Food vs. FuelWritten by Dennis Sun
Published: 09 May 2008
Some of the issues we’re all hearing this spring – How dry is it going to be? What will the price of calves and lambs reach? When are fuel prices going to top out? How are we going to live with these high food prices? If you’re in the livestock business, and that business alone, it could be a challenging summer.
Some glimmers of hope are wind development and the rising prices being paid for mineral rights. At a bull sale last week I heard some mineral right owners in Niobrara County could receive as much as $300 per acre for oil and gas rights. Western North Dakota, with all the interest in the Bakken Formation, is just going nuts. Those wheat farmers are doing better in energy than wheat. A friend told me the wells are flowing at around 2,000 barrels a day. A story I read said there is an estimated 270 to 500 million barrels of oil in the formation. He went on to say “it will make the north slope of Alaska look like a child’s mud puddle. There won’t be too many wheat farmers hanging around western North Dakota next winter.” They’ll surely be off to warmer climates!
We’re lucky in America to spend only seven percent of our income on food. That’s up to around 10 percent now, but in places like China and India they spend up to 50 percent of their income on food. I’m not sure we could stand that high of a percentage.
There seems to be a real tug-of-war in the food, fuel and energy markets. Cheap food needs low cost grains, as do some ethanol fuels. Meats really get caught up in the circus, but we’re really lucky cattle and sheep are grazers. Pork and poultry really take the hit with grains.
The Chinese consume one-half of all the pork produced in the world. What is going to happen when we work our way through our own high numbers of hogs? Right now the Chinese are importing grain to feed in pork production. What happens if one, or more, of the large grain-producing countries has an extended drought? One can only fertilize so much to raise production. That adds to the cost of grain and, at some point, has environmental consequences.
I don’t mean to be pessimistic, but we are all going to have to change to live in this new world of high food and fuel costs. At some point in time there has to be a new fuel-efficient engine built to conserve fuel. As fuels keep rising, we all are going to have to change our lives.