Friday, August 5, 2011

Agriculture: How cheap energy (and capitalism) increased the gaps between rich and poor

And how increasing energy prices will shift things to the better....

The simple agriculture equation has always been that one has to get substantially more energy out of the food than one has put into the production of it. As long as in-energy is human labour it is an iron law that can only be skipped for shorter periods. The agriculture worker should not only feed herself or himself but also other family members who are too young, too old or too sick to work, as well as some few others that supply services. Finally, in almost all society there have been rulers that have taken a great share of the production. In pure agrarian societies, around 80 percent of the population is engaged in farming.

250 billion energy slaves

One can contrast the energy embedded in human labour with the external energy sources we have conquered, to give us an idea how important the deployment of external energy sources are. If we make a back-of-the-envelope-calculation we see that the 7.71 tons of oil equivalents (toes)[1] of energy the American uses (the average Senegalese 0.25), corresponds to the food consumption of 400 people. They are the “energy slaves” (in the form of fossil fuel) working for him or her. Another way of looking at it, and also to put in an economic perspective, is that a barrel of oil represents the energy of 25,000 hours of human toil, i.e. 14 persons working a year with normal labour standards. Even with an oil price of many hundred dollars per barrel, it is very cheap compared to human labour (Rundgren 2011). 
According to FAO, 6,000 MJ of fossil energy (corresponding to a barrel of oil) is used to produce one ton of maize in industrial farming, while for the production of maize with traditional methods in Mexico only 180 MJ (corresponding to 4.8 litre of oil) is used. This calculation includes energy for synthetic fertilizers, irrigation and machinery, but not "shadow energy", i.e. energy used for making machinery, transporting products to and from the farm, and for construction of farm buildings. The energy return on energy input is below 1 (i.e. there is more energy consumed than produced) for modern rice farming and just above 1 for modern maize farming, while traditional production of rice and maize give a return of 60 to 70 times on energy used (FAO 2000).

The total energy harvested per hectare can increase substantially with increased use of ancillary energy. This energy can come in the form of better (and timelier) soil preparation, irrigation, (chemical) fertilizers etc. The ratio between energy return and energy input, i.e. efficiency in use of energy, seems to be fairly constant to a certain level after which it rapidly deteriorates. In industrial farming systems we have since long passed this level. Harvested energy per labour unit increases dramatically with increased input of energy with a factor of between ten and hundred, allowing the most advanced agriculture systems to have one farmer per hundred persons. Here we see no similar threshold or limit as for energy efficiency per hectare (Bayliss-Smith 1982).

Why the oil price and the grain price will follow each other

Farming uses energy in many different forms: diesel for tractors and pumps; electricity for pumps; fans and in-door machinery such as milking machines. Fertilizers represent a big energy use. Energy represents 90 percent of the production costs for nitrogen fertilizers, 30 percent for phosphorus fertilizers and 15 percent for potassium fertilizers. For production in the USA energy costs represented between 22% and 27% of the production costs for wheat, maize and cotton and 14% of the production costs for soy beans[2] (US CRS 2004). These figures do not include embedded costs in buildings, machinery etc. so the actual share of the costs is substantially higher. In Argentina, energy costs were calculated to account for 43% of production costs in 2006 (Baltzer et al 2008). In a situation with rising energy prices, agriculture prices will follow suit. This could also be seen in the food price – and oil price hike 2007-2008[3]. Increased energy prices influence food prices in four different ways:
-       by making the production more expensive
-       by making biofuel more interesting to produce and therefore reduce the production of food, leading to higher prices
-       increased transport costs which directly reflect on food prices
-       reduced competition in the food sector, i.e. increased transport costs means that the pressure of global competition is reduced (Rundgren 2011).

Many people are still totally dependent on firewood for their supplies of energy, Solomon Island 2010.

