Thursday, September 06, 2012

Inflation Jumps to 3.42%; welcome to the new food world

Singers in Chiayi city. 

The government's latest calculations...
The consumer price index (CPI) rose 3.42 percent last month from a year ago, following a 2.46 percent increase in July. It marked the highest level since August 2008, when the index expanded 4.68 percent, the DGBAS said in its monthly report.

DGBAS section chief Wang Shu-chuan (王淑娟) attributed the higher-than-expected rise in consumer prices last month to the surge in vegetable and fruit prices triggered by the two typhoons — Saola and Tembin — and torrential rains.

Vegetable prices increased 57.93 percent last month from a year earlier, the highest since October 2007, while fruit prices rose 20.14 percent, the report said.
Wow. Analysts also said that rising global fuel costs are an issue. Note that the rising grain prices due to the drought in the US have yet to affect prices here, but they will probably start impacting small bakeries at some point. The Japan Times scribes:
The FAO's price index increased 23 percent for corn, 19 percent for wheat and 12 percent for sugar in July from the previous month. The futures prices at the Chicago Merchandise Exchange have soared about 40 percent for corn and wheat, and about 30 percent for soybeans in the past two months.
Other factors are complicating demand -- rising grain prices and lack of grain have driven up meat prices, which were also being pushed up by long-term rising demand in developing nations as their incomes rise. And of course, America's insane biofuels policy, which consumes 40% of our corn crop, also drives up food prices. The Taipei Times ran a good overview commentary on the worsening global food issue a few days back.

Since gov't inflation reports are heavily influenced in a downward direction by political factors, just add whatever fudge factor you think is appropriate to arrive at the real figure. Veggies are so expensive I got into the foul habit of curbing my consumption of them. I expect that in the next few years, there is going to be a huge expansion of home and rooftop gardening in Taiwan as it begins to sink into the urban service working classes that high food costs are here to stay. Buy land ASAP, folks....

Taiwan's overall food security situation is grim. Many articles tell tales similar to this one:
According to Peng, rising energy cost and the unaffordable price of petroleum for cross-ocean shipping will be part of the cause that will kill global food trade. Research done by Oxford University reveals that this is likely to happen in 13 years. The report says that world production of petroleum will meet only half of world’s need in 2023. Or if the prediction of World Energy Outlook– which foresees the price of each barrel of petroleum will rise to USD 200 in 2030–comes true, then the cost of shipping will get too high to continue cross-ocean food trade. Food exporting countries will also cut their production because it will be too expensive.

Actually something like this already happened in 2008 when the petroleum price rose to 120 USD per barrel. At that time Taiwan suspended importing sweet corn from the U.S and gave special permission to import it from China. The follow-up question is: Can China be the alternative when China’s food self-sufficiency rate is only 95% and dropping?
The petroleum price predictions here are likely nonsense -- the world has plenty of oil as shale and slate oil sources remain largely untapped, far more than peak oil theorists originally realized -- but the 2008 issues remain. As China's food demand increases, emergency food imports to Taiwan will become more difficult. The US is likely to become a far less reliable supplier given that drought will only worsen there over time as humans continue to relentlessly heat the planet. What policies does Taiwan have in place to promote long-term food security?
Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums! Delenda est, baby.


Readin said...

"And of course, America's insane biofuels policy, which consumes 40% of our corn crop, also drives up food prices."

Not that I would coach anyone on how to vote, but I do note that McCain was one of the few presidential candidates who had the guts to oppose corn subsidies even though it would hurt him in Iowa.

Also note that Obama is a big fan of ethanol and put in place much of the current policy.

Okami said...

You forgot the other end of food inflation, smaller portions for the same price which is becoming very common in the US. Impacts bulk purchasers cooking large amounts at once to save cash hard as they normally plan out to the portion. I saw this recently when I bought 3 cans of spaghetti sauce and one was larger than the other 2, but still the same price.

I'm planning my rooftop gardens now. I can see it rising due to the govt taking their foot off of the subsidy machine with finances tightening. If you do get land get in touch with the ag machine people at the Wufeng Ag extension as picking veggies by hand sucks. The lack of cheap import farm labor impacts farming heavily.

