The blog Uneasymoney, posted an article this morning claiming that policies which encouraged the production of biofuels was responsible for the crazy run in commodity prices throughout the 2000′s and was ultimately responsible for the 2007/2008 crash.
The post refers to an article in the Journal of Economic Perspectives, which I am reading now but the results of which are summed up here:
the research of Wright et al. shows definitively that the runup in commodities prices after 2005 was driven by a concerted policy of intervention in commodities markets, with the fervent support of many faux free-market conservatives serving the interests of big donors, aimed at substituting biofuels for fossil fuels by mandating the use of biofuels like ethanol.
What does this have to do with the financial crisis of 2008? Simple. ..the Federal Open Market Committee, after reducing its Fed Funds target rates to 2% in March 2008 in the early stages of the downturn that started in December 2007, refused for seven months to further reduce the Fed Funds target because the Fed, disregarding or unaware of a rapidly worsening contraction in output and employment in the third quarter of 2008. Why did the Fed ignore or overlook a rapidly worsening economy for most of 2008 — even for three full weeks after the Lehman debacle? Because the Fed was focused like a laser on rapidly rising commodities prices, fearing that inflation expectations were about to become unanchored – even as inflation expectations were collapsing in the summer of 2008. But now, thanks to Wright et al., we know that rising commodities prices had nothing to do with monetary policy, but were caused by an ethanol mandate that enjoyed the bipartisan support of the Bush administration, Congressional Democrats and Congressional Republicans. Ah the joy of bipartisanship.
So then, what I’m gathering here is that the Fed was obsessive about commodity prices fearing inflation, despite the fact that the Fed was in no position to influence commodities markets. This distracted the Fed from focusing on the real causes of the crash and the Lehman disaster, making a bad situation worse.
I’m not sure that this correctly connects the dots, given that there is little evidence that the run in commodity prices had anything to do with biofuels. Even as biofuel consumption increased throughout the 00′s, overall production of corn and yield per acre also increased. Assuming that commodity prices are in part dictated by supply, I would (from an armchair economist perspective) assume that prices should remain somewhat constant.
I’m interested to see that the article disregards financialization of commodities, following a loosening of rules of speculation on ag products in the 90′s and the move toward commodities following the equity bust of 2000 as not being a major factor in the rise in corn prices. This is particularly strange when we consider that non-energy commodities also exhibited rapid price increases and violent fluctuations throughout the 00′s. I fail to see how energy policy could result in increases and volatility in, for example, copper.
It’s a tempting thesis, and made more tempting by the explicit identification of individuals who suggested and implemented such policy, but not one borne out by the data, in my limited, amateurish opinion. The list of potential factors which influenced the run in commodities is a long and confusing one (climate change, increased demand from China and India, global instability, etc. etc.), but I don’t think that the effect of Wall Street greed can be discounted as a major determinant. Interestingly, despite the overall themes of the paper, the author does a poor job of discounting the effect of financialization in the creating of commodity price bubbles.
In reading this paper now, I’m somewhat confused. On the one hand, he confirms many of my initial suspicions that the rising price of food is unrelated to supply and demand factors as growth of both supply and demand were more or less constant, despite localized climate shocks. On the other, he seems to blame a rise in prices during the crash to a shift in energy policy toward biofuels, while overlooking that commodities were already volatile and rising, beginning with the crash of the tech bubble in 2000. I am thining that much of the rise in commodities during 2007/8 was due to panicky speculation as real estate markets tumbled, not to any change in energy policy. Certainly, it may be the case the the policy influence traders to try to exploit potential areas of growth, but it’s hard, then, to discount the effect of financial speculation in commodities outright.
I can at least agree with this:
The rises in food prices since 2004 have generated huge wealth transfers global landholders, agricultural input suppliers, and biofuels producers. The losers lobal landholders, agricultural input suppliers, and biofuels producers. The losers have been net consumers of food, including large numbers of the world’s poorest ave been net consumers of food, including large numbers of the world’s poorest peoples.
Kenya, lacking mineral or oil resources, is an agricultural economy. Specifically, they are really good at growing tea, and, to a lesser extent, coffee. This helps explain why Kenya’s developmental trajectory has been far more successful than that of other economies. Tea production is labor intensive and often depends on small and mid-sized farms which employ lots of people. Instead of money flowing in the pockets of the corrupt, who often squirrel it away in overseas accounts, money goes directly in the pockets of growers.
Kenya is the UK’s biggest tea supplier, but Egypt buys more tea by volume from Kenya than any other country. A piece in Think Africa Press today wrote on the dual problem of falling demand for tea from Egypt due to prolonged unrest, and that of falling commodity prices worldwide.
