Cattle Rustling? The growing gap between cattle and beef prices

Graph of Canadian cattle prices and retail beef prices, 1995 to 2017
Retail prices of ground beef and steak compared to farmers’ prices for cattle, 1995–2017

This week’s graph highlights the growing gap between what Canadians pay for beef and what farmers receive for their cattle.  The rising blue lines show grocery-store prices for steak and ground beef.  The comparatively flat green lines represent the prices farmers and feedlot operators receive for the cattle they sell to beef packers.  Steers (castrated male cattle) are more likely to be the source of steaks, while cows are primarily turned into ground beef.

The blue lines show what consumers pay; the green lines show what farmers get.  The widening gap between the blue lines and the green lines reveals the amount that packers and retailers take for themselves.

Let’s look first at the dotted lines.  The green dotted line shows the per-pound price farmers in Alberta receive for their cows.  (prices across Canada are similar.)  In the decade-and-a-half before 2010, that price averaged about 50¢.  In recent years it has averaged about $1.00.  One could say that farmers are receiving an extra 50¢ per pound for their cows.  These figures do not take into account rising costs (they are not adjusted for inflation) but we’ll leave that issue aside for now.  Note what happens to the blue dotted line: the grocery-store price of ground beef.  It more than triples, from about $1.70 per pound to about $5.50.  Farmers’ prices increased by 100%, but packers and retailers increased their take by 320%.  Farmers’ prices increased by 50¢, but packers and retailers increased their prices by nearly $4.00.

The solid green line shows the price that farmers (or feedlot operators) receive for slaughter-ready steers.  The solid blue line is a representative price for grocery-store steaks.  If we compare recent years to those before 2013, we see that steer prices have risen by perhaps 50¢ or 60¢ per pound.  Over the same period, steak prices have risen by $5.00 or $6.00.

There is little discernible connection between the prices consumers pay and the prices farmers receive.  This is true of cattle and beef, but also true of nearly every other farm-retail product pair.  For a graph comparing the prices of wheat and bread, click here.  Similar “wedge” graphs can be created for corn and cornflakes, hogs and pork chops, and many other farm-retail product pairs.

Food processors, packers, and retailers are choking off the flow of dollars to Canadian farms, with devastating effects.  The number of Canadian farms raising cattle has been cut nearly in half in a generation—from 142,000 in 1995 to less than 75,000 today.  Moreover, many of these farms reporting cattle are dairy farms (which do sell cattle for slaughter, but support themselves primarily from milk sales).  The number of farms classified as “beef cattle ranching and farming, including feedlots” stood at just 36,000 in 2016.  Farm debt is a record $100 billion.  And the number of young farmers (<35 years of age) today is just one-third the number a generation ago.

Canadians are paying many times over.  We’re paying a high price at the store.  We’re paying again through our taxes to fund farm support programs—money paid to farmers to backfill for the dollars extracted by powerful transnational packers, processors, and retailers.  And we’re paying yet again as our rural economies are hollowed out, our communities decimated, our family farms destroyed, and our nation’s capacity to sustainably produce food is eroded.

Graph sources: Statistics Canada CANSIM Tables 326-0012 and 002-0043.  

Everything must double: Economic growth to mid-century

Graph of GDP of the world's largest economies, 2016 vs 2050
Size of the world’s 17 largest economies, 2016, and projections for 2050

In February 2017, global accounting firm PricewaterhouseCoopers (PwC) released a report on economic growth entitled The Long View: How will the Global Economic Order Change by 2050?  The graph above is based on data from that report.  (link here)  It shows the gross domestic product (GDP) of the largest economies in the world in 2016, and projections for 2050.  The values in the graph are stated in constant (i.e., inflation adjusted) 2016 dollars.

PwC projects that China’s economy in 2050 will be larger than the combined size of the five largest economies today—a list that includes China itself, but also the US, India, Japan, and Germany.

Moreover, the expanded 2050 economies of China and India together ($102.5 trillion in GDP) will be almost as large as today’s global economy ($107 trillion).

