Parenti’s Bread Loaf Crunched
By Brad Wilson at Jul 30, 2011
This is a response to “Reading the World In a Loaf of Bread,” by Christian Parenti, (http://www.zcommunications.org/reading-the-world-in-a-loaf-of-bread-by-christian-parenti). While I strongly agree with Parenti’s values and intentions, I have issues with the balance in his overall thesis. Here I crunch numbers that put Parenti’s thesis into a very different context.
World hunger is, of course, a hugely important topic, especially for US readers, who are so distant from the extremes of the problem. Parenti’s article covers a lot of crucial concerns. Unfortunately, however, like about everyone else, he leaves out half of the concerns related to the price of bread, and it’s the much bigger half. This then leads to a false overall view, and false advocacy. On this missing factor he ends up, strangely, sounding a lot like the exploiting corporations and the mainstream media, and not the victims themselves. What’s needed is an understanding of the problem of low wheat prices, as well as higher ones, and then of the dilemmas that these two sets of facts together create.
I’m not arguing against most of what Parenti says, only the missing part about how low wheat prices are also a big part of the story of “world politics from a loaf of bread.” Parenti tells about HIGH(er) prices for wheat, corn and other commodities, but not about the much bigger problem of LOW prices. We’ve had relatively higher prices for wheat, corn and rice for a few years, since about 2007. Prior to that we had lower and lower prices almost nonstop for more than 50 years, (ie. except during the “Great American Grain Robbery” period of the US corporate-Soviet grain deal of the 1970s, when we also had a few years of higher prices). Parenti states that “when wheat prices increase globally, so does the price of that loaf -- and so does trouble. In many places on this planet, that proved an unmitigated catastrophe.” This point is stressed with various adjectives describing the rise in prices. Wheat “surged.” Corn “surged by a “staggering” amount. He does not state the more common truth (over the decades and including the recent years he emphasizes), which is just the reverse.
One anomaly is that Parenti’s emphasis contradicts important statements from the Africa Group at WTO and La Via Campesina, the huge international peasant organization. The Africa Group has stated that Africa’s struggle to deal with poverty is “compounded by the LONG TERM trend of declining prices of primary agricultural commodities” (emphasis added). Likewise, in a major policy document, Via Campesina, at one point stated: “What are we fighting against? ... The dumping of food at prices blow the cost of production in the global economy....” They understand the problem of recent higher prices, but see them in this long term context.
Note that in emphasizing higher prices, Parenti gives no real standard for fair prices (or “fair trade” prices). Statistically he uses a relative standard. He states, for example, that “between June 2010 and June 2011, world grain prices almost doubled,” that specifically “global wheat prices surged by 70% between June and December 2010, .... and that price kept rising all through the spring of 2011. By June, wheat cost 83% more than it had a year before. During the same time frame, corn prices surged by a staggering 91%....” By implication we are led to conclude that the previous relatively lower prices are good or appropriate, and the higher prices are bad, but he gives no adequate evidence for that point, as I show below.
Using Parenti’s relative principle we could easily reverse the standard. Instead of suggesting that the lower June 2010 prices were appropriate, we find that those wheat prices were only 46% of June 2008 prices, and corn was only 55% of June 2008. By that very different relative standard, half priced grains doubled, to get up to where they’re supposed to be. Of course, you can also go back before 2008 and see that those 2008 prices were relatively much higher than 1999-2005 prices. On the other hand, out of 144 years of USDA records, and adjusted for inflation, from 1999-2005 we witnessed the 7 lowest wheat prices in history, plus the 10th lowest.
We see then that it matters which standard is used. We must ask: which standard can be justified on non relativist grounds? How should a standard be determined? In answering these missing questions we begin to get to the heart of the matter. We then begin to offer adequate overall analysis and adequate solutions, solutions for advocacy which do not then parrot agribusiness vested interests and oppose important policy positions from the Africa Group at WTO and Via Campesina.
