Forget oil, the new global crisis is food

[Rajiv]

Forget oil, the new global crisis is food

A new crisis is emerging, a global food catastrophe that will reach further and be more crippling than anything the world has ever seen. The credit crunch and the reverberations of soaring oil prices around the world will pale in comparison to what is about to transpire, Donald Coxe, global portfolio strategist at BMO Financial Group said at the Empire Club's 14th annual investment outlook in Toronto on Thursday.

"It's not a matter of if, but when," he warned investors. "It's going to hit this year hard."

Mr. Coxe said the sharp rise in raw food prices in the past year will intensify in the next few years amid increased demand for meat and dairy products from the growing middle classes of countries such as China and India as well as heavy demand from the biofuels industry.

"The greatest challenge to the world is not US$100 oil; it's getting enough food so that the new middle class can eat the way our middle class does, and that means we've got to expand food output dramatically," he said.

The impact of tighter food supply is already evident in raw food prices, which have risen 22% in the past year.

Mr. Coxe said in an interview that this surge would begin to show in the prices of consumer foods in the next six months. Consumers already paid 6.5% more for food in the past year.

Wheat prices alone have risen 92% in the past year, and yesterday closed at US$9.45 a bushel on the Chicago Board of Trade.

At the centre of the imminent food catastrophe is corn - the main staple of the ethanol industry. The price of corn has risen about 44% over the past 15 months, closing at US$4.66 a bushel on the CBOT yesterday - its best finish since June 1996.

See also Food production: land, population and water

Colin Tudge’s So Shall We Reap gives as clear a description as any of the effect of population growth on our food system. The world’s population will continue to grow to a peak of 9Bn in the middle of this century. Yet most of the land in the world which will sustain agriculture is already being used.

In fact, the resource is shrinking because of soil erosion. One estimate is that in 40 years (from the 1950s to 1990s), 30 percent of the world’s arable land has been lost. In the past this happened most in less-populated countries such as Saudi Arabia, but increasingly it is happening in populous countries such as China.

At the same time, climate change will reduce yields – some crops for instance yield 10% less for every 1 degree rise in temperature. More catastrophically, sea-level rises could wipe out a huge proportion of the world’s best arable land, including in the UK. Lack of water in the world’s hottest countries will make those countries increasingly reliant on exports of grain from temperate countries like Europe – even Britain may need to become a net exporter of food rather than a net importer.

Even where arable land remains, its yield is declining steadily as a result of modern agricultural methods, especially (again) through soil erosion. Arable land typically has around 8” of fertile soil. For each 1” of this which is lost, yields decline by around 10% . In particular, soils have lost organic matter, which is essential to hold water and nutrients for plants. Studies have shown that soils high in organic matter can hold the water from rain (and especially from heavy rainfalls) many times more effectively than barren soils. So the loss of soil organic matter (as well as tree cover etc) is responsible for both drought and flooding. Soil organic matter also greatly reduces the rate of soil erosion, and may even prevent it.

At present the world’s arable farmers compensate for the loss of natural soil fertility by adding fertiliser. We will need to decide, in future, whether precious energy can be used in this way. It would be better to build soil fertility by adding organic matter, and make use of natural fertilisers (ie by returning animal and human manure to the land), than to expend energy on artificial ones.The other important way in which arable land is being lost is to development, such as housebuilding, roadbuilding and airports. Already some 20% of the world’s best land has been used in this way. The UK’s plans to build huge new housing developments in the East and South-East of England are both suicidal, in the sense that they will use up precious high-quality land, and pointless, in the sense that London will soon be shrinking rather than growing. Similarly plans for new roads (including bypasses) and airports are both wasteful of good land, and anachronistic at a time when traffic is bound to reduce.The current drive to biomass ignores these pressures on the land

Also Global food prices rise 40% in 2007 to new record

As world food prices continue to surge, 37 countries are facing critical food crises due to conflict and disasters, according to a report from the U.N. Food and Agriculture Organization (FAO).

FAO's global food price index rose 40 percent this year to the highest level on record. Food costs in the world's poorest countries — including Iraq, Afghanistan, Nepal, Pakistan, and 20 African countries — rose 25 percent to $107 billion.

"Urgent and new steps are needed to prevent the negative impacts of rising food prices from further escalating and to quickly boost crop production in the most affected countries," said FAO Director-General Jacques Diouf in a press conference last week at FAO's Rome headquarters. "Without support for poor farmers and their families in the hardest-hit countries, they will not be able to cope. Assisting poor vulnerable households in rural areas in the short term and enabling them to produce more food would be an efficient tool to protect them against hunger and undernourishment."