It takes more energy to eat than to farm
The increase of energy use in agriculture was particularly rapid in the period between the Second World War and the first oil price chock 1973; while labour force was reduced to half between 1952 and 1972 in England, energy use tripled (Bayliss-Smith 1982). In the USA energy use decreased from mid 1970s to mid 1980s as a response to increased oil prices, thereafter it has stabilized (Hendricksson 1994).
Looking at the whole food chain however, energy use has constantly increased. Use of energy along the food chain for food purchases by or for U.S. households increased between 1997 and 2002 at more than six times the rate of increase in total domestic energy use. As a share of the national energy budget, food-related energy use grew from 12.2 percent in 1997 to 14.4 percent in 2002. (US CRS 2004). In pre-industrial and semi-industrial agriculture systems, most of the food is sold, eaten and prepared close to where it is produced, but the modern food chains are highly centralized and globalized. And it is just getting worse and worse. In industrial countries between 10 and 15 times more energy is used in the food system than what is contained in the food we end up eating (Hendricksson 1994).  
A big part of the energy consumption is caused by the consumers buying, storing and preparing food. In Sweden 1997, agriculture production represented 15-19 percent, processing 17-20 percent; distribution and retail 20-29 percent and consumption 38-45 percent of the total energy use in the food chain. 7-11 percent of the total energy is consumed by the much discussed transports, and here it is in particular the final stretch that counts. A person driving a car 5 kilometres for shopping uses a lot more energy per food unit than a ship with meat or soy from another continent. Also in some developing countries, consumption takes the lion's share of energy use; in this case, it is mainly cooking over an open fire that takes energy. 1,500 kWh (corresponding to a bit more than a cubic meter of firewood) is used per capita for cooking[4], which is somewhere between half and one third of what is used per capita for cooking in Sweden or the USA (Uhlin 1997). Cooking represents more than a fifth of the total energy consumption in Africa and Asia[5] and in some countries, cooking represent up to over 90% of household energy consumption (IEA 2006). The use of energy for cooking is more than the total energy in the food. So while farming in developing countries and traditional systems is energy efficient, cooking is not.

Increasing energy prices will revert some of the developments that were made possible by cheap fossil fuel. It poses a challenge for society, but also an opportunity to steer into a path of true sustainability. It will lead us towards more sustainable agriculture methods, such as organic farming and more localised food production webs. In general, in a world with rapidly increasing human population and a simultaneous depletion of natural resources, the obsession with replacing human labour with oil and other nature resources makes little sense. That those changes also will serve to mitigate climate change is just another argument in favour of such a shift in our societies' metabolism.  Notably, to abolish the use of external energy and rely solely on manual labour is not the desired situation, it is rather about finding a new balance that works on a global scale and is sustainable. Renewable energy, such as bio-energy, windmills and watermills have since thousands of years already been used in farming. They can be enhanced and solar energy and biogas can be added to the mix. But it is not likely that renewable energy will allow such wasteful systems that we have today. For example,  with very cheap energy it pays to use that energy to bind atmospheric nitrogen instead of using natural nitrogen fixation. With electricity prices of solar energy, or by they use of biogas it is cheaper to use natural nitrogen fixation than using chemical fertilizers. 

Unequal energy access and the unequal terms of trade
Commercialisation is promoted as the recipe for development for the almost half a billion smallholders in the world. Peasant farming is built on a rather high degree of autonomy and it regenerates most of its needed resources, such as labour, capital, soil fertility and pest control, within the farming system. By nature, peasants resist commercialisation because they want to minimize risk and dependency (v.d. Ploeg 2009). If all the forces of coercion are brought to play and farmers try to commercialise their production, most farmers will simply not survive in this struggle for modernisation. If they did, there would be enormous over-production. European farms had difficulties to cope with competition from North America especially after the introduction of steamship transport. The response was to introduce protectionist measures. Still the pressure of competition was a lot lower for them than it is for poor farmers in developing countries today. In addition, because of the productivity gains in developed countries, agricultural prices dropped with some 60 percent in the period 1960 to 2000 (Dorward et al 2002). As the productivity, and energy use, of the poorest farmers remained much the same, it is obvious that they lose out. At current prices, it would require one life of labour for a manual farmer to acquire a pair of oxen and small animal drawn equipment, and ten generations of labour to buy a small tractor (Mazoyer and Roudart 2006). The productivity gap has widened over the last decades, both relatively and in absolute numbers. 