We must not, however, simply focus on economic growth “over there.”  The US economy will nearly double in size by 2050, and Americans will continue to enjoy per-capita GDP and consumption levels that are among the highest in the world.  The size of the Canadian economy is similarly projected to nearly double.   The same is true for several EU countries, Australia, and many other “rich” nations.

Everything must double

PwC’s report tells us that between now and 2050, the size of the global economy will more than double.  Other reports concur (See the OECD data here).  And this doubling of the size of the global economy is just one metric—just one aspect of the exponential growth around us.  Indeed, between now and the middle decades of this century, nearly everything is projected to double.  This table lists just a few examples.

Table of projected year of doubling for various energy, consumption, transport, and other metrics
Projected year of doubling for selected energy, consumption, and transport metrics

At least one thing, however, is supposed to fall to half

While we seem committed to doubling everything, the nations of the world have also made a commitment to cut greenhouse gas (GHG) emissions by half by the middle decades of this century.  In the lead-up to the 2015 Paris climate talks, Canada, the US, and many other nations committed to cut GHG emissions by 30 percent by 2030.  Nearly every climate scientist who has looked at carbon budgets agrees that we must cut emissions even faster.  To hold temperature increases below 2 degrees Celsius relative to pre-industrial levels, emissions must fall by half by about the 2040s, and to near-zero shortly after.

Is it rational to believe that we can double the number of cars, airline flights, air conditioners, and steak dinners and cut global GHG emissions by half?

To save the planet from climate chaos and to spare our civilization from ruin, we must—at least in the already-rich neighborhoods—end the doubling and redoubling of economic activity and consumption.  Economic growth of the magnitude projected by PwC, the OECD, and nearly every national government will make it impossible to cut emissions, curb temperature increases, and preserve advanced economies and stable societies.  As citizens of democracies, it is our responsibility to make informed, responsible choices.  We must choose policies that curb growth.

Graph source: PriceWaterhouseCoopers

Some good news on climate change

Graph adapted from Millar et al.
A graph produced by Millar et al. illustrating their re-assessment of carbon budgets.

A September 18th article in the journal Nature Geoscience provides some good news in the struggle to save human civilization (and perhaps half the planet’s species) from the ravages of climate change.  The article by Richard Millar and nine colleagues calculates that there is still time to hold global temperature rise to 1.5 degrees Celsius above pre-industrial temperatures.  (Article link is here.)

A 1.5 degree target was set in Paris in 2015.  While many people assert that holding temperature increases to 1.5 degrees is impossible, Millar et al. reassess carbon budgets to show that the target is attainable.  By their calculations, humans can emit an additional 700 to 900 billion tonnes of CO2 and still have a 66% chance of holding temperature increases below 1.5 degrees.  That amount of CO2 is approximately equal to 20 years of emissions at current rates.  (Previous assessments indicated that the carbon budget for 1.5 degrees would be used up in 5 to 7 years at current emission rates.)

The findings in the Millar paper are good news.  Here’s why: they take away the argument that “it’s too late.”  We still have it within our power to hold temperature increases below dangerous levels, spare low-lying island nations, prevent the inundation of rich river-delta agricultural lands in Bangladesh and elsewhere, retain the Greenland ice sheet, and prevent the worst ravages of climate change.  Here’s the message everyone should hear: It’s not too late.

But while it’s not too late, it is late.  The other message people should take from this article is that we have no time to spare.  Aggressive action is necessary now.  If we are to save ourselves from ourselves we must embark on a mobilization of near-wartime scale and speed to transform the global economy and its energy and transportation systems.  We need government-led mobilization for transformation.

The article’s lead author, Richard Millar, wrote a commentary stating that “the window for achieving 1.5C is still narrowly open.  If very aggressive mitigation scenarios can be implemented from today onwards, they may be sufficient to achieve the goals of the Paris Agreement.”  (Find that commentary here.)  At a press event he stated that holding increases to 1.5 degrees requires “starting reductions immediately and then reducing emissions to zero over 40 years.”  Like nearly everyone else who has looked at this issue, Millar and his team have concluded that emissions reductions must begin immediately and emissions from the global economy must be reduced to zero by the 2050s or 2060s.

