Take one part high fuel prices. Mix in stagnant wages and high consumer prices generally. Stir in global uncertainty and an ever-exploding human population. Add misplaced production and chimera-chasing. Add to all that the floods of May and June 2008 that inundated much of Iowa, Illinois, and Missouri, and you have a perfect storm—at least as far as corn is concerned. When it clears, corporate business will be the richer, but the world will be in chaos—and hungry.
True, the world is always in chaos. True, much of the world is always hungry. True, rivers flood: It is in their job description that they do so. Yet it is only in recent times that it has become customary for them to do huge amounts of damage, monetarily and physically, when they flood, for it is only in recent times that builders, insurers, growers, and consumers have decided to repeal the laws of physics and build on, settle in, and plow lands that are tellingly labeled floodplains on hydrographic maps. Granted that this happens in California and New York, these days, as much as in the Midwest, but it is suggestive that Iowa, for one, is now clocking hundred-year floods every three or four years. It is not that the rivers have grown any larger or more likely to flood, but that targets for ruin have come to the rivers in increasing number, with inevitable result.
The habit of overlooking physical reality in the hope that nature will somehow play ball is a curiously American trait, and it will play out in all our pocketbooks in the near term. For this year the floods, more than sweeping away a few cars and inauspiciously located homes, are carrying off a good portion of the nation’s corn crop. That crop was already oversubscribed, thanks to record demand for maize worldwide, especially in booming economies such as China and India, and to the ever-increasing use of corn to produce bioethanol. In response to that demand, corn acreage has been increasing across the nation: In 2006, 78.3 million acres were under cultivation for corn, while in 2007 the figure was 90.5 million acres. In Iowa, with the largest amount of land in any state devoted to it, 13.9 million acres went to corn in 2007, up from 12.6 million acres in 2006; elsewhere in the Midwest and Upper South, the production of previously important crops such as soybeans, rice, and cotton fell markedly as farmers shifted to corn.
This is the largest acreage given over to corn since World War II, with no exigency other than the hope for profit driving the boom. Corn has become big business, and so, for once, has all the infrastructure supporting it, to say nothing of the ground on which it grows; for the first time since the mid-1970’s, the value of cropland rose faster, by percentage, than that of residences in the world’s most-expensive cities, a boon to landholders, more and more of them corporations and fewer and fewer of them individuals. Late in June 2008, the fertilizer and oilseed firm Bunge Ltd. bought Corn Products International for $4.4 billion to secure its hold on “finished corn products,” mainly starches and sweeteners, but also to consolidate its land holdings to take advantage of the boom; meanwhile, Cargill and Archer Daniels Midland, the nation’s largest agribusinesses, concentrated on ethanol production, adding billions to coffers that have grown larger simply by virtue of a solid real-estate portfolio.
Corn is in high demand, and this has had the effect of driving up food prices dramatically. But the laws of supply and demand apply only so far, for, contrary to them, prices did not fall when agribusinesses began producing corn from horizon to horizon. Just the reverse occurred, thanks to that pressing international competition for what is globally appearing to be a scarce resource—maize in particular, that is, but, in the coming years, foodstuffs in general. Indeed, corn topped seven dollars per bushel in June, twice the level of June 2007. Like that of oil, the price of corn promises to go nowhere but north, particularly given the loss of so much of this year’s crop.
The floods of 2008 will restrict supply in the near term. So will the cost of oil; according to the USDA, it is projected that corn acreage will fall to 86 million acres in the coming harvest, mostly as a response to what economists call “input costs”—namely, the price of the fuel and petrochemical fertilizers needed to grow crops on an industrial scale. (And why not use corn-based ethanol for fuel? Because it’s too expensive—but now we’re getting into matters that are headache-inducing in their complexity.) Mexico, India, and other Third World countries are rushing to make up the difference as U.S. producers continue to turn over crops to fuel production instead of food, but the perfect storm has already done its damage. In its wake can come only poverty and hunger.