[c1ue]

Re: Forget oil, the new global crisis is food

Rajiv,

No surprises here.

As I've said a number of times before - increasing food prices are irritating but sustainable for the US and other 1st world countries.

What will end up happening is the poor countries who are not self sufficient in food will get slammed.

This applies equally for the 'green' foodies at Whole Foods; the lower yields and higher costs engendered by organic food growth also subtracts land and thus total possible food yield.

[Rajiv]

Re: Forget oil, the new global crisis is food

This applies equally for the 'green' foodies at Whole Foods; the lower yields and higher costs engendered by organic food growth also subtracts land and thus total possible food yield.

This is not quite true "organic" agriculture properly done will out perform oil based "inoroganic" agriculture on a per hectare basis. For good farmers, it will also outperform on a $ per hour basis.

From Organic Crop Production Overview

Notions of Organic

As organic farming and marketing entered the 1970s, it began to develop as an industry. As a result, a clearer definition was needed to distinguish it and its products from conventional agriculture. This was no straightforward task. Environmental issues and other alternative agriculture philosophies had created diverse notions about what organic agriculture was and what it should be.


A particularly problematic image grew unexpectedly from the anti-pesticide movement of the 1960s. This was the romantic notion that organic simply meant "doing next-to-nothing." In this exploitative approach, not only were pesticides avoided, sound farming practices that built the soil were also largely ignored. The results achieved on such farms were predictable, as yields were low and the quality poor. These approaches became collectively known as organic by neglect and are a far cry from the responsible farming models proposed by Albert Howard and J.I. Rodale.


It is unclear how many farmers actually chose to farm "by neglect" and advertise themselves as organic over the years. However, this extreme representation of organic agriculture was quickly taken up by critics who tried to characterize all of organic agriculture as soil depleting and unproductive.(10) To counter this, current standards for certified organic production require an "organic plan" outlining the use of soil building activities and natural pest management.


There is a further notion that organic farming also describes farm systems based on soil building, but that continue to use some prohibited fertilizers and pesticides in a limited or selective manner. A USDA study of U.S. organic farms (11) made note of many such individuals who readily and sincerely referred to themselves as organic farmers. While these growers were largely conscientious and would, in most instances, fall under the modern umbrella of "sustainable farmers," industry standards evolved to preclude all synthetic pesticides or commercial fertilizers. The approach to farming by this loose-knit group of growers and their supporters has come to be called "eco-farming" or "eco-agriculture" — terms coined by Acres USA editor Charles Walters, Jr.(12)


A further notion of organic agriculture that bears addressing is the persistent image of organic farming as being possible only on a very small scale. This impression has been enhanced by the high visibility of organic market gardens. These, of course, are small because market gardening — conventional or organic — is usually done on a smaller scale. Also, some organic market garden systems, such as Biointensive Mini-Farming, use highly labor intensive/low capital investment technologies. These have become popular among U.S. gardeners and, more importantly, with those concerned with Third World development, where such systems are especially relevant. Focus on these systems has, unfortunately, distorted the picture of organics as a whole.


Traditionally, organic farms truly have been smaller than conventional operations. This has been due in part to labor requirements. Organic systems are generally more labor intensive. Studies done in the late 1970s by Washington University, for example, found that about 11% more labor was required per unit of production where agronomic crops were concerned.(13)

See also "Can Organic Farming Feed Us All?"

The only people who think organic farming can feed the world are delusional hippies, hysterical moms, and self-righteous organic farmers. Right?

Actually, no. A fair number of agribusiness executives, agricultural and ecological scientists, and international agriculture experts believe that a large-scale shift to organic farming would not only increase the world’s food supply, but might be the only way to eradicate hunger.

Halweil notes that two recent studies reveal that a global shift to organic farming would yield more food, not less, for the world's hungry. Organic farming tends to raise yields in poorer nations, precisely those areas where people are hungry and can't afford chemical-intensive farming. "In poorer nations, organic farming techniques like composting and green manuring and biological pest control may be farmers' best hope for boosting production and reducing hunger," writes Halweil.

Beyond this yield advantage, organic farming has proven benefits for wildlife, water and air quality, and food safety. And while analysts on the two sides of this issue are constantly at odds, some experts are starting to advocate a middle path that uses many of the principles of organic farming and depends on just a fraction of the chemicals used in conventional agriculture. Such an integrative system, they believe, would have great benefits for farmers, consumers, and the environment. "The lack of widespread support for organic farming from governments, industry, and farmer organizations is short-sighted and may ultimately be contributing to world hunger," says Halweil.