The cause of the farmers’ problems lies far to the north of the cool, tea-covered slopes of the Aberdares, in the heat of Cairo and the continuing fallout from the Arab Spring. In 2010, the last year before the uprising in Egypt, Kenya supplied the tea-obsessed UK with around half of its tea, but Egypt was the the single largest destination for Kenyan tea exports, buying nearly a fifth of what the factories around Nyeri produce. With the overthrow of President Mohammed Morsi in July 2013 and the ongoing campaign against the Muslim Brotherhood causing continued political instability, demand has plummeted and prices have gone with them.
“It’s a supply and demand issue,” says Chai Kiarie, Field Services Manager at Gitugi Tea Factory. “We produced more tea this year, but we still made nearly $2 million less than we did last year. With these problems abroad, the demand just isn’t there.”
This isn’t an isolated problem. Coffee prices, once riding high on a boom in commodity prices have been steadily falling since the financial collapse. The commodity boom was a winning sitaution for African economies and helped drive much of the rapid growth seen throughout the 00′s. Regulation has started curbing speculative practices that drove the increases, removing a source of destructive volatility which drove up food prices in developing countries, but has also decreased badly needed foreign exchange revenues.
I visited a few farms the last time I was in Kenya. Farmers aren’t waiting around for subsidies to help pull them out of a potential mess. All of the farmers I spoke with are looking for new ways to diversify their operations and meet potentially lucrative world wide demand for competitive products. All of them wanted to think of ways to increase productivity while decreasing the cost of inputs. The pressures from falling tea demand could help push them to find ways to innovate and increase both revenues and stability.
An example from SFGate (a San Francisco local news and entertainment portal), entitled “Report links antibiotics at farms to human deaths”:
“The Centers for Disease Control on Monday confirmed a link between routine use of antibiotics in livestock and growing bacterial resistance that is killing at least 23,000 people a year.”
Other headlines, mostly from websites promoting vegetarian diets and opposing “factory farming,” state emphatically that the CDC has “discovered a link” between the administration of antibiotics and antibiotic resistance:”
“Antibiotics Used to Make Livestock More Profitable May Be Killing Us” – Truth Out
“Farm Antibiotics Linked to Human Deaths: CDC” – NewMaxHealth
I took the time to download and read the actual report (crazy, I know), “Antibiotic Resistance Threats in the US: 2013″. Within the report, there are statements of concern regarding risks of low level antibiotic use on factory farms. The CDC suggests that the practice should be phased out.
However, nowhere in the text does the CDC attribute any of the (estimated) 23,000 yearly deaths from drug resistant infections to livestock farming specifically. The report provides no indication as to what percentage of deaths are due to antibiotic use on farms, nor to any other specific cause.
This is, of course, for good reason. No one really knows.
What I found interesting, was a graphic that illustrates how drug resistant bacteria (and fungi) emerge and infiltrate the human population. In the graphic, there are two possible scenarios:
1) Resistance develops within the human gut, and resistant strains of bacteria spread through institutional environments by way of contact with fecal matter and due to improper cleaning and sterilization procedures.
2) Resistance develops within the animal gut, and drug resistant bacteria enter the human population through improperly cooked meat and through poor management of animal discharge with contaminates vegetable crops which humans eat.
The first scenario, is, of course, an operational problem. Out patient procedures are becoming more common to minimize the possibility of spreading resistant bacteria within institutional environments, but obviously it is impossible to contain every possible pathway at all times.
The second is more interesting, but again, this is also an operational problem. The first pathway, contact with uncooked meat, is a fairly easy problem to solve on an individual level. Cook your burgers or buy your horse sashimi only from places you can trust. Of course, there is no failsafe here.
The problem of discharge management is also an operational one. Farms have to maintain standards to insure that animal waste does not contact, say spinach farms as happened back in 2009.
I cannot say whether antibiotic use is good or bad for raising livestock (having no expertise in the field), though I will take many of colleagues words at face value and assume that it is not necessary and that the potential costs outweigh the benefits. The jury seems to be out on the issue, however.
However, it would appear from the CDC report, that the greater potential for harm comes from operational issues, which should be resolved in any case. Though resistant bacteria are a threat to human health (and potentially detrimental to the long term economic health of the food industry), there are many other threats that follow the exact same transmission pathways. The e. coli outbreak in California spinach in 2009 is a great example.
Though I understand that those who oppose meat eating or factory farming wish to use what I would call a distortion of the fact and the CDC report to further a particular political position, it would seem that those interested in protecting human health would be far better off calling for more stringent standards within the livestock industry.
So, to answer the question in the title: “Is antibiotic use in livestock killing humans?, ” I have the following responses:
1. It is not clear from the CDC report that any of the 23,000 deaths have anything to do with livestock.
2. Assuming that any of the deaths have anything to do with livestock, the problem would appear to have more to do with how food is cooked (dumbass factor) and the poor management of animal waste (both of which also come with other threats to human health).
