Let them eat ethanol

THERE has been much discussion about why nobody saw the uprisings in the Middle East coming. The best explanation I can find is that none of our international intelligence comes from people who live on less than $2 a day and buy bread.

"Bread, liberty, and dignity" has been the catch-cry of the Egyptian revolutionaries, the latest in a string of global uprisings that have their roots in surging food prices.

History students will know that revolutions about bread are far from unprecedented. A grain shortage was a key factor leading to the events in France, 1789, and responsible for the spread of the famous but apocryphal quote from Marie Antoinette "Let them eat cake".

Egyptians, it turns out, love bread even more than the French, being the biggest consumers of wheat per capita in the world. It is common for Egyptians to eat bread with every meal.

The Egyptian government has produced its own subsidised bread for some time, but this is a temporary solution that inevitably leads to shortages and economic problems down the track.

The international wheat market is big and complex, so it would be simplistic to attribute the Egyptian bread shortages to Australia, but it would also be foolish to ignore our contribution. Australia has historically provided the Middle East with between 14 to 40 per cent of its wheat, which means that our agricultural policies have much more to do with the uprisings in the Middle East than any of us may care to admit. Whether or not Australia exports its wheat to Egypt in any given year, Australia's wheat exports are significant enough to influence the price.

Australians usually talk about the price of wheat in terms of its impact on our farmers and the export income it provides. Seldom do we connect high prices of wheat with the grinding poverty of people around the world.

The causes of wheat shortages that have led to unrest in Egypt, Algeria, Tunisia, Jordan, Morocco and Yemen are multiple. This time around, factors have included stockpiling in China and India, drought in Russia, and price volatility caused by financial speculation. A long-term issue is how Asians have increasingly come to be able to afford higher priced wheat, leaving those in poorer traditional markets behind.

The problem is that the interests of people across the world who live under the poverty line but aren't quite poor enough to get food aid are virtually ignored by the producing nations.

Increasingly, when it comes to food production, even the nominal defenders of the downtrodden -- the Left -- are blinded by environmental rather than human considerations. Take Bill Shorten, for example. Just before being elected to parliament in 2007, Shorten announced that to save water, rice growing in Australia should be banned in favour of the cultivation of hemp for fibre. Such a move would suddenly turn Australia into a net importer of rice, and put pressure on the international price of the poor's most important staple food.

The mandated policies of our state governments to ensure we use ethanol in our petrol are no less unsympathetic. While large amounts of ethanol are produced from the remnants of flour starch wastes and sugar crops, wheat is increasingly being sought as a key ingredient. An ethanol plant is being built in Western Australia that will initially take 500,000 tonnes of products per year from specially grown wheat.

Australian interest groups who lobby, one way or another, to make wheat more expensive are as diverse as they are powerful. They range from the economic hard heads urging us to maximise our export income; farmers and ethanol producers trying to make a quid; and environmentalists promoting biodiesels, and inadvertently reducing production by opposing irrigation and genetic modification and promoting organic farming practices. Impoverished Egyptians are simply not on anybody's political radar.

To make the political situation even more impossible for your average Cairo revolutionary, it turns out that Australia's largest manufacturer of ethanol, Manildra, is also the most generous donor to our major political parties.

Worldwide, it is estimated that many millions of tonnes of grain are now being redirected from food to fuel. Keen to achieve energy self-sufficiency, the US is leading the way, and is now diverting an estimated quarter of the entire grain crop to make ethanol.

With so many forces working to jack up wheat prices, it's impossible to see how changes of government are going to make any difference to the lives of the poorest people in the Middle East. This issue has the potential to cause continued unrest in the world's most volatile region, and the price of bread could end up being more costly than we imagined.