So here’s where we are: Millar et al. calculate that we have the time (if only just).  We have the technologies: solar panels, wind turbines, electric trains, net-zero and passive solar homes.  We have historical examples of action on a similar scale: the WWII repurposing of the major industrial economies.  And we have the productive capacity: a global manufacturing sector of unprecedented scale and output.  Civilian and military aircraft makers must be compelled to immediately begin building trains.  Auto makers must build electric cars.  The home renovation industry must be redirected away from fantasy kitchens and home spas and toward energy-efficiency retrofits.  And electrical utilities must rapidly replace GHG-emitting generation plants with near-zero-emission alternatives.  And we must do all these things at rates that reflect that our future depends upon our success.

The calculations by Millar et al. are sure to be controversial and closely examined.  They may be revised.  But the paper has weight because the team that wrote it includes many of the leading experts on carbon budgets.  As climate scientist Glen Peter notes here: “the authors of this paper developed the idea of carbon budgets, are the world leading experts on carbon budgets, and derived the carbon budgets for the IPCC process.”  We should all hope that Millar and his colleagues are correct in their reassessment.

The graph above is taken from a commentary by Millar and adapted from the article by Millar et al.  (Link to the commentary here.)

$20 TRILLION: US national debt, and stealing from the future

Debt clock showing that the US national debt has topped $20 trillion

Bang!  Last week, US national debt broke through the $20 trillion mark.  As I noted in a previous post (link here), debt of this magnitude works out to about $250,000 per hypothetical family of four.

Moreover, US national debt is rising faster than at any time in history.  Adjusted for inflation, the debt is seven times higher than in 1982 ($20 trillion vs. $2.9 trillion).  Indeed, it was in 1982—not 2001 or 2008—that US government debt began its unprecedented (and probably disastrous) rise.

The graph below shows US debt over the past 227 years.  The figures are adjusted for inflation (i.e., they are stated in 2017 US dollars).

Graph of US national debt, historic, 1790 to 2017
United States national debt, adjusted for inflation, 1790-2017

It’s important to understand what is happening here: the US is transferring wealth from the future into the present.  The United States government is not merely engaging in some Keynesian fiscal stimulus, it is not simply borrowing for a rainy day (or 35 years of rainy days), it is not just taking advantage of low interest rates to do a bit of infrastructural fix-up or job creation, and it is not just responding to the financial crisis of 2008.  No.  The US government, the nation’s elites, its corporations, and its citizens are engaging in a form of temporal imperialism—colonizing the future and plundering its wealth.  They are today spending wealth that, if this debt is ever to be repaid, will have to be created by workers toiling in decades to come.

You cannot understand our modern world unless you understand this: Fossil-fueled consumer-industrial economies such as those in the US, Canada, and the EU draw heavily from the future and the past.

We reach back in time hundreds-of-millions of years to source the fossil fuels to power our cars and cities.  We are increasingly reliant on hundred-million-year-old sunlight to feed ourselves—accessing that ancient sunshine in the form of natural gas we turn into nitrogen fertilizer and enlarged harvests.  At the same time, we irrigate many fields from fossil aquifers, created at the end of the last ice age and now pumped hundreds of times faster than they refill.  We extract metal ores concentrated in the distant past.  And the cement in the concrete that forms our cities is the calcium-rich remnants of tiny sea creatures that lived millions of years ago.  We have thrust the resource-intake pipes for our food, industrial, and transport systems hundreds-of-millions of years into the past.

We also reach forward in time, consuming the wealth of future generations as we borrow and spend trillions of dollars they must repay; live well in the present at the expense of their future climate stability; deplete resources, clear-cut ecosystems, extinguish species, and degrade soils and water supplies.  We consume today and push the bills into the future.  This is the real meaning of the news that US national debt has now topped $20 trillion.

