The Food Crisis Should Not Be Left To Cowboy Capitalists Or Pinstripe Farmers

Via The Financial Times, some commentary on the impact of drought and markets on food production & availability:

The worst US drought in half a century is further evidence that we are in the midst of a global food crisis. In 2007-08, there were riots in more than 20 countries, as the cost of commodities surged. After a brief respite, prices of corn and soya have in recent months risen to all-time highs. I believe this is evidence that we cannot sustainably feed a world population forecast to reach 10bn by 2050. Are we cowboy capitalists, with our love of growth at any cost, about to ride full speed into disaster?

Food prices have risen for three main reasons. Demand for meat from the expanding middle class in developing countries (especially China) absorbed corn and soya – one pound of beef carcass requires 30 pounds of grain and one pound of pork requires 12 pounds of soya. Chinese soya demand, growing at 10 per cent a year, has transformed the agriculture of the western hemisphere, which now has more acreage with the crop than with wheat. Second, the global population has continued to increase at a rapid pace. Third, the weather has become more hostile to farming, with a substantial increase in severe droughts, floods and heatwaves.

The UN has estimated that the world will be able to increase food production by 60 per cent over the next four decades. Although there is no consensus number, the academic literature suggests at least a 70 per cent increase in food production will be required by 2050. Moreover, I believe that the UN forecast is highly unlikely to be met, given the long list of farming troubles.

Consider some examples: the world is steadily depleting its mined fertilisers – potash and phosphate; chemically-resistant bacteria and pathogens are on the rise; and agricultural input costs, such as for oil and fertiliser, are forecast to increase. Growth in grain productivity per acre of farmland is slowing and the marginal productivity of fertiliser has declined towards zero in developed countries. Meanwhile, slowly rising temperatures are inhibiting output. The results of this year’s weather suggest that earlier estimates of the negative effects of droughts and floods were seriously underestimated.

All our food and resource problems could be handled easily if we were the homo economicus of economic theory – well-informed, rational and incorruptible. Most estimates of future outcomes are based on that assumption. But it just isn’t so.

Sadly, we are easily manipulated by vested interests, we passionately prefer good news to bad, we are more short-sighted than we think we are, and we are all too corruptible. The world is likely to act too slowly to conserve resources, improve farming technologies and discourage meat eating and waste, which accounts for between 30 and 40 per cent of all food from field to mouth. Our behaviour, which unnecessarily pushes up prices, will inadvertently cause malnutrition and outright starvation in poor countries.

In the end, market prices may change this behaviour, but they will at first send rich countries too faint a signal for them to react, while pushing the poorest out of the market. A symbol of our current indifference is that filling up a single tankful of a sport utility vehicle with corn-based ethanol displaces enough calories to feed one Egyptian farmer for a whole year.

Many people in developing countries, such as Egypt, spend 40 per cent of their income on food compared with a rich-country average of about 10 per cent. Food and energy prices played a part in the recent uprisings in the Middle East. If grain prices were to double in price again, as they did in the period after 2008, the west would be irritated but poorer countries could see further social unrest.

China is the only government that seems to appreciate the potential consequences of resource and food shortages. In contrast, the US seems to be in complacent isolation in its agricultural fortress.

North America has seven times more water and 10 times more arable land than China, when measured on a per-capita basis. (As well as plenty of fertiliser and hydrocarbons.) It feels immune and will move slowly, seeing these issues as concerns for other countries. It will not be long however before China’s anxieties and growing power will force the US to address the world’s central problem. This summer’s drought should, but probably won’t, serve as a warning.

This entry was posted on Wednesday, August 15th, 2012 at 7:47 pm and is filed under Uncategorized.  You can follow any responses to this entry through the RSS 2.0 feed.  You can leave a response, or trackback from your own site. 

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About This Blog And Its Author
Seeds Of A Revolution is committed to defining the disruptive geopolitics of the global Farms Race.  Due to the convergence of a growing world population, increased water scarcity, and a decrease in arable land & nutrient-rich soil, a spike of international investment interest in agricultural is inevitable and apt to bring a heretofore domestic industry into a truly global realm.  Whether this transition involves global land leases or acquisitions, the fundamental need for food & the protectionist feelings this need can give rise to is highly likely to cause such transactions to move quickly into the geopolitical realm.  It is this disruptive change, and the potential for a global farms race, that Seeds Of A Revolution tracks, analyzes, and forecasts.

Educated at Yale University (Bachelor of Arts - History) and Harvard (Master in Public Policy - International Development), Monty Simus has long held a keen interest in natural resource policy and the geopolitical implications of anticipated stresses in the areas of freshwater scarcity, biodiversity reserves & parks, and farm land.  Monty has lived, worked, and traveled in more than forty countries spanning Africa, China, western Europe, the Middle East, South America, and Southeast & Central Asia, and his personal interests comprise economic development, policy, investment, technology, natural resources, and the environment, with a particular focus on globalization’s impact upon these subject areas.  Monty writes about freshwater scarcity issues at and frontier investment markets at