Thursday, 24 April 2008

Free Exchange on food prices

At the Free Exchange blog food prices are under discussion. They write,
Economists continue to explore the roots of the crisis. So far, the list of culprits includes bad weather, export restrictions, growing demand, and biofuel production. That last item has come in for particular scrutiny in America, where government incentives have led to a boom in ethanol production and have helped to tie movements in energy costs to those in food markets.
Another issue noted is the effects on fertilizer production:
And, as Felix Salmon noted yesterday, fertiliser is overwhelmingly produced from natural gas. Mr Salmon quotes Paul Scheckel, who writes:
Fertilizer production is second only to petroleum refining when it comes to industrial use of natural gas in the United States: 97 percent of the fertilizer applied to crops is manufactured from natural gas. With spiking energy costs, fertilizer manufacturers are opting to close their doors and instead sell their natural gas supplies.
So a reduction in fertilizer production. Which just adds to the cost of food production.

No comments: