Hurricane ethanol

Who's the culprit in Japan's fruit juice price hikes? Florida weather or Brazilian sugar cane?

Published May 11, 2007 8:28PM (EDT)

For biofuel critics eager to seize upon any evidence that boosted ethanol production is pushing up food prices, the news blurb from Japan was tasty fodder:

Prices of 100-percent orange and grapefruit juice in box containers are rising by about 10 percent because of hurricanes in Florida and a shift of farmers from citrus to biofuel ingredients.

According to another version of the same news report, a spokesperson for the Japan Fruit Juice Association stated that "switching from orange to sugarcane cultivation has been promoted in Brazil, which accounts for about 60 percent of global orange juice output, leading to a worldwide decline in orange production."

There's just one problem: The most recent forecast from Brazil predicts that orange crop production will rise to 18.3 million tons this year, up from 18.1 million tons last year. Yes, citrus production in Florida is way down, as the cumulative impact of hurricanes in 2004 and 2005 continues to take its toll. And prices of orange juice futures are currently spiking, in response to a government prediction that the 2007 hurricane season will be busy. But the main impact of that has been to create a market opportunity for Brazilian exports of oranges and orange juice to Florida, where big-time producers like Tropicana are hungry for raw materials. This is disappointing to Florida citrus growers, who are seeing their pricing power undercut, even with the protection of tariffs designed to make Brazilian exports more costly, but it's hardly proof that orange groves in Brazil are being replaced by sugar cane plantations.

That's not to say that such a thing couldn't happen in the future. And proactive farmers all over the world would be smart to prepare for such an eventuality. As an example, in Jamaica, the president of the Citrus Growers Association is asking the government to subsidize the replanting of citrus orchards that were wiped out by disease. An article in the Jamaica Gleaner notes that "Brazil is the world's largest citrus producer with about 400 million boxes annually, but with increasing pressure to grow sugar cane for ethanol production, there are expectations that orchards might be converted to cane in a few years." (Italics mine.)

Of course, it will take some years before new orchards in Jamaica come online. And that brings up a critical point that should be part of every food vs. fuel debate. In the short term, food prices can react almost immediately when the price of an upstream commodity (corn destined for tortillas, or corn for animal feed for pigs) spikes. It takes a lot longer for the supply of that commodity to adjust to the new prices.

But that will happen. If one of the great injustices of globalization has been that American and European overproduction of agricultural commodities has undercut farmers in the developing world with subsidized low prices, then, in the long run, the corn-ethanol boom may inadvertently fix that social inequity. The surge in tortilla prices can thus be seen as a clear market signal for farmers in Mexico who have long been bulldozed by American competition. Already, the price of corn futures in the U.S. has been falling for a month, in response to the hugely increased size of the corn crop under cultivation in the United States. I'll lay odds that the same thing will happen with pork and chicken, only it will take a bit longer. (And I'm not necessarily saying that's a good thing -- we'd probably all be a lot healthier if high-fructose corn syrup and bacon were more expensive.)

The preceding argument should not be taken as a declaration that there will be no problem raising enough food and fuel from agriculture to support a global population of 10 billion people all driving Ford Expeditions and running their air conditioning full time. Or that we shouldn't worry about conservation and the preservation of rain forest biodiversity and energy efficiency. We should be worrying about all those things. But at the same time, we shouldn't forget that one of the greatest beefs that the developing world has about "free trade" is the lack of markets in the developed world for its agricultural commodities. Subsidized industrial agribusiness production in the developed world has created artificially low prices for many such commodities -- cotton, sugar, corn -- and cut the legs out from under the poor countries that could benefit from higher prices the most. A biofuel boom could solve that problem.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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