Graph sources: U.S. Department of the Treasury, “TreasuryDirect: Historical Debt Outstanding–Annual”  (link here

Falling per-capita farmland raises critical questions

Graph of per capita farmland arable land, global, 1950 to 2050
Per-capita arable land (cropland), world average, 1950 to 2050.

As populations continue rising, per-capita farmland area is falling.  In 1950, for each person in the world (about 2.5 billion back then) there was, on average, 0.46 hectares of cropland (“arable” land).  That is an area roughly equal to the in-bounds playing area of a US football field.  Today, per-capita cropland area is just 0.19 hectares.  By 2050, it will be lower still: 0.15 hectares—one-third the area in 1950.  We’ll soon be down to just a third of a football field each.

The graph above shows the average per-capita cropland area from 1950 to 2050.  The units are fractions of a hectare.

Humanity’s in a bind.  We’re becoming more numerous.  The UN predicts a global population of 9.8 billion by mid-century.  Moreover, we’re becoming richer.  Projected rates of economic growth—3 percent compounded annually, according to the World Bank—will cause the size of the global economy to nearly triple by 2050.  That enlarged, enriched population will want to consume more food.  It will want to consume more of its food in the form of meat rather than vegetables or grains.  It will be more prone to overeating and more demanding of processed foods and junk food.  And it will waste more of its food, because comfortable, well-fed people do that.  In addition, more food will be diverted to energy and fuel uses, including biofuels for air travel and ocean shipping.  Based on these factors, the UN projects that food production in 2050 will have to be 70 percent higher than in 2005 (see here or here).

Here’s the bind.  In order to deal with climate change, the world’s governments have committed to reducing GHG emissions by 30 percent by 2030—just over 12 years from now.  And reductions of 50 to 80 percent are needed by 2050.  How do we expand food supplies and reduce emissions?  Bringing new land into production (Amazon rainforest, for example) emits huge plumes of GHGs as soil carbon is released by tillage.  If we want to reduce emissions we cannot afford to continue releasing carbon stored in forests or grasslands.  So the alternative is to intensify production—produce more on the land we already have.  This usually requires more fertilizer.  But the most used and most critical fertilizer, nitrogen, is made from natural gas and is a major source of GHG emissions.  Globally, nitrogen (N) fertilizer use has doubled since the 1970s (see blog post here); Canadian farmers have doubled their N use since the 1990s.  Our commitments to downward-trending GHG emissions is already in conflict with upward trending nitrogen fertilizer usage.

In the face of monumental problems such as these it is best to just spend some time mulling our predicament.  We must resist the “rush to solutions.”  For now, let’s just consider some questions:
– Can we continue to waste 20 to 40 percent of our food?
– Can we burn food in cars and airliners and cruise ships?
– Should we increase livestock production by two-thirds in the next three decades (as the UN predicts), knowing that many livestock production systems inefficiently turn 5 to 10 Calories worth of grain into one Calorie of meat?
– Should we continue to make bad food out of good—producing millions of tonnes of nutritionally disfigured foods such as soft drinks, cocoa puffs, and potato chips?  (One quarter of US Calories now come from junk food.  See here.)
– Should we continue to foster a food industry that promotes over-eating and resulting health problems?

As our per-capita land base contracts, and as our atmospheric emission-space fills, can we afford these extravagances?  …these follies?  An adequate response to these problem will require re-imagining and restructuring of our food system–fundamental changes to food production and consumption.

Graph sources: FAOSTAT and the UN Population Division 


Efficiency, the Jevons Paradox, and the limits to economic growth

Graph of the cost of lighting in the UK, 1300-2000

I’ve been thinking about efficiency.  Efficiency talk is everywhere.  Car buyers can purchase ever more fuel-efficient cars.  LED lightbulbs achieve unprecedented efficiencies in turning electricity into visible light.  Solar panels are more efficient each year.  Farmers are urged toward fertilizer-use efficiency.  And our Energy Star appliances are the most efficient ever, as are the furnaces and air conditioners in many homes.

