Bet the Farm: How food stopped being food
There is enough food grown in the world to feed its entire population, yet approximately 1 billion people go hungry every year. With this in mind, food journalist and Harper’s Magazine contributing editor Frederick Kaufman went searching for the variables that make a slice of pizza cost so little. Demystifying the complex system of wheat futures, he traveled to farms, labs, manufacturing facilities, and Wall Street, where he uncovered who cornered the wheat market in 2008 and created the food bubble. I hungrily asked him six questions about his new book, Bet the Farm: How Food Stopped Being Food.
1. Wheat prices have been erratic in recent years, and this summer they rose again, from $264.36 per metric ton in May to $349.4 per metric ton in August. The current price is only $90 below the 2008 peak you mention in your book. Left untouched, will the market become more volatile as time goes on? What does this mean overall to the average consumer in America and those who depend on American cereals abroad?
We are ten years into a global food crisis, and while 17 million American families do not have enough to eat, the rest of the country has no clue. For 900 million people on the planet, hunger is a given. And while that number is flat-out apocalyptic, only the activists and the military seem to get it. Problem is, while the numbers boggle the mind, what economist call the ‘price signal’ is still too weak for the average consumer in this country to care. Sure, that box of Wheaties is getting a little slimmer, and that gallon of milk a little pricier, but we are still paying 10 to 12 percent of our weekly take-home pay on food. And that percentage has stayed roughly the same even though the price of global grain has almost tripled since 2002. Why? Because American wheat is subsidized wheat, and when we pay for a packaged good, we are mostly paying for the packaging. In a country like Egypt, on the other hand, the percentage of weekly take-home pay devoted to food has surpassed forty, and people are just as apt to purchase wheat as Wheaties.
Let’s say the price of food doubles in the next twenty years. The Arab Spring will seem like a pep rally. And no doubt, grain prices will stay volatile. Every day, three times as much speculative money is bet on the volatility of imaginary grain on the futures market as money is spent on the actual stuff. The global grain markets have attracted the attention of the investment bankers, the hedge-fund managers, and the sovereign wealth funds. And the price of global grain is ‘discovered’ on the futures markets. Every savvy money manager knows that, down the line, food will only become more ‘valuable’—i.e., more expensive.