Finishing her bag of Karu cheese-flavoured snacks, Shoko Taketani blushes and
admits that she still feels oddly peckish. It is not her imagination:
Japanese crisp packets contain 10 per cent fewer crisps than they did a
month ago.
In Munich, beer at this year’s Oktoberfest will be the most expensive in the
festival’s history and Matthaias Hickl is breaking the habit of a lifetime:
he is staying away in protest.
In Kuala Lumpur, Rhosdi is mulling a decision he thought would always be
beyond him: whether to trade in his motor scooter for his first car. He is
one of the 1.2 million Malaysian civil servants who have just received a
windfall pay increase — their first in 15 years.
Though geographically diverse and apparently unrelated, these developments are
in fact connected, symptoms of a new global trend. Stomachs and petrol tanks
are for the first time in competition and farmers everywhere are asking
themselves a novel question: am I planting food or energy?
There is no single source for the revolution sweeping across every continent.
But one starting point is Jim Curl’s 350-acre farm in Brahman, Oklahoma.
This year he planted a third of it with genetically modified corn instead of
the area’s traditional crop of wheat.
This amounts to 100 acres or so, a mere flap of a butterfly’s wings in the
great scheme of things. But by the time the impact of Mr Curl’s decision has
made its way to the other side of the world, the results are seismic.
The economics of food — what is affordable, what it costs, and what that money
buys — are creating unprecedented waves through all continents. From nut
plantations in Indonesia to barley fields along the Rhine, farmers are all
adjusting to this new world.
Part of the result is tortilla riots in Mexico, the astonishing leap in
Brazilian chicken leg prices and mayonnaise price spikes in Western Europe.
These, say industry insiders, are the first skirmishes of a conflict that
could soon dominate geopolitics: the war for resources between the world’s
800 million cars and its six billion stomachs. In the developed world, the
war will come down to price and choice; in the developing world it could
come down to survival.
The war centres largely on global demand for biofuels — “green” replacements
for petrol, such as ethanol, that can be produced from sugar, corn and other
agricultural products rather than fossil fuels.
Farmers are making a perfectly rational economic choice. With the price of
crude oil high, they are planting crops to meet demand for cheaper biofuels.
But converting more crops into energy means there is less to go into
foodstuffs. And so the price of those foodstuffs rise.
The price increases for German beer, for instance, arise from replacing barley
fields with ethanol feedstocks. And the consequences are widespread.
“I’m not going to the Oktoberfest this year,” Mr Hickl said. A Bavarian based
in Milan, the 40-year-old artist is accustomed to joining countrymen on the
annual pilgrammage to perhaps the world’s biggest drunken party. But no
more. “The price of a measure is heading up towards ¤eight euros<NO>and at
that rate only tourists and the super-rich can afford to get drunk,” Mr
Hickl said. “I’m furious — and I’m not going.”
The US is a driving force in such change. In January President Bush called for
a massive increase in the use of ethanol over the next decade — a move
regarded by traders as setting the battle lines of the future conflict.
America now devotes more acreage to growing corn than at any time since
1944. Farmers planted 90.5 million acres this year, 15 per cent more than 12
months ago. But little of it will go anywhere near a dinner plate.
If White House targets to double ethanol production by next year are achieved,
and in due course 40 per cent of that corn ends up in petrol tanks, the
world may have a difficult, expensive time feeding itself.
This emphasis on ethanol as the biofuel of choice, said Michael Lewis,
Deutsche Bank’s head of commodities research, has created unprecedented
competition between food and energy. “Agricultural commodities are the
subject of a growing battle between the demands of automobiles in the US and
the demands of feeding people in the developing world,” he said.
In Oklahoma, the choice for farmers like Mr Curl is a micro one. Some 80
ethanol refineries are being built in the US, to add to the 114 already up
and running. One is planned near Mr Curl’s farm. “It should raise the price
quite a bit,” he said — possibly to as much as $4 a bushel from the current
$3.50-$3.60. And so instead of producing food, a third of Mr Curl’s land is
growing future energy.
