Tuesday, October 7, 2008

sufficient grain supply? continued

Some time ago, I posted about how some people had convinced themselves that food was becoming permanently too expensive for increasing portions of the population because of Biofuel policies. Specifically, I posted about how silly I thought this idea was.

At the time, wheat futures had doubled in the previous year and looked ready to rocket off to infinity - effectively pricing everyone out of food. Some economists saw this for what it was - a speculative bubble. Some environmentalists saw this for what it wasn't - a sign that poorly design biofuel policies were making poor people starve.

The update is that wheat futures are back down to where they were a year ago - and are rapidly falling. Considering that the biofuels policies haven't changed, but speculative investment strategies have, this seems to indicate that were we looking at a speculative investment bubble.

That being said, I do still agree that the US biofuel mandate should be modified to exclude any fuel made from food sources. Converting corn sugars into Hummer Juice just doesn't make sense from an energy or food perspective.


TheBehst said...

Will this keep food farmlands (and or forests) from being allocated to biofuel crops? Is this an issue?

shaun said...

it means we saw grain prices skyrocket because of wall st investment strategies, not because of increasing biofuel demand.

in practice, i doubt that most commodity grain farmers care what their crop is used for. i imagine they are more concerned about how much they get paid for their crop. the lower price today versus most of the last year seems to indicate that there will be less pressure to push new land into farm use.