The pdf of the article is here

[touchring]

Re: Forget oil, the new global crisis is food

As I've said a number of times before - increasing food prices are irritating but sustainable for the US and other 1st world countries.

What will end up happening is the poor countries who are not self sufficient in food will get slammed.

I agree with this.

[GRG55]

Re: Forget oil, the new global crisis is food

This is not quite true "organic" agriculture properly done will out perform oil based "inoroganic" agriculture on a per hectare basis. For good farmers, it will also outperform on a $ per hour basis...

Some years ago I heard an astute investment manager describe modern agriculture as "using land to convert petroleum into food" - an appropriate description if ever there was when one examines how much industrial agriculture depends on petroleum.

I am not sure what is meant by "organic agriculture", as opposed to "oil based inorganic agriculture" in this context. But I'll bet it's nigh impossible to completely kick the oil input habit and still increase crop yields on a worldwide basis. Not sure if it's "good" or "bad", but I suspect most of the advances in global food production will come from introducing into Africa/Asia/CIS many of the same productivity techniques (seeds, fertilisers, mechanization, etc) that are commonplace in North America and other heavy industrial ag regions.

[c1ue]

Re: Forget oil, the new global crisis is food

Rajiv,

The context is clear: Organic farming is better than non-organic farming by guys with wooden hoes.

However, neither the article - nor presumably you - are saying that organic farming produces more food per given bit of land than 'normal' farming.

More up-to-date research refutes these arguments. For example, a recent study by scientists at the Research Institute

for Organic Agriculture in Switzerland showed that organic farms were only 20 percent less productive than conventional plots over a 21-year period.

vs.

For example, the often-cited statistic that switching to organic farming in the United States would only yield one-quarter of the food currently produced there is based on a U.S.Department of Agriculture study showing that all the manure in the United States could only meet one-quarter of the nation’s fertilizer needs—even though organic farmers depend on much more than just manure.

I'm not saying organic farming is evil - merely pointing out that any assumption that food prices are dependent on supply inherently dictates that food prices will go up when supply decreases; and organic farming in the 1st world will decrease yield per land unless the land used was not previously 'normal' farmed. And the ones who will pay (in misery) for this shortfall will be the 3rd world.

I'd bet that there isn't much new farmland being created in the 1st world...

[zoog]

Re: Forget oil, the new global crisis is food

Rajiv,

The context is clear: Organic farming is better than non-organic farming by guys with wooden hoes.

However, neither the article - nor presumably you - are saying that organic farming produces more food per given bit of land than 'normal' farming.



vs.



I'm not saying organic farming is evil - merely pointing out that any assumption that food prices are dependent on supply inherently dictates that food prices will go up when supply decreases; and organic farming in the 1st world will decrease yield per land unless the land used was not previously 'normal' farmed. And the ones who will pay (in misery) for this shortfall will be the 3rd world.

I'd bet that there isn't much new farmland being created in the 1st world...
[/left]

I think the issue with organic vs petroleum-based farming is that while organic farming may have lower yields, the fields can remain productive for many years. Intensive, petroleum-based fertilizer-and-pesticide farming generates extraordinary yields.... for a short time. Then the field is pretty much worthless.

We're losing farmland all the time. In my opinion, it would be better to go back to lower, but sustained crop yields to make the most of what farmland we have left for the long term. The last thing we should be doing is teaching the third world to become more dependent on oil for growing food like we are.

[Verrocchio]

Re: Forget oil, the new global crisis is food

Rajiv,

However, neither the article - nor presumably you - are saying that organic farming produces more food per given bit of land than 'normal' farming.

[/left]

There are two severe problems with "modern" agriculture: (1) heavy reliance on petroleum-based inputs and (2) loss of arable land.
Discussion of the pros and cons of organic vs non-organic farming is related only to the first problem. The rising cost of petroleum cannot be ignored if a meaningful comparison of these two contrasting farming approaches is to be had. In addition to the factors noted in this thread so far, the second problem is exacerbated by changing climatic conditions (i.e., global warming).

[Guest]

Re: Forget oil, the new global crisis is food

It's very possibly going to be a significant miscalculation to regard this particular iteration of the "Commodity Supercycle" as solely or primarily a product of monetary abuse (hence late 2000's US economic implosion must equal a collapsing commodity supercycle). Gazing at the sheer size of the demographic "thermonuclear gigaton" demographic bomb depicted here, one even has to wonder how long monetary aggregates can be credibly claimed as the primary driver (in perpetuity - given the size of this monster wave - really?).