Table 1 Agricultural labour productivity, dollar per man-year

Agriculture as share of GDP
Low income countries
Middle income countries
High income countries
United Kingdom
Source: World Bank 2007

To believe that low resourced smallholder farmers would be able to compete on staple food in free world markets - with energy access being the main factor of competitive advantage - is simply very far from reality. In reality, we instead see how country after country become net food importers. Cheap energy could be seen as their way out of the situation, but the reality is quite different: it is cheap energy that has pressed down the prices of agriculture products - and thereby the market value of their labour to a dollar per day; it is cheap energy that has allowed the gaps to increase to unprecedented heights because the rich could always use more cheap energy than the poor, and the gap between those relying on their own labour and those relying on use on fossil fuel has just increased. Energy scarcity, higher energy prices will result in less global competition and higher food prices. While being painful for many societies and for net food buyers in the short run, is still better for the smallholder farmers in developing countries than the opposite. Policy-makers should better grab this opportunity for a turn of agriculture development, instead of promoting continued or increased external input dependency (fertilizers, GMOs, credits) and continued global competition in a market where the big players are all on steroids in the form of cheap oil.

Baltzer, Kenneth; Hansen, Henrik; Lind, Kim Martin 2008, A Note on the Causes and Consequences of the Rapidly Increasing International Food Prices, Institute of Food and Resource Economics, University of Copenhagen
Bayliss-Smith, T. P. 1982, The Ecology of Agricultural Systems, Cambridge University Press
Dorward, Andrew, Jonathon Kydd, Jamie Morrison and Ian Urey, A Policy Agenda for Pro-Poor Agriculteal Growth, Imperial College at Wye, accessed at
FAO 2000, The Energy and Agriculture Nexus
FAO 2007, The State of Food and Agriculture
Hendrickson, John 1994, Energy Use in the U.S. Food System: A Summary of Existing Research and Analysis, Center for Integrated Agricultural Systems
Hoffmann, Ulrich, 2011, Assuring food security in developing countries under the challenges of climate change: key trade and development issues of a fundamental transformation of agriculture, UNCTAD discussion paper 201, February 2011
IEA 2006, World Energy Outlook, OECD/IEA
IEA 2008, Key Energy Statistics 2008, International Energy Agency
Mazoyer, Marcel & Roudart, Laurance 2006, A History of World Agriculture: From the Neolithic Age to Current Crisis, transl. James H. Membrez, Monthly Review Press
McDonald's 2008, Vårt Miljöengagemang
Ploeg, Jan Douwe van der, 2009, The New Peasantries: struggles for autonomy and sustainability in the era of empire and globalization.
Rundgren, Gunnar, 2011, Garden Earth - From hunter and gatherer to capitalism - and thereafter, forthcoming
Uhlin, Hans Erik 1997, Energiflöden i livsmedelskedjan, Naturvårdsverket
US CRS 2004, Energy Use in Agriculture: Background and Issues, 19 november 2004, US Congressional Research Services
USA Today 2008,–03–10-drugs-tap-water_N.htm, 16 March 2009
WHO 2006, Fuel for Life: Household Energy and Health, World Health Organisation
World Bank 2007, World Development Report 2008

[1]       a toe is a common unit for energy and express the amount of energy released when a ton of oil is burnt. 1 toe = 42 GJ = 11 MWh = 10 Gcal.
[2]       Who can be grown without nitrogen fertilizers as they have natural nitrogen fixation.
[3]       There were also other factors driving this, such as biofuels, increased meat consumption and speculation. Increased oil price was doubtless one main driver.
[4]       As an interesting comparison, McDonald's Sweden states that they use 1 kWh per meal (McDonald's 2008).
[5]       The introduction of energy-saving stoves or the use of other fuels that are easier to regulate should be a prioritized measure. It is not only about conservation of forest and saving energy; soot and smoke indoors is a health hazard and one of the bigger killers. Between 1.5 million (WHO 2006) and 4 million (Pimentel et al 1998) people are killed by this every year.

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