The implication of all this talk and technology is that efficiency can play a large role in solving our environmental problems.  Citizens are encouraged to adopt a positive, uncritical, and unsophisticated view of efficiency: we’ll just make things more efficient and that will enable us to reduce resource use, waste, and emissions, to solve our problems, and to pave the way for “green growth” and “sustainable development.”

But there’s something wrong with this efficiency solution: it’s not working.  The current environmental multi-crisis (depletion, extinction, climate destabilization, ocean acidification, plastics pollution, etc.) is not occurring as a result of some failure to achieve large efficiency gains.  The opposite.  It is occurring after a century of stupendous and transformative gains.  Indeed, the efficiencies of most civilizational processes (e.g., hydroelectric power generation, electrical heating and lighting, nitrogen fertilizer synthesis, etc.) have increased by so much that they are now nearing their absolute limits—their thermodynamic maxima.  For example, engineers have made the large electric motors that power factories and mines exquisitely efficient; those motors turn 90 to 97 percent of the energy in electricity into usable shaft power.  We have maximized efficiencies in many areas, and yet our environmental problems are also at a maximum.  What gives?

There are many reasons why efficiency is not delivering the benefits and solutions we’ve been led to expect.  One is the “Jevons Paradox.”  That Paradox predicts that, as the efficiencies of energy converters increase—as cars, planes, or lightbulbs become more efficient—the cost of using these vehicles, products, and technologies falls, and those falling costs spur increases in use that often overwhelm any resource-conservation gains we might reap from increasing efficiencies.  Jevons tells us that energy efficiency often leads to more energy use, not less.  If our cars are very fuel efficient and our operating costs therefore low, we may drive more, more people may drive, and our cities may sprawl outward so that we must drive further to work and shop.  We get more miles per gallon, or per dollar, so we drive more miles and use more gallons.  The Jevons Paradox is a very important concept to know if you’re trying to understand our world and analyze our situation.

The graph above helps illustrate the Jevons Paradox.  It shows the cost of a unit of artificial light (one hour of illumination equivalent to a modern 100 Watt incandescent lightbulb) in England over the past 700 years.  The currency units are British Pounds, adjusted for inflation.  The dramatic decline in costs reflects equally dramatic increases in efficiency.

Adjusted for inflation, lighting in the UK was more than 100 times more affordable in 2000 than in 1900 and 3,000 time more affordable than in 1800.  Stated another way, because electrical power plants have become more efficient (and thus electricity has become cheaper), and because new lighting technologies have become more efficient and produce more usable light per unit of energy, an hour’s pay for the average worker today buys about 100 times more artificial light than it did a century ago and 3,000 time more than two centuries ago.

But does all this efficiency mean that we’re using less energy for lighting?  No.  Falling costs have spurred huge increases in demand and use.  For example, the average UK resident in the year 2000 consumed 75 times more artificial light than did his or her ancestor in 1900 and more than 6,000 times more than in 1800 (Fouquet and Pearson).  Much of this increase was in the form of outdoor lighting of streets and buildings.  Jevons was right: large increases in efficiency have meant large decreases in costs and large increases in lighting demand and energy consumption.

Another example of the Jevons Paradox is provided by passenger planes.  Between 1960 and 2016, the per-seat fuel efficiency of jet airliners tripled or quadrupled (IPCC).  This, in turn, helped lower the cost of flying by more than 60%.  A combination of lower airfares, increasing incomes, and a growing population has driven a 50-fold increase in global annual air travel since 1960—from 0.14 trillion passenger-kilometres per year to nearly 7 trillion (see here for more on the exponential growth in air travel).  Airliners have become three or four times more fuel efficient, yet we’re now burning seventeen times more fuel.  William Stanley Jevons was right.