The global population time bomb this time around is not only unique in it's sheer size and the sharp inflection point it's crossing, it is also a one-time event. This was most decidedly not a factor in previous commodity cycles. To imagine a factor of this size does not introduce upon a current commodity supercycle with some notable anomalies compared to all previous commodity supercycles - well ... one could make a good case for that ending up being a significant mis-estimation.

One could not claim that this viewpoint enjoys a unanimous opinion here at iTulip however. One might imagine at this point hearing a chorus of "Oh, so you are saying it's different this time!" - to which the correct answer is YES, in point of fact, it is most decidedly different this time.


The Biggest Cycle of Them All



It’s a great time to be an investor.

There aren’t too many things you can count on in the investment world. The whole thing is cyclical. The housing market is at the tail end of the cycle. So is the U.S. economy. We’re in the middle of the commodities cycle. The technology cycle is just getting started.

It’s all cyclical. However, these cycles only ever seem to last two, five or 10 years at most from trough to trough (or peak to peak for us glass-is-half-full-kind of people). But there is one cycle bigger, stronger, and longer lasting (therefore, a lot more profitable) than them all. It will be so big, in fact, I’d say it’s not really much of a cycle at all.

I’m talking about population growth.

As you can see in the chart above, we’ve just hit the parabolic point when global population surges forward. Over the next 20 years, the world is going to add another billion people primarily in the developing world.

Think about it: When you add a billion people to the mix, there will be a lot of consequences. The most evident will be pollution, transportation and energy demand. But the biggest one (thankfully, one the investment community is just starting to piece together) is food demand.

The global population marched past 6 billion in 2000 and is on its way to 7, 8, and eventually 10 billion. That’s a lot of new mouths to feed. Most importantly, with the world economy continuing to grow, those mouths now have the money to buy food.

This one’s as close to a no-brainer as they come. At my premium advisory service, BreakAway Investor, we were first to capitalize on the growing food and agriculture market, delving into it years ago. But, as you can see in the chart, we’re not far from the starting line.

In the last week of November, we uncovered two more direct ways to capitalize on the global agriculture boom. Since then, those two picks are up 120% and 39%, respectively, with a lot more to go. Learn more about these two stocks and how to become a BreakAway Investor member.

Good investing - Andrew Mickey
Editor, BreakAway Investor

[BiscayneSunrise]

Re: Forget oil, the new global crisis is food

For those interested in a deeper understanding how the modern, industrial food supply chain works and how it differs from sustainable methods I recommend "The Omnivore's Dilemma" by Michael Pollan.

[quigleydoor]

Honeybees: Colony Collapse Disorder

What is your level of concern about the honeybee crisis? Pretty much all vegetables, fruits, and nuts require pollination by honeybees and other insects, or else there will be no crop. In the industrial food system we have in America, truckloads of beehives are driven around the country to do the work. In the last year or two, these entire beehives have been dying mysteriously. The bees just dissipate and go die some where (kind of like they all start saying "f*ck this, I'm sick and tired").

The best info I've seen on this problem was a PBS Nature episode. Researchers have isolated a particular viral infection, but they also blame industrial pesticides for weakening the bees' immune systems.

This might all sound cute to you. But all of our food supply depends on the honeybee, except for grains, corn, and hemp (wind-pollinated). If the honeybees throw in the towel before we figure out a solution, we'll be hiring slaves to hand-pollinate our crops.

[zoog]

Re: Honeybees: Colony Collapse Disorder

What is your level of concern about the honeybee crisis? Pretty much all vegetables, fruits, and nuts require pollination by honeybees and other insects, or else there will be no crop. In the industrial food system we have in America, truckloads of beehives are driven around the country to do the work. In the last year or two, these entire beehives have been dying mysteriously. The bees just dissipate and go die some where (kind of like they all start saying "f*ck this, I'm sick and tired").

The best info I've seen on this problem was a PBS Nature episode. Researchers have isolated a particular viral infection, but they also blame industrial pesticides for weakening the bees' immune systems.

This might all sound cute to you. But all of our food supply depends on the honeybee, except for grains, corn, and hemp (wind-pollinated). If they bees throw in the towel before we figure out a solution, we'll be hiring slaves to hand-pollinate our crops.

They all came to my flower garden this summer, where they could pollinate at a leisurely pace, away from the slavedrivers in the commercial agricultural market.

(Being serious now.) Actually most of my visitors are bumblebees, but they are also used for agricultural pollination. As usual, the media reported on this briefly and then subsequently ignored it, so most people have totally forgotten. Furthermore, most of us are so far removed from food production, we have no way of judging how serious the problem really is. It sounds critical to me, but, I don't know? Are bumblebees also affected by this sudden decline? If not, could more of them be used to replace the missing honeybees for food pollination? One problem with bumblebees is that most of the colony does not survive the winter.