Now, before anyone accuses me of trying to minimize the problem, it is true that antibiotic resistance is a serious, serious problem. Antibiotics are over prescribed in the United States to humans, and new antibiotics are not being developed (mostly). We’ve run out of options to fight existing bacteria and as long as doctors are willing to hand antibiotics out like candy, the problem will only become more severe.
NOTE: Now, this blog post is not a defense of the livestock industry, nor a call for greater use of antibiotics. In general, however, I take issue with misuse and distortions of data for political aims on any part of the political spectrum. Call it a weakness of mine.
First, there is no such thing as a “Monsanto Protection Act” anymore than there is any such thing as “Obamacare.” This is a term created by the item’s opponents to rile up opposition, rather than foster critical analysis. I think that Liberals should be well aware of the political problems associated with demonizing and reductionist labeling of things they don’t like.
Second, though Presidents can veto any bill that comes across his desk, the veto of appropriations bills are rare, and have often been overridden by Congress in the past. It may be a shock to liberals, but Presidents aren’t kings. Conservatives often don’t seem to understand the three branches of Government. Liberals often appear to understand it even less.
Third, there was hardly “no debate.” A Google search will reveal that discussions of this particular item go back at least to June of 2012 and the “Famer’s Assurance Provision” as it is correctly known is part of another Ag Appropriations bill which passed last year. Anyone who tells you this is new, is either lying, or doesn’t know what they are talking about. (Even Snopes took this on.)
Fourth, there is no evidence (that I’m aware of) that GMO’s, which are already in our food supply, are having deleterious effects on human health or the environment. There have been some studies on mouse models that I know of, but it appears that no one can really agree on what a “GMO” really is. Until we can nail that down, and have more informed discussion of which GMOs are “bad” and which are “good”, I don’t think that screaming about GMO’s is any more productive than poorly informed discussion of complex issues such as climate change.
I’m not trying to suggest that there are no effects of “GMOs” whatever they may be. I am saying that lefties are accepting that there are broad effects without question and are relying on less-than-scientific and politically motivated sources such as Salon and the Huffington Post to inform them. That’s a very, very dangerous position to take.
Fifth, I think we should all know by now that rightists use issues like this to weaken Democratic Presidencies. I was of the opinion that much of the furor over controversial portions of the 2012 NDAA bill was stoked by right wingers hoping for a Achilles heel in the 2012 Obama campaign. When we buy into this type of sensationalist reporting without examining the evidence, we play right into their hands.
Sixth, well, I had a sixth, but lost it. But back to GMO’s: It’s interesting that discussions of GMO’s in Sub-Saharan Africa are opposite of what we hear in the US. People view the American and European opposition to GMOs, some of which have the potential to increase food yield while minimizing inputs, as an infringement on developing countries’ rights of self determination. It’s easy to dismiss their concerns as uninformed. However, people and policy makers in developing countries face competing issues of immediate economic needs and broad environmental concerns. Lots of things seem obvious to us, but then we have most of our basic needs already met.
I mean this not as a defense of the Farmer’s Assurance Provision or anything else having to do with GMO’s (so chill out). The endless (and perhaps deserved) vilification of Monsanto has reached a point where examination of the facts is secondary to screaming like a blithering idiot. To me, this is dangerous. When we reduce ourselves to merely accepting positions without criticism, we allow ourselves to be manipulated by just about anything. Not everyone has the time to read all that is required to create a truly informed and reasoned opinion on all subjects, I realize. Striving toward obtaining as much information as is reasonable, however, and acting critically should be a priority for everyone, however.
Liberals are the smart ones. We can do better.
I’ve written before on the link between unrest in South Africa and the problem of rising food prices. Looking at the plot of the right, it’s not hard to notice the similarities in the series of conflict events post 2005 to food prices as estimated by the FAO’s Food Price Index (FPI).
I began to wonder whether some of the recent rise in conflict events is somehow related to rising food commodity prices. Having found a correlation in South Africa, it’s not out of the realm of possibility.
I calculated the cross correlations between the FPI and conflict events and found that the FPI was predictive of conflict, but that conflict was not predictive of FPI. This was similar to what I found in South Africa.
Plotting the FPI against the number of monthly conflict events, I found something interesting. It appears that the two are mostly unrelated until the FPI reaches a threshold of approximately 200, then the number of monthly events shoots up. It is interesting to note that in other research, 210 was the assumed maximum price that households would absorb before taking to the streets.
I’ve repeatedly written on the problem of stock market speculation in food commodities as a cause for rising volatility in world food prices. I won’t beat this into the ground again. However, results such as these indicate that the problem of rising and volatile food prices is not just an economic problem, but also a problem of human health and welfare.