One final point about efficiency.  “Efficiency” talk serves an important role in our society and economy: it licenses growth.  The idea of efficiency allows most people to believe that we can double and quadruple the size of the global economy and still reduce energy use and waste production and resource depletion.  Efficiency is one of our civilization’s most important licensing myths.  The concept of efficiency-without-limit has been deployed to green-light the project of growth-without-end.

Graph sources: Roger Fouquet, Heat Power and Light: Revolutions in Energy Services

Improvident province: Saskatchewan government debt

Total Saskatchewan provincial government debt, 1977 to 2017

   ‘Improvident’: Lacking foresight; spendthrift; failing to provide for the future.  

This week’s graph shows total Saskatchewan government debt, adjusted for inflation, for the period 1977 to 2017.  The coloured shading indicates the political party in power at the time: orange for New Democratic Party, blue for the Conservative Party, and green for the Saskatchewan Party.

From 2007 to 2015, Saskatchewan experienced an economic boom.  In 2007 and ’08, commodity values spiked and pushed up the prices of potash, uranium, oil, natural gas, lumber, and grains and oilseeds.  Provincial gross domestic product (GDP) rose sharply.  Even after the financial problems of 2008, a revival in energy prices and energy-sector expansion in this province and neighboring Alberta kept demand for employees strong and wages high (for many workers, though not all).  Since the boom began, housing prices in Saskatchewan have nearly doubled.  Saskatchewan went from being a have-not province to a prosperous and swaggering economic leader.

As resource royalties rose and taxable incomes and sales increased, provincial tax inflows initially swelled.  One could imagine that the provincial government would take advantage of these windfalls to pay down Saskatchewan’s debt.  The government did not.  Instead, it cut taxes and embarked on several ill-conceived spending projects.  Corporate income taxes in Saskatchewan are now, according to the government, the lowest in the country (source here).  As the graph shows, after 16 years of paying down the debt (1992-2008), that pay-down ended in 2009, just as the Saskatchewan economy was heating up.

Initially, provincial debt levels stayed relatively constant as the boom proceeded, but debt began increasing in 2012.  Since then, Saskatchewan’s provincial government debt has doubled, with much of the increase racked up before the economic good times ended. Even as the economy was prospering the government was borrowing money.

Having squandered its chance to pay down debt, save for a rainy day, or build up a financial cushion, the Saskatchewan government came to the end of the economic upturn only to find itself in an increasingly dire financial situation.  In its most recent budget, the province took several draconian steps to try to control its self-inflicted deficits and restrain its ballooning debt.  The government:
– shut down the province’s bus company;
– cut transfers to cities;
– reduced funding to libraries;
– eliminated funding for home repairs for people on social assistance;
– reduced wages for civil servants;
– cut subsidized podiatry services (creating a risk of increased foot amputations for diabetics and others);
– cut subsidies for hearing aids for children; and
– eliminated funding to pay for funerals for its poorest citizens.

Projections by the provincial government show that by 2020 the province’s debt will return to levels not seen since 1992.  In that year, provincial government cabinet ministers were forced to fly to New York City to meet with bond-rating agencies to prevent those agencies from downgrading provincial debt to “junk” status.  The specter of a return to those levels of debt shows that the government of Saskatchewan truly bungled the boom.

Graph sources: data obtained by request from the Economic & Fiscal Policy Branch of Saskatchewan’s Ministry of Finance

Earning negative returns: Energy use in modern food systems

Graph of energy use in the U.S. food system
Energy use in the U.S. food system, 2010, 2011, and 2012

Humans eat food and food gives us energy.  Some humans use some of that energy to move their bodies and limbs to produce more food.  Our great-grandparents ate hearty breakfasts and used some of that food energy to power their work in fields or gardens.  Here’s the important part: until the fossil fuel age, our food production work had to produce more energy than it required.  We had to achieve positive returns on our energy investments.  If we expended 1 Calorie of energy working in the field, the resulting food had to yield 3, 4, 5, or more Calories, or else we and those who depended upon us would starve.