[quigleydoor]

Re: Honeybees: Colony Collapse Disorder

Are bumblebees also affected by this sudden decline? If not, could more of them be used to replace the missing honeybees for food pollination? One problem with bumblebees is that most of the colony does not survive the winter.

Actually a subpage of the link I included answers these questions:

Honeybees aren't our only pollinators. Other insects and birds pollinate fruits and vegetables as well. The problem with other natural pollinators picking up the bees' slack is that today's agricultural industry has simply grown too large for them to keep up. The leviathan that is U.S. agriculture creates a huge demand for pollination. Because honeybees are relatively mobile and can pollinate a generous number of crops, they have been the ideal recruits to meet our crop needs. But honeybees don't perform such feats naturally without help -- lots of it. Commercial beekeepers keep colonies nourished and healthy and move their hives from state to state in semis, selling their pollination services to farmers at a premium.

With the threat of CCD looming, researchers are starting to study how other pollinators like the larger bumble bees could step in for honeybees. "The Dutch have figured out how to use bumblebees," says Pettis. Bumblebees share many similarities with honeybees. Both are social nesters, although the bumblebees' society is not as highly ordered as that of honeybees. Also, bumblebees make a new nest each spring by solitary queens, who hibernate through the winter. Honeybees remain in the old nest.

Perhaps the biggest consideration is an economic one. Bumblebees last just 2 months and cost $200 per colony, whereas honeybees can last several months in the summer with colony rentals running only $100 to $140. As a result, the use of bumblebee pollination is usually confined to high-value crops like tomatoes. Clearly, the use of bumblebees is a step in the right direction, but not a final solution.

"There's nothing waiting in the wings that can replace honeybees at this time," says Pettis, "but we can solve the problem in honeybee health." Pettis says that by focusing on reducing stress and improving nutrition, beekeepers can limit some of the factors that potentially lead to disastrous conditions like CCD, thereby keeping bees -- and our diets -- healthy.

Elsewhere in the pages for this documentary, an interview with the filmmaker:

I think it's important to note that the CCD scare has brought some overdue attention to the importance of bees, but bees and other pollinating animals have been disappearing for at least 20 or 30 years. This is just the latest example of a worldwide crisis that until now really hasn't received the kind of attention that something like global warming gets. But pollinator decline is just as important -- and just as worrisome.

[touchring]

Re: Honeybees: Colony Collapse Disorder

This might all sound cute to you. But all of our food supply depends on the honeybee, except for grains, corn, and hemp (wind-pollinated). If the honeybees throw in the towel before we figure out a solution, we'll be hiring slaves to hand-pollinate our crops.

We can hire butterflies?

[Verrocchio]

Re: Forget oil, the new global crisis is food

The global population marched past 6 billion in 2000 and is on its way to 7, 8, and eventually 10 billion. That’s a lot of new mouths to feed. Most importantly, with the world economy continuing to grow, those mouths now have the money to buy food.

Money won't buy enough food for every hungry mouth, if there isn't enough food on the planet to feed everyone. There are several plausible threats to agriculture around the world that could wipe out major food crops. Fortunately, some far-sighted thinkers formed the Global Crop Diversity Trust and created the mother of all seed banks, the Global Seed Vault. Buried deep in a mountain on the Arctic island of Spitzbergen, the GSV will hold seeds of the 1.5 million agricultural crops grown on the planet.

Svalbard Global Seed Vault: Ark of the Arctic

Should global catastrophe strike, the world’s crops at least will be safe, deep-frozen in a vault in the middle of a Norwegian mountain. Johnny Davis ventures inside the Noah's Ark for seeds

The most northerly point on earth accessible by aeroplane, the Arctic archipelago of Svalbard is the nearest you can come to the North Pole without recourse to huskies, sleds or a base camp support team. Comprising the island of Spitsbergen ('jagged mountains' in Dutch) and a handful of its even more desolate neighbours, the archipelago is half the size of England, yet home to fewer than 2,300 people - the most remote populated spot in the world.

Excerpt: Faced with a particularly pernicious disease, a natural disaster or global warming, one of the world’s major crops could easily be wiped out completely. 'The biggest crop in South Africa right now is maize,' Fowler said. 'But if you look at the temperature changes projected in South Africa for the next 50 years, you have to conclude that maize is going to have a hard time remaining productive. Some of these crops just aren’t going to make it.'