These answers must begin at the farm level, not the consumer level. A fair trade price for wheat is not determined by what people living on $1 per day, (like “one in five Egyptians,” for example,) can pay. In fact, there is no price that is “affordable,” (by US standards,) to them. The standard must begin at the farm gate. Prices must be at least the cost of production, then farmers need a minimum price above that, but then they need “living wage,” “fair trade” prices. Had today’s poor (ie. rural) countries had that over the past 60 years, the realities today would be very different.
How would farm prices above the cost of production affect consumers, such as the hungry? As it turns out, according to the UN-FAO, (“Livestock in the Balance,”) “Almost 80 percent of the world’s UNDERNOURISHED people live in RURAL areas ... and most depend on AGRICULTURE ... for their livelihoods” (emphasis added). Likewise 70% of the population in Least Developed Countries is rural. Much the same can be said for most of the countries cited by Parenti (ie. they’re mostly 40%+, 50%+, 60%+ 70%+ rural). The hungry, then, largely depend upon farm income, including that from wheat, corn, rice, and cotton, or from crops that compete with them. Higher farm prices, then, are what they need for wealth creation and jobs creation in their poor rural economies. In light of Parenti’s claims, these hunger facts seem hugely counter-intuitive, so let’s probe them more deeply, to better explain the overall context.
First, however, keep in mind that this is not to suggest that the context of recent increased suffering that Parenti points to is not real and devastating. Clearly it is. Food prices for extremely poor people who can only afford to buy relatively unprocessed food have gone up dramatically. From September 2005 to January 2011 the farm price of 20 pounds of wheat went up by $1.35, rice went up $1.41, and corn $1.30. Here in the United States the farm share for a loaf of bread or a box of cornflakes has drastically fallen over the years to about 2% (with shares of the agribusiness input complex removed from the farmer share,) and a doubling of that, for example, is of relatively very little consequence, especially at our levels of income.
For desperately poor people in other countries, however, the farm share of what they buy (ie. wheat flour) is much higher. Continuing my example of 20 pounds of grain, we find that the farm level price for 20 pounds of food had been, in September 2005, $1.11 (wheat), 62¢ (corn) and $1.33 (rice), close to the lowest ever (adjusted for inflation). All told, with the rise in prices this then meant that the farm value of 20 pounds of wheat became $2.47, corn was $1.92, rice was $2.74. Again, while that’s not a crisis for us, elsewhere people have long been so incredibly poor that it was, as Parenti emphasizes, a life threatening change.
One important macroeconomic fact is that, in free markets, farm commodities like wheat do not self correct. They’re inelastic. They lack price responsiveness on both supply and demand sides under most market conditions that we’ve had for more than 130 years. Prices therefore tend to be low, below the cost of production.
Related to this fact, the US farm bill is the world’s most important piece of historical policy that has fixed the problem of inelasticity. During the Great Depression, (when wheat prices fell to just 38¢ per bushel for two years,) programs were developed to fix the lack of price responsiveness. The programs featured price floors and supply reductions (acreage set asides, as needed) on the bottom side of price, (to protect farmers,) and price ceilings with reserve supplies on the top side (to protect consumers, flour mills, etc.). With the Steagall Amendment of 1941, price floors were set at 90% of parity. From 1945-1953, for example, wheat prices averaged about 95% of parity (a simple average of yearly averages).
Parity is an example of a standard for what prices should be. Had the poor (ie. farming) countries of the world received parity prices over the past 60 years, whey would have created trillions of dollars in additional wealth throughout their economies via economic multipliers.
If wheat price figures are adjusted for inflation, they shed additional light on farm and food price standards. 38¢ wheat from the Great Depression would be about $5.20 (GDP deflator 2010) to $6.07 (CPI 2010) today. Only 5 (yearly average) wheat prices since 1990 are higher than $5.20 (through 2010). In fact, adjusted for inflation, we’ve had 16 of the 20 lowest wheat prices in history since 1990. That then sheds light on the UN-FAO food price index, which shows food prices since 1990. Recent food prices are said to be records, (for all years since 1990) but for wheat, that’s a record during 16 of the 20 lowest farm prices in history, going back to 1866. The highest wheat price since 1990, was during the marketing year 2008, which ranks 35th (low) out of 145 years of yearly average prices. This then is important context for all of the recent discussions in the media, in progressive and conservative blogs.