Pioneering research by David and Marcia Pimentel and others show that traditional food systems yielded positive returns.  The Pimentels’ book, Food, Energy, and Society, documents that for every unit of energy that a traditional farmer (i.e., no fossil fuels) put into cultivating and harvesting corn or other crops, that farmer received back 5 to 10 units.  For almost the entire 10,000-year history of agriculture, food systems were net energy producers.  Food powered  societies and civilizations.

In the 20th century we did something unprecedented: we turned human food systems from energy sources into energy sinks.  Today, for every Calorie consumed in North America, 13.3 Calories (mostly in the form of fossil fuels) have been expended.  This calculation includes all energy use in the food system: farm production, transport, processing, packaging, retailing, in-home food preservation and cooking, energy use in restaurants, etc.  It also takes into account the fact that 30 to 40 percent of all food produced is thrown away.

Traditional food systems generated an energy return on investment (EROI) of between 5:1 and 10:1.  Because our modern food system returns one unit of energy for every 13.3 invested, the EROI works out to just 0.08:1.*

The graph above shows energy use in the US food system in the years 2010, 2011, and 2012.  The data is from a recent report published by the USDA.  It shows very high levels of energy use throughout the entire food system.  Perhaps surprising, aggregate food-related energy use in US homes—running refrigerators, powering ovens, washing dishes—far exceeds aggregate energy use on US farms.  Similarly, energy use in food services (food served in restaurants, hospitals, prisons, care homes, etc.) also exceeds energy use on farms.  This data shows that the entire food system is very energy costly.  As we’re forced to curtail fossil fuel use we will be forced to dramatically transform all parts of our food systems.

* This comparison does not take into account the firewood used to cook meals in traditional systems.  But even taking that into account we still find that traditional systems have EROI values that were (and are) large multiples of the EROI values for fossil-fueled systems.

Graph source: Canning, Rehkamp, Waters, and Etemadnia, The Role of Fossil Fuels in the U.S. Food System and the American Diet (USDA, 2017)

Full-world economics and the destructive power of capital: Codfish catch data 1850 to 2000

Graph of North Atlantic cod fishery, fish landing in tonnes, 1850 to 2000
Codfish catch, North Atlantic, tonnes per year

Increasingly, the ideas of economists guide the actions of our elected leaders and shape the societies and communities in which we live.  This means that incorrect or outdated economic theories can result in damaging policy errors.  So we should be concerned to learn that economics has failed to take into account a key transition: from a world relatively empty of humans and their capital equipment to one now relatively full.

A small minority of economists do understand that we have made an important shift.  In the 1990s, Herman Daly and others developed the idea that we have shifted to “full-world economies.”  (See pages 29-40 here.)  The North Atlantic cod fishery illustrates this transition.  This week’s graph shows tonnes of codfish landed per year, from 1850 to 2000.

Fifty years ago, when empty-world economics still held, the fishery was constrained by a lack of human capital: boats, motors, and nets.  At that time, adding more human capital could have caused the catch to increase.  Indeed, that is exactly what happened in the 1960s when new and bigger boats with advanced radar and sonar systems were deployed to the Grand Banks and elsewhere.  The catch tripled.  The spike in fish landings is clearly visible in the graph above.

But in the 1970s and ’80s, a shift occurred: human capital stocks—those fleets of powerful, sonar-equipped trawlers—expanded so much that the limiting factor became natural capital: the supply of fish.  The fishery began to collapse and no amount of added human capital could reverse the decline.  The system had transitioned from one constrained by human capital to one constrained by natural capital—from empty-world to full-world economics.  A similar transition is now evident almost everywhere.

An important change has occurred.  Unfortunately, economics has not internalized or adapted to this change.  Economists, governments, and business-people still act as if the shortage is in human-made capital.  Thus, we continue our drive to amass capital—we expand our factories, technologies, fuel flows, pools of finance capital, and the size of our corporations, in order to further expand the quantity and potency of human-made capital stocks.  Indeed, this is a defining feature of our economies: the endless drive to expand and accumulate supplies of capital.  That is why our system is called “capitalism.”  And a focus on human-made capital was rational when it was in short supply.  But now, in most parts of the world, human capital is too plentiful and powerful and and, thus, destructive.  It is nature and natural capital that is now scarce and limiting.  This requires an economic and civilizational shift: away from a focus on amassing human capital and toward a focus on protecting and maximizing natural capital: forests, soils, water, fish, biodiversity, wild animal populations, a stable climate, and intact ecosystems.  Failure to make that shift will push more and more of the systems upon which humans depend toward a collapse that mirrors that of the cod stock.

