardless of whether they are the same type of plant or not, will be GMO’d and become GMO’s themselves. And once those plants have become GMO’d by the soil contamination, all future descendants of those plants will be GMOs.)]

Brabeck-Letmathe seem equally skeptical,

“If you look at those countries that have introduced GMOs,” Mr. Brabeck-Letmathe says, “you will see that the yield per hectare has increased by about 30% over the past few years. Whereas the yields for non-GMO crops are flat to slightly declining.” And that gap, he says, “is a voluntary gap. . . . It’s just a political decision.”

And it’s one thing for rich, well-fed Europe to say, as Mr. Brabeck-Letmathe puts it, “I don’t want to produce GMO [crops] because frankly speaking I don’t want to produce so much food.” That, he says, he can understand.

What’s harder for him to understand is that Europe’s policies effectively forbid poor countries in places like Africa from using genetically modified seed. These countries, he says, urgently need the technology to increase yields and productivity in their backward agricultural sectors. But if they plant GMOs, then under Europe’s rules the EU “will not allow you to export anything—anything. Not just the [crop] that has GMO—anything,” because of European fears about cross-contamination and almost impossibly strict purity standards. The European fear of genetically modified crops is, he says, “purely emotional. It’s becoming almost a religious belief.”

This makes Mr. Brabeck-Letmathe, a jovial man with a quick smile, get emotional himself. “How many people,” he asks with a touch of irritation, “have died from food contamination from organic products, and how many people have died from GMO products?” He answers his own question: “None from GMO. And I don’t have to ask too long how many people have died just recently from organic,” he adds, referring to the e. coli outbreak earlier this year in Europe.

Also, Brabeck-Letmathe gives a brief historical summary of Nestlé and the food industry as a whole:

Nestlé exists, Mr. Brabeck-Letmathe says, because as Europe’s population “urbanized,” as people moved to the cities and traded their ploughshares for time cards, “somebody had to ensure that people” who worked 12 hours a day in a factory could feed themselves. For the first time in history, “you need[ed] a food industry. You need[ed] somebody who takes a product, who treats it so that its shelf life allows it to be transported, to be brought into the consumption center. That’s why we have canning, that’s why we have pasteurization, that’s why we have all these things.”

The vast majority of us would have no idea any longer how to feed ourselves if we turned up one day to find the supermarket empty. We rely on industrialized food production, distribution, preservation and storage to make our urban lifestyles, our very lives, possible.

There’s a whole separate discussion in the article regarding taxation of the 98.5% of water that humans use which isn’t used for direct consumption or washing clothes. Many processes and products — including ethanol and biofuels — are only economically possible if water is free. But water isn’t really “free”, it’s always been abundant enough that it could be treated as free yet we are approaching a time that won’t be true. If most of that water has even a nominal fee attached to it, then the uses of it that are unnecessarily wasteful will get priced out of the market. Such as biodiesel, where the production ratio is 9 100 : 1 for water used : biodiesel produced. Ouch.

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