Compare the 2008 price with wheat prices during the 1940s. Adjusted for inflation, wheat averaged (average of yearly averages) nearly $15 per bushel for 1942-1952, well above double the price levels behind Parenti’s high end of percentages. Some poor farmers sold that $15 wheat, and some desperately poor people bought it, but those figures aren’t part of FAO’s equation for what’s a “record” high wheat price (since 1990).
Parity prices and percentages of parity are more accurate measures for fair prices than mere adjustments for inflation. Parity figures prices in relation to farming costs. Over the years yields have risen, so the parity standard of prices has risen more slowly than inflation.
100% of parity was the traditional standard for what we might call fair trade or living wage prices today. Wheat averaged 95% of parity 1945-1952, or about $15.50 (a simple average of yearly averages), while the similar figure for 100% wheat parity 1945-1952 is $16.37.
The US parity farm programs programs are important because the US has been the global price leader for major commodities. The US has had export market shares well above 50% for major commodities, yet the US chose to use this enormous clout to lower, not maintain, market prices. At the same time, OPEC, with smaller export shares, showed they had enough clout to raise prices.
Note that wheat, corn, and rice prices per bushel were comparable (even identical,) to oil per barrel several decades ago, but then OPEC raised prices and the US Congress lowered farm prices. Farm prices gradually tanked to the very low, post 1990 levels. We find then that corn prices per bushel averaged the same as oil per barrel in 1947, ($2.16). Decades later we found that Parenti’s “staggering” “surge” in corn prices to June of 2011, (at a modest 63% of parity) was a tiny fraction of recent oil prices. In 2010 dollars, the 1947 (record) yearly average price of corn and oil was $17.40 (GDP deflator, or $21.10 CPI, or 146% of corn parity), well above double any recent daily “surge” in prices.
This relates to the food riot question also. The US lost money on wheat, corn and rice exports for decades, to give below cost raw materials to domestic and foreign processors and consumers, even as the US lost billions on farm exports. Export dumping, “the long term trend of declining prices of primary agricultural commodities,” was then seen, for example by the WTO Africa Group, (ie. mostly very rural countries,) as, the main cause of their poverty. More recently, Parenti tells how people in importing countries rioted when export dumping mostly ended. It was viewed in these chronically poor countries as an outrageous change, as sky high prices. People were dirt poor so it hurt tremendously.
Actually, in the bigger picture, the price of wheat had nearly tripled by the 2008 marketing year, (the highest recent price year,) but that is nominally since 1947! In 1947 wheat was just over the price of a barrel of oil. Adjusted for inflation, wheat prices for 2008 were down to be only 38% (from $18.41 to $6.91) of the 1947 price. That 38% of the 1947 price triggered riots. And in fact, that 38% represents a more than 2-fold increase over 1999, the lowest wheat price in history, which was only 17% of the 1947 wheat price.
In contrast, oil in nominal terms was up (not 3 fold, but) more than 42x from 1947-2008. Perhaps the smaller wheat changes were more shocking to the poor than the more than 5-fold increases in oil prices (5.33 x when adjusted for inflation) were to relatively very rich people. Again the comparable figure for wheat was not a similar increase, (ie 5 x,) but rather a reduction to only 38% of the 1947 price.
Corporate America fought against the policies and programs that gave farmers fair prices, and won reductions in price floors from Congress. For example, in the 1962 report of the Committee for Economic Development, “An Adaptive Program for Agriculture,” corporate leaders called for “massive changes,” including the lowering of wheat price floors by about 25% within five years (30% adjusted for inflation). The major purpose of the program was to push US farmers, [“excess resources (mainly labor)”] off the land, “one third” of them “in a period of not more than five years.” Of course, this was also designed to put downward pressure on urban wages, as millions of farmers went to the city to compete for jobs. The CED later (1974) praised themselves for getting this, their goal for one decade, through Congress. Because of the US role as global price leader, these changes had a devastating impact world wide.