Once copied across a continent, such decisions mean farming states could
become as big a player in global energy markets as a member of Opec (the
Organisation of Petroleum Exporting Countries).
Mr Curl’s decision has momentous consequences. Planting more corn for ethanol
has meant a 15 per cent cut in the amount of land devoted to soya. So soya
oil prices are rising. That in turn has opened the door to cheaper palm oil
— 90 per cent of which comes from Malaysia and Indonesia.
That surge in sales of palm oil is, in Malaysia in particular, creating
dramatic social change overnight. Government coffers are so full that last
month all civil servants — everyone from deputy public prosecutors to
ministry cooks — were given pay rises of between 7.5 per cent and 42 per
cent. The one-off windfall was their first salary increase since 1992 and
cost the Government £1.1 billion. To make life even sweeter, the
cost-of-living allowance for the same workers — who represent about a tenth
of the country’s workforce — was doubled.
Suddenly, people in one of Malaysia’s most underpaid and conservative sectors
are talking about dipping their toes in the stock market, buying homes and
upgrading their lifestyles.Rhosdi, for instance, a state-school teacher in
his 30s, is able to think about the social advance involved in swapping two
wheels for four.
Envious of the civil servants’ good fortune, private sector employees have
begun lobbying for similar pay rises. Tellers at branches of Maybank in
Kuala Lumpur have begun wearing prominent signs around their necks demanding
that management “match the civil servants’ increase”.
In this complex train of economic cause and effect, there is another butterfly
flapping its wings in Beijing in the shape of Liu Ping. She used to buy her
monthly quota of half a pound of oil for the three members of her family
with a ration coupon.
“The oil just about filled a beer bottle and we had to make do for a month.”
That was in the 1960s and 1970s, when the family used to steam most of their
food. “We just didn’t cook dishes that needed lots of oil, like eggplant or
beans.” Some people used lard even in the 1980s when oil was at last
available in the shops, but at a cost of 1 yuan per kilo – a lot for the
average family living on 40 yuan a month.
Now Mrs Liu, 60, uses about 6 catties (pounds) of oil a month to cook for her
husband and daughter, underlining how economic growth in China — and India —
has created vast new markets for edible oils, particularly soya and palm
oil.
Diets in China and India have changed out of recognition as prosperity has
grown, creating greater demands for meat and, as a consequence, the crops
that feed livestock.
Dairy is also affected. Chinese, for instance, will by 2020 be consuming about
40kg of milk per capita compared with today’s average 24kg. Milk, yoghurt,
and cheese form an increasingly large proportion of urbanites’ diet. Ice
cream has emerged as a favourite snack.
But it is corn — global inventories are at a record low and the price of the
crop is 50 per cent higher than it was last year — and edible oils where the
greatest impact is being be felt.
As the billion-strong populations of both countries gradually rise from
poverty, vegetable oils – an extremely expensive proportion of the average
developing world diet – have formed a greater part of everyday meals.
In Beijing, a ten-litre bottle of oil costs about 80 yuan — inexpensive for
today’s new-rich city dwellers and affordable even to China’s farmers.
Within a year, say economists, China could reach the hugely significant point
of becoming a net importer of corn. Oils give food a sophistication that
more and more Chinese and Indians are getting a taste for.
Shoko Taketani, with her empty crisp packet in Tokyo, knows this to her cost.
— Additional reporting by James Bone in New York, Roger Boyes in Berlin and
Jane Macartney in Beijing
Corn on the hop
27%: of this year’s record 12.46 billion bushel corn harvest in America
will be used by the biofuel industry
15%: is the most petrol use that could be offset even if all the corn
used in America were used to produce biofuel
15%: of all arable land in Europe will be needed if the EU is to meet
its target of ensuring that 10% of transport is driven by biofuels 2020