You're slightly off on the peak oil, which deals with light sweet crude in easily to get places which is getting rarer. Right now the cost of oil extraction is huge, especially with natural gas where companies and businesses are going bankrupt and the number of wells has dropped precipitously with those still going mostly dealing with liquid hydrocarbons(wet gas) as the decline rate on dry gas wells is horrendous along with the fact that you can't move it easily nor cheaply to. Fracking is only popular in the US as well, in France it has been banned(gj Gazprom) and Australians hate it because they get almost nothing if it is found on their land.

Michael Turton said...

Point is, the peak oil scenario isn't going to occur. Oil will be more expensive, but sadly it will still be around. All that carbon is going to be dumped into the atmosphere....

wasabi said...

I hear Soylent Green is an excellent source of protein.

Andrew Chen said...

I respectfully beg to differ about the state of peak oil. I think if you have studied carefully the average depletion rate (even with horizontal drill bits) of shale rigs there are not simply enough around to replace the dying kings and queens in Saudi Arabia & Russia. Also the net energy throughput for shale oil extraction is close to parity, and far worse for oil/tar sand, which means it is only going to take higher oil price in order to make the extraction profitable. And you add the environmental disaster that gets brought to the underground aquafier layer there is practically no way we can tap into all the potential wells.

For a starter I'd recommend visit it often comes with technical discussion on the future estimate and the oil and the challenges that are facing us.

Anonymous said...

You forgot the other end of food inflation, smaller portions for the same price which is becoming very common in the US

Looking at the average American waistline, that can only be a good thing.

In Taiwan, the biggest issue with fruit and veg rises in August figures has been the recent typhoons. Not much that could have been done about that.

Michael Turton said...

Yeah, Andrew, I know that technical discussion. But I suspect that in the end they will subsidize its production despite the technical issues. I mean, look at the net energy for ethanol, but there we are, making it. Whether that oil gets pulled out of the ground isn't going to be decided by technical factors or economic reality or climate needs, but politics.

StefanMuc said...

Ok, peak oil or not: prices will likely increase in the future, due to increased demand and higher costs for extraction.

That said: wind energy is already competitive in many places, and PV is not all that far behind. Even if we assume that regenerative energy sources would not get cheaper (and it's likely they will) overall the price of petroleum can't substantially exceed those prices. Because once that happened, investment in regenerative sources would explode, reducing the demand for fossil fuels and thus driving down the price.

So if we say wind energy costs are currently in the range of fossil fuel + 20%, (IIRC that's roughly the right range once standby power is included in the calculation) then the price for shipping would increase by 20% at worst. (And more efficient transport with better engines would reduce that further.)

So concerning the thesis that global food trade will die: I can't see how that could come about.

It can be useful to extrapolate current trends to calculate what kind of problems may be ahead, but that method has limitation, too.

Michael Turton said...

So concerning the thesis that global food trade will die: I can't see how that could come about.

His figures are wrong (theoretically even if oil became prohibitively expensive we could just switch back to sail). But in a few decades as storms whip across the ocean for weeks at a time as a result of warming, global trade disruptions will become serious.


Martin J Frid said...

There is a big debate about peak oil in Japan, where I am based, so I would be curious to know if it is discussed at all in Taiwan. Are any of the general books that are out there translated...? With oil prices going through the roof in 2008 (from $20 in 1992 to 2002 to around $147 per barrel at the peak in 2008, now at around $90-110) it is difficult to explain away supply problems as consumption continues to increase. And, no, you cannot just "switch back to sail" with the huge amounts of food and feed that is transported by sea and by air. Very local sail, yes, which would be good, but that is not where the protein is coming from.

Michael Turton said...

...And, no, you cannot just "switch back to sail" with the huge amounts of food and feed that is transported by sea and by air

I've never seen anything on peak oil in Taiwan, but surely someone must be discussing it.

As for sailing ships, there's quite a bit of discussion out there about the possibilities.