In fact, Congress spread the reductions out over more years. Price floors were lowered gradually, overall, from 1953 to 1995, and then they were eliminated (dropped to zero). As expected due to inelasticity, prices followed price floors right on down to the lowest prices in history. Farmer numbers were reduced by 1/3 then reduced again and again, as prices went down by the CED’s 25% and then more and more. Adjusted for inflation, for example, wheat tanked out during the Great Depression at only $4.57 (1931, 2010 dollars). Adjusted for inflation, that extremely low price was higher, however, than every year 1997-2006, as we returned to “Hooverism” in farm policy, and dumped our exports on global markets to devastate vulnerable farmers worldwide.
Recent farm bill proposals in Congress, (ie. 2007-2008,) including those supported by progressives, have all been much worse than even the 1962 corporate CED plan.
These then were the years where the US went the reverse way of OPEC, using our export market clout to lower, not raise, farm prices and export profits. (It was said to be more “competitive” to lose money on exports instead of making a profit like OPEC.) We lowered prices for nearly 60 years, increasingly squeezing that “80 percent of the undernourished” that is “rural.” We find then, that wheat prices were below full costs (USDA-ERS) 33 out of 35 years, 1976-2010. Parenti’s “staggering” 2011 wheat and corn “surges”, will likely be only the 3rd year above zero (vs full costs) in 36 years. That, (the 3rd high price, not the 33 low prices,) he would have us believe, is an outrage that is creating the very real “catastrophe.” That’s his message for the rural people who live in Least Developed Countries and who are calling for fair trade prices to create wealth and jobs in their economies. A year or 2 of prices somewhat approaching fair trade levels is “an unmitigated catastrophe.” After winning a brief reprieve from exploitation by agribusiness’ low prices for decades, (by the US Congress, with help from mainstream media, and Europe,) the desperately poor farmers of the third world have him to fight too, as he works to save them with his partial understanding of their predicament.
Ok, turning back to the consumers again, Parenti does, of course, offer a standard. Yes, he says, recent higher (surging, staggering) prices cause that “trouble,” such as food riots and hunger. I don’t want to discount those troubles, (they’re real and huge,) but we can now see them in a more proper context. What we have is not a shortage of food, (though we could have that in the future,) but rather food poverty. Most food poverty is rural poverty, and rural poverty, in most cases, is also farm poverty. (“...Of the underweight children under 5 ... about 75% are found in smallholder farming systems, and landless rural poor....” Millennium Project, Interim Report) Rural people were exploited for more than half a century.
In the US a fraction of our farm poverty has ben compensated for with farm commodity subsidies. For example, (adjusted for inflation, 2010 dollars, and assuming 10% additional supply reduction,) since 1953, corn prices x production have been about $1.4 trillion below the parity standard, but then farmers have been given 17% of that amount back in subsidies. During this time period, a large majority of US farmers have gone out of business, as intended by corporate leaders, but overall they’ve fared better than farmers globally, who had few alternatives to living on $1, $2, or $3 per day. If you figure-in what economic multipliers could have done for the poorer of the world’s farmers, then the losses over this period, not mentioned by Parenti, are well into the multitrillions or deca-multitrillions.
We see then, that the massive devastation of low farm prices has created an enormous and savage dilemma. Seeing this dilemma is the key to any adequate analysis of the recent increases in the crisis. Even low “export dumping” prices for wheat, rice and corn are too high for the “undernourished” to be able to afford. When market prices recently begin to approach US standards of break even, minimums above zero, or even living wage, fair trade levels that could create massive long term wealth for LDCs, we find that there are many complications to LDC’s benefiting from the changes. They’ve been so severely devastated for so long that they severely lack infrastructure, capital and technology. It’s very hard for them to take advantage of the higher prices, and instead, they’re taken advantage of, for example, with land grabbing. The global food system has been savagely broken, not as Parenti suggests, (ie. not by what are really a few years of above zero farm prices,) but by decades of lower and lower farm prices. The broken system doesn’t work. It’s a system that has created huge, savage dilemmas for the rural poor, dilemmas that could have been avoided if we had won the farm justice that the US family farm movement has fought for for decades, and the US had profited on farm exports over the years.
