Policy Changes Could Lessen Food Shortages and Price Spikes

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After Russia invaded Ukraine in 2014, wheat and corn prices rose sharply. This sparked fears about looming shortages.

Russia and Ukraine account for nearly 30 percent and 20 percent respectively of the global grain exports.

Even though America doesn’t rely on corn or wheat from Russia, or Ukraine, staple crops like wheat and other cereals are traded on global commodity markets. Wheat futures hit record heights in March, just after Putin declared war on Ukraine. Wheat traded 41% higher at the Chicago Exchange in March than the week before. The sharpest price rise in 60+ years was evident by this spike.

Since Ukraine represents 13 percent of all corn on the global market, the Russian invasion also saw corn prices rise dramatically. Corn prices have risen by over 21 percent since the invasion.

However, the prices of corn, wheat and other foods had been steadily rising even before war. The shelves of grocery stores and supermarkets told of an era of scarcity of many commodities.

The corn price alone went up by over 20 percent between 2021 and 2021.

What’s true of crops is true of dairy and meat prices as well. Accordingly, the Bureau of Labor Statistics Consumer Price Index(CPI) revealed that in February 2019, food prices rose by 7.9 per cent year-over-year, an increase of more than 40 percent in the last forty years.  This was prior to Russia’s invasion of Ukraine. Indeed, as detailed by the Heritage Foundation, “[o]ver the past six months, every month’s price increase has been above 4 percent and each successive month has been higher than the previous month (starting at 4.6 percent in September through 7.9 percent in February).”

CPI also confirmed the obvious fact that food prices continue to rise every month, as grocery shoppers know.

Biden’s Energy policies have had an even greater effect on food prices than other policies. Food production is dependent on oil and natural gas. The tractors, harvesters, loaders, trucks, trains, and irrigation systems on farms don’t run on unicorn farts or green energy fantasies, they run on diesel, gasoline, and natural gas. The oil and natural gas used in fertilizers and pesticides make U.S. crops and yields world-famous.

As detailed in a recent report from The Heartland Institute, the most important factor driving higher oil and gas prices has been the series of anti-fossil-fuel measures implemented by the Biden administration. Prices for oil increased 60 percent and natural gas prices rose by 61 percent. Gasoline prices rose approximately 42 percent to 98 cents per gallon. Agriculture is an energy-intensive sector.

In addition to the increased cost of fuel for planting, harvesting, and shipping crops, fertilizer costs have also gone up. There are multiple uses for oil and natural gas (a component of fertilizers). It has limited chemical capabilities and refinement. Moreover, oil and gas used and refined for transportation fuels, for instance, can’t be turned into fertilizer. During times of abundant and growing supply, that is not a problem, but, of course, that’s not the situation we confront now. In January 2022, fertilizer prices were up 98 per cent compared to January 2021.

The Biden administration’s successful efforts to stop oil and gas pipelines from being built, its new regulations on oil and gas operations, its moratorium on new oil and gas leases, and its slow-walking of drilling permits, have caused higher oil and gas prices, and, as a result, higher food prices as well.

Biden and his team either can’t understand the connection or get it, but don’t care. Think back to the Thanksgiving day, when Jen Psaki, White House Press Secretary, downplayed rising turkey prices. When Energy Secretary Jennifer Granholm was asked by reporters about the effects of rising gas prices upon American homes and whether or not the Biden administration will reverse its policies on energy, Granholm laughed.

Is there any policy to alleviate the current and future food shortages or price rises, if Biden doesn’t reverse his anti-fossilfuel policies?

Yes. Yes. What’s more, 1.275 million of arable land lies fallow under the Wetland Reserve Program (WRP).

One can debate whether it’s wise federal policy to pay farmers not to farm under normal circumstances when crops are plentiful, but that’s not the case now. With pending food shortfalls and drastically higher prices, some peoples’ lives are literally at risk, and the poor, especially, might face choosing between buying food or other essentials.

Therefore, the Department of Agriculture needs to issue an urgent waiver which allows farmers without penalty to plant acreage that is enrolled in WRP or CRP. The waiver should be extended as long as there is a crisis. This waiver could allow millions to be produced, thereby reducing the potential price increase and any pending shortage.

If the CRP/WRP continues, this emergency waiver should be included in all contracts. This would allow the Agriculture Secretary, to declare a crises that would result in the issuance of a waiver allowing food production on land fallowed by the programs.

Bipartisan support is likely to be given for increasing acreage available for production. This could help alleviate food shortages in the US and abroad.

H. Sterling Burnett, Ph.D. ([email protected]) He is also the director of The Arthur B. Robinson Center on Climate and Environmental Policy (The Heartland Institute), a nonpartisan nonprofit research centre based in Arlington Heights, Illinois.

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