Highest Soy Prices in 30 years

The highest soy prices in 30 years are forecast for 2007 in Europe. This is according to a Dutch language article on the Wervel website.

With prices expected to be roughly 50% higher than in 2006, and since nearly all meat, dairy and processed foods in Europe are based on soy, European consumers are likely to see sharply higher food prices this year.

Why are soy prices going up? It turns out large numbers of US farmers are abandoning soy crops in favor of growing corn (maize), and this is causing a world wide shortage of soy.

Why are US farmers switching to corn? The use of corn based ethanol is growing in popularity as an automotive fuel in the US, and this is causing shortages of this grain and forcing the price of it up. Farmers simply see more profit in growing corn.

Since nearly all meat, dairy and processed foods in the US are based on corn, higher grain prices will likely result in sharply higher food prices for US consumers as well.

Undeniably this is good news for small farmers, many of whom have been expected to produce below their own costs for many years and could now possibly make a profit. Unfortunately not many of these farms producing corn are independently owned anymore, most are owned by large corporations who stand to benefit the most.

I guess for most of us these price increases won’t be a big concern, after all the average person in Europe or the US pays about 10% of their income for food. If this should double, most of us will get by.

The real problem is the rest of the world, since food prices are very much a global phenomenon. In many places in the world people use a much higher percentage of their income to feed themselves. To double the price of their food potentially means they can only eat half as much. This could be a huge problem for the developing world.

It takes the same amount of corn to feed one person for a year, as it does to produce 25 US gallons of ethanol. This is about the size of the fuel tank in an average SUV. If someone drives an SUV, and fills their tank twice a month, this is the same as feeding 24 people for a year. In addition, ethanol pollutes the air more than normal gasoline.

Why is ethanol becoming so popular in the US? After all, isn’t it a good thing for America to reduce their dependence on foreign oil? Reducing their dependence on foreign oil would be a good thing, but it turns out that producing corn based ethanol consumes twice as much energy than what would be in the final product. The majority of this energy comes from fossil fuel based sources, powering tractors and trucks that plow the fields and transport the grain and producing chemical fertilizers and pesticides that are based on petroleum products. There is hope for a technological breakthrough to improve the way ethanol is produced and make it more energy efficient, but that is simply not there yet. This means in the coming year the US consumption of fossil fuels and production of greenhouse gases is set to sharply increase, all in the name of using a supposedly environmentally friendly automotive fuel.

Besides increases in greenhouse gases, other environmental consequences are likely to be equally devastating. When soy beans are grown, they fix their own nitrogen. In plain speaking terms, they produce their own fertilizer and leave the ground in a better state than before they were grown. Commercial production of corn on the other hand is very detrimental to the environment. Corn requires significant levels of fertilizers and pesticides, and rapidly degrades the topsoil. According to Harper’s Magazine, in their February 2004 article, “The Oil We Eat“, the entire state of Iowa is about six feet (almost 2 meters) lower than before WWII, primarily due to animal feed grain production and the associated loss of topsoil.