One additional point is important in effective advocacy. We’ve seen how the US Congress, (under corporate pressure,) lowered wheat prices from 95% of parity to 17% of parity, but then they recently rose to 63% of parity. In light of the strange weather we’ve had lately, what if wheat corn and rice prices rose much higher, to 200% of parity, or 400% (Note: in 2008 oil prices averaged 744% of the wheat parity standard.) In the past this kind of a problem was seriously addressed by important policy measures, the price ceilings and reserve supplies mentioned briefly above. These policies (plus price floors and bottom side supply management,) were part of the New Deal farm programs and were again voted on in congress in 1985 in the attempt to reverse the decades of corporate led congressional reductions. That legislation was the Harkin-Gephardt Farm Bill. Today these policies can be found in the Food From Family Farms Act of the US National Family Farm Coalition. These are the main US farm bill policies that address the problems that Parenti emphasizes.
These then are my corrections and additions to Parenti’s analysis. He grabs the bull of the price dilemma by only one horn, apparently because he, like most other contemporary writers, is unaware that the dilemma exists. He sees the obvious “rock” of starvation, but not the “whirlpool” of low farm prices, the major long-term cause of rural poverty and global “undernourishment.” He calls for full rudder to the right, an easier looking, one sided, urban solution, rather than tacking appropriately past both hazards. Give the people cheap bread! As it turns out, this essential short term solution is also the long term exploitative solution of agribusiness, a return to export dumping. In reality, what’s needed are fair farm prices in the long term, and massive food aid and economic assistance in the shorter run. Both solutions are needed to begin address the savage dilemma. Parenti’s solution, as it reads, is essentially a call for a return to export dumping. With more facts, however, we see that export dumping, far from being any sort of a permanent solution, is the true cause of the problem in the first place.
For further reading:
See the main supportive links from leading NGOs that address both horns of the dilemma at my “Food Crisis Primer” and “Farm Bill Primer,” http://www.zcommunications.org/zspace/bradwilson.
Brad Wilson, “False on the Food Poverty Crisis: 25 Online Examples,” http://www.zcommunications.org/false-on-the-food-poverty-crisis-25-online-examples-by-brad-wilson. I’m currently working on a review of 500 mainstream media articles which have the same shortcomings.
Brad Wilson, “WTO Africa Group with NFFC, Not EWG,” http://www.zcommunications.org/wto-africa-group-with-nffc-not-ewg-by-brad-wilson.
Brad Wilson, “Via Campesina with NFFC: Support for Fair Farm Prices,” http://www.zcommunications.org/via-campesina-with-nffc-support-for-fair-farm-prices-by-brad-wilson.
Brad Wilson, “UK's OneWorld Wrong on Farm Subsidies,” http://www.zcommunications.org/uks-oneworld-wrong-on-farm-subsidies-by-brad-wilson.
Brad Wilson, “Unique US Role in Fixing the LDC Food Poverty Crisis,” http://www.lavidalocavore.org/diary/4655/unique-us-role-in-fixing-the-ldc-food-poverty-crisis.
Brad Wilson, “Michael Pollan Rebuttal: Four Proofs Against Pollan's Corn Subsidy Argument,” http://www.zcommunications.org/michael-pollan-rebuttal-four-proofs-against-pollans-corn-subsidy-argument-by-brad-wilson.
Brad Wilson, “Farm "Shock Doctrine?"” http://www.zcommunications.org/farm-shock-doctrine-by-brad-wilson.
