Wednesday, 23 April 2008

Biofuels Debate in Brazil

So this week…in order to make things just a bit more exciting…the UN came out with a major report saying that the biofuels “rage” is making food scarce throughout the world and driving up prices. We are starving folks to death….as the UN claims.

So, then the Brazilian President stood up and made a pretty cut-and-dry speech on the true picture of crops in the world. Truth as he laid out….is that developing countries are now purchasing more food and improving the diet requirements of the population…something that the UN demanded almost a generation ago. Instead of a meager allowance of 1200 calories a day in some locations as reported in the mid-1980s….we now have a thriving population consuming 2000 to 2400 calories per day. The sad truth is…more calories mean more consumption. While the UN geniuses didn’t grasp in the mid-1980s….was that food supply was eventually going to be stretched.

The interesting part of this conversation is that as more countries continue to develop….the consumption and the requirements for food will increase. The plain honest truth is that we will be forced to grow as much or more food in the future, and the prices will correspond to that requirement. Cheap food….is finished, and the UN may not grasp the reality of this statement.

A lot of Americans now complain about the increasing cost of food over the past six months, but in this case….fuel costs for the truckers and the farmers have risen. Add in a banking crisis and the dollar exchange issues….and the cost of buying a bucket of chicken or a box of Oreo cookies goes up.

Is the price of corn going up? Yes….but then there will be an all-time crop record this year for acres planted in the US. Every farmer and his brother are taking advantage of the pricing scheme currently. The price of wheat….as low as it has been for the past five years. We will likely see a shift of wheat acres to corn acres….as we proceed into the summer.

Are biofuels killing us? With the current requirements…its very doubtful…..and you’d have to figure this logic….if we did an all-time record on bio-fuel production then the price of a barrel of crude would decrease….but you don’t see that. This bit of math logic might make you reconsider how reliable the media is in their analysis or if they are in the fear business.