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Even giants are being hurt by rising energy prices

In general it may be true that if we were willing - and in some cases able - to pay more for food, then some serious problems with our food system might be solved. The same may be said of our energy system - higher energy prices will make it much easier for renewable energy to come to the fore and will encourage conservation.

The trouble is that along the path towards a better, more sustainable farming and energy system, there will be many casualties. For one thing, there are millions, perhaps billions, of people whose bodies cannot afford to conserve and eat less, because they are already at or below 2,000 calories a day, and eating a diet poor in nutrients. In some cases farmers may be caught in a double bind: higher food prices bring them less money not more - because fertilizer prices, driven by rising oil and gas prices, are climbing even faster than food prices.

So much so that, as an NPR story about a small Honduran farmer highlighted today, some farmers are actually planting less acreage (though some are undoubtedly more).

These stories, however, all too rarely point out the underlying connection - that high oil prices are driving up both food and fertilizer costs, and understanding the energy picture is vital in trying to understand the farm picture.

The graph below is an average of the US price of several different types of fertilizer. It shows how fertilizer costs have doubled in five years, even before oil reached $100 a barrel. Nitrogen-based fertilizers,which are often the most important, are made from natural gas. But in many places, natural gas prices are roughly proportional to oil, so there is no respite there.

http://www.ers.usda.gov/Data/FertilizerUse/

The result is that the poor farmer either plants less land and yields less food, whilst trying to spend less on petroleum-based fertilizer (and pesticides, herbicides, and insecticides) or else tries to find other ways of farming without using such products. This may be the only way out of the trap of the Green Revolution - it wasn't just about clever hybridisation, it was about using large quantities of oil and gas, and now that oil and gas are inevitably becoming problematic, so is the Green Revolution, at least for many small farmers.

But surely large farmers are doing well out of high food prices. Some are, but spare a thought for poor Archers Daniels Midland, who have just reported quartlerly profits at little more than one third what they were last year - a miserable $372 million compared to a crisp $995 million in 2007.

In fact, they are the world's largest grain processor, and very heavily invested in corn ethanol. They are part of the reason why corn prices have shot up, taking food prices with them. The irony is that they have helped push corn prices up so much, that making ethanol is coming dangerously to close to being unprofitable. Furthermore generous US subsidies for the ethanol industry are coming under scrutiny.

Thus, rising energy prices are having unfortunate and counter-intuitive effects on both large and small food and fuel producers. Understanding more about energy depletion won't always cure such agricultural problems, but not knowing - as so many auto manufacturers seem hell bent on proving - is a recipe for disaster.

What do you think? Leave a comment below.

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