National Family Farm Coalition, “Food from Family Farms Act: A Proposal for the 2007 Farm Bill,” http://www.nffc.net/Learn/Fact%20Sheets/FFFA2007.pdf
“NFFC Farm Bill 1: Farm & Food Crisis,” (& “... 2,” & “...3,”) http://www.youtube.com/user/FireweedFarm#p/c/A1E706EFA90D1767/1/QagTBTQe2jg
“Farm Bill 1: Agribusines Against Fair Prices,” (& “... 2,” & “...3,”) http://www.youtube.com/user/FireweedFarm#p/c/A1E706EFA90D1767/6/zfgZqgfkxXk
“Farm & Food Policy 1: Consumers,” (& “... 2,” & “...3,”) http://www.youtube.com/user/FireweedFarm#p/c/A1E706EFA90D1767/9/zCfwU2_vdTE
Ben Lilliston, “A Fair Farm Bill for the World’s Hungry,” IATP, 2007, http://www.iatp.org/documents/a-fair-farm-bill-for-the-worlds-hungry
Daryll E. Ray, "Rethinking US Agricultural Policy: Changing Course to Secure Farmer Livelihoods Worldwide:" APAC, U. of Tenn., http://agpolicy.org/blueprint.html
Daryll E. Ray, "It's Price Responsiveness! It's Price Responsiveness!I IT'S PRICE RESPONSIVENESS!!!" APAC, U. of Tenn., http://agpolicy.org/weekcol/248.html
Sophia Murphy, Ben Lilliston, Mary Beth Lake, "WTO Agreement on Agriculture: A Decade of Dumping:" http://www.iatp.org/iatp/publications.cfm?accountID=451&refID=48532
Daniel G. De La Torre Ugarte and Sophia Murphy, “The Global Food Crisis: Creating an Opportunity for Fairer and More Sustainable Food and Agriculture Systems Worldwide,” http://agpolicy.org/present/2008/DanielDTUHFBCarnegie.pdf.
Daryll E. Ray & Harwood D. Schaffer, “If others cannot afford what we produce, how does that play out?” Policy Pennings, APAC, U of Tenn., July 29, 2011, http://agpolicy.org/weekcol/574.html.
Anne Laure Constantin, “Turning High Prices Into an Opportunity:
What is Needed?” IATP, April 2008. http://www.iatp.org/documents/turning-high-prices-into-an-opportunity-what-is-needed
“The State of Food and Agriculture: Livestock in the Balance,” UN-FAO, 2009.
Millennium Project Task Force on Hunger, (2004) “Halving Hunger by 2015: A Framework for Action,” Interim Report, Millennium Project, New York.
Committee for Economic Development, “An Adaptive Program for Agriculture,” (1962) http://www.normeconomics.org/adaptive.html.
Some Statistical Sources:
USDA-ERS: “Commodity Costs and Returns,” http://www.ers.usda.gov/Data/CostsAndReturns/testpick.htm
USDA-NASS: “Historical Track Record - Crop Production,” http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1593
Historical Crude Oil Prices (Table), http://www.inflationdata.com/inflation/Inflation_Rate/Historical_Oil_Prices_Table.asp
USDA-NASS, “Agricultural Statistics Annual,” (yearly parity prices in chapter 9, under “Farm product prices,”) http://www.nass.usda.gov/Publications/Ag_Statistics/index.asp
Reading the World In a Loaf of Bread,” by Christian Parewnti, http://www.zcommunications.org/reading-the-world-in-a-loaf-of-bread-by-christian-parenti.
Tomgram: Christian Parenti, “Staff of Life, Bread of Death,” July 19, 2011. “Reading the World In a Loaf of Bread: Soaring Food Prices, Wild Weather, Upheaval, and a Planetful of Trouble,” http://www.tomdispatch.com/archive/175419.
“Soaring Food Prices, Wild Weather, Upheaval, and a Planetful of Trouble
Reading the World In a Loaf of Bread,” by Christian Parenti, http://www.commondreams.org/view/2011/07/19-6.