"The Great Disruption"

Is food replacing oil as the biggest factor effecting the global balance of geopolitical power? The Atlantic considers how biofuel mandates in "the world's biggest farming nations" are significantly disrupting supplies in the global food market, and could end up pushing 100 million people into poverty.

The growth of the global food market has meant more food for billions of people, yet it has also led to a greater concentration of supply. In 2006, the top five oil producers supplied 43 percent of the world’s oil. By comparison, the top five corn producers grew 77 percent of the world’s supply; rice producers, 73 percent; beef and wheat producers, 66 percent each. Because of this concentration, a supply disruption in even one place can ripple through the food market worldwide.

Some disruptions are unavoidable. Last year, for instance, drought in Australia, a major wheat exporter, helped drive up wheat prices by nearly 100 percent. But some disruptions are the result of political decisions. For example, in response to the high wheat prices, India, then the world’s second-largest rice exporter, decided to rely on rice, not wheat, for its public food program—and instituted a ban on most rice exports. Vietnam and Egypt, fearing local rice shortages, quickly followed suit. The result was a seize-up in the global market for rice: prices rose from $333 a ton in 2006 to $963 a ton in May of 2008.

The creation of politically popular biofuel mandates by many of the world’s biggest farming nations has been particularly disruptive. U.S. law, for instance, requires that ethanol make up at least 5 percent of vehicle fuel (rising to 22 percent by 2022), and 30 percent of U.S. corn went toward ethanol production last year. The U.S. government has claimed that biofuel demand is responsible for only 3 percent of the increase in global food prices over the past year. But a recent World Bank report estimated that figure to be 75 percent once the resulting economic changes, such as shifts in land use, are considered.

High prices hurt poor, import-dependent nations the most. The price hikes of the past three years threaten to push 100 million people back into poverty, according to the World Bank, erasing seven years of progress.

And read this editorial from The Guardian (UK) on the topic of biofuel and rising food prices.