Graph source:  United Nations GRID-Arendal, “Collapse of Atlantic cod stocks off the East Coast of Newfoundland in 1992


Taking nearly the whole loaf: US and Canadian wheat and bread prices, 1975 to present

Graph of Canadian retail store bread price and country elevator wheat price, 1975-2016
Canadian retail store bread price and farm-gate wheat price, 1975-2016

Graph of United States retail store bread price and farm-gate wheat price, 1975-2016

United States retail store bread price and farm-gate wheat price, 1975-2016

It’s been said before but it bears repeating: farmers are making too little because others are taking too much.  For instance, food retailers, processors, grain companies, and railways are taking far too large a share of the retail price of bread.  And the share taken by these companies is increasing—choking off the flow of dollars to our family farms.  At the same time, these same corporations are profiteering by driving up the prices of the staple foods we all need to feed ourselves and our families.

This week’s two graph show data for the US and Canada.  Both graphs show the price of a bushel of wheat (the relatively flat line across the bottom of each graph) and the retail value of the approximately 60 loaves of bread that can be produced from a bushel of wheat (the upward-trending line in each graph).  The wheat prices are farm-gate or country elevator values.  The units are Canadian or US dollars, as appropriate, not adjusted for inflation.

The units are not important, however.  What is important is the widening gap between what consumers pay for bread and the amount of money that makes it back to the farm.  This growing gap represents the ever-larger share taken by food retailers, flour millers and other processors, railways, and elevator companies and grain traders.

Very little of the money spent in grocery stores makes it back to American or Canadian farms.  Compounding this problem is the fact that most of the money that does make it back to these farms is quickly captured by powerful farm-input companies. (See details here.)  Corporations upstream and downstream from farmers use their market power to capture huge profits for themselves while reducing net farm income to zero in many years.  To keep farms solvent, governments and citizens must step in with taxpayer-funded farm support payments.  In Canada, these payments have totaled $100 billion dollars over the past three decades, and more than $400 billion in the US.  From some perspectives, the primary beneficiaries of these payments are the executives and shareholders of the dominant agribusiness/food corporations.

Finally, there is the issue of efficiency.  Farmers are relentlessly urged to become more efficient.  Indeed, they are forced to increase efficiency simply to remain solvent in the face of declining farm-gate prices and rising input costs.  Farmers are so efficient today that they can produce grains and other products for 1970s’ prices.  But what of efficiency elsewhere in the system?  What does it indicate about the efficiency of huge corporate flour millers and food retailers if they must constantly take more and more money for themselves?  Are they becoming less efficient as they get larger?  Or are they simply using their increasing size and power to capture more profit for themselves?  And if citizens are going to be made to pay more for food anyway, then why badger farmers to become ever more efficient?

Farmers are the primary victims of the abuses of power within the food system.  But everyone is hurt as we are made to pay increased taxes to fund farm-support programs and to pay increased retail prices to support the outsized profit needs of the dominant food-system transnationals and their shareholders.

Graph sources:
Canadian bread: Statistics Canada, Consumer Prices and Price Indexes (Catalog number 62-010); CANSIM Table 326-0012.
US bread: Bureau of Labour Statistics, “Bread prices 1980-2015“.
Canadian wheat: Government of Saskatchewan, Saskatchewan Agriculture and Agri-food, “StatFacts-Canadian Wheat Board Payments for No. 1 CWRS”; CANSIM Table  002-0043.
US Wheat: United States Department of Agriculture, “Wheat Yearbook”