Warfare: Food Supply/Access

[Watcher In The Middle]

Battlefield for "The Next War", perhaps?


Forget oil, the new global crisis is food
By Alia McMullen, Financial Post Published: Friday, January 04, 2008

BMO strategist Donald Coxe warns credit crunch and soaring oil prices will pale in comparison to looming catastrophe

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.

Article (http://www.financialpost.com/story.html?id=213343)

Wheat at $9.45 a Bu.; Beans (Jan., 2008 Contract) at around $11.50 a Bu.; and Corn at $4.66 a Bu. in January is more than a little bit scary.

The thought/principle of using food supplies as a weapon by the US has always been firmly denounced by politicians of all stripes here in the US in the past (as far back as I can remember). Occasionally, some pol would slip up, and then would get firmly, but throughly trashed from all quarters for echoing the unthinkable. And deservedly so.

But do those same rules still apply in today's world? - particularly with oil pricing where it is, where there's more than a little feeling in the general public that OPEC member nations are not only gouging us for oil, but are also baiting us at every turn.

I'm in no way advocating this approach, but I could see rapidly growing support for economic warfare through restrictions on food supplies (particularly exports) developing here in the US.

Thoughts and Comments appreciated.

[Jedburgh]

The linked article is a bit alarmist in its tone, although the basic data it's built on is pretty much on target. However, for a more cogent and reasoned look at the issue I recommend a read of this brief from the 6 Dec 07 issue of The Economist:

Food Prices: Cheap No More (http://www.economist.com/displaystory.cfm?story_id=10250420)

....According to the World Bank (http://www.worldbank.org/), 3 billion people live in rural areas in developing countries, of whom 2.5 billion are involved in farming. That 3 billion includes three-quarters of the world's poorest people. So in principle the poor overall should gain from higher farm incomes. In practice many will not. There are large numbers of people who lose more from higher food bills than they gain from higher farm incomes. Exactly how many varies widely from place to place.

Among the losers from higher food prices are big importers. Japan, Mexico and Saudi Arabia (http://www.recexpo.com/recweb/show_overview.asp?id=92) will have to spend more to buy their food. Perhaps they can afford it. More worryingly, some of the poorest places in Asia (Bangladesh (http://www.usaid.gov/bd/programs/food_sec_response.html) and Nepal) and Africa (Benin and Niger) also face higher food bills. Developing countries as a whole will spend over $50 billion importing cereals this year, 10% more than last.

Rising prices will also hurt the most vulnerable of all. The World Food Programme (http://www.wfp.org/english/), the main provider of emergency food aid, says the cost of its operations has increased by more than half in the past five years and will rise by another third in the next two. Food-aid flows have fallen to their lowest level since 1973.

In every country, the least well-off consumers are hardest hit when food prices rise. This is true in rich and poor countries alike but the scale in the latter is altogether different. As Gary Becker (http://www.becker-posner-blog.com/archives/2007/10/rising_food_pri.html), a Nobel economics laureate at the University of Chicago, points out, if food prices rise by one-third, they will reduce living standards in rich countries by about 3%, but in very poor ones by over 20%.

Not all consumers in poor countries are equally vulnerable. The food of the poor in the Andes, for example, is potatoes; in Ethiopia, teff: neither is traded much across borders, so producers and consumers are less affected by rising world prices. As the World Bank's annual World Development Report (http://web.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/EXTWDRS/EXTWDR2007/0,,menuPK:1489865~pagePK:64167702~piPK:64167676~th eSitePK:1489834,00.html) shows, the number of urban consumers varies from over half the total number of poor in Bolivia, to about a quarter in Zambia and Ethiopia, to less than a tenth in Vietnam and Cambodia.

But overall, enormous numbers of the poor—both urban and landless labourers—are net buyers of food, not net sellers. They have already been hard hit: witness the riots that took place in Mexico over tortilla prices earlier this year. According to IFPRI (http://www.ifpri.org/), the expansion of ethanol and other biofuels could reduce calorie intake by another 4-8% in Africa and 2-5% in Asia by 2020. For some countries, such as Afghanistan and Nigeria, which are only just above subsistence levels, such a fall in living standards could be catastrophic.....

[LawVol]

I'm not so sure this argument is as viable as it appears at first glance. The author points mostly to the rise in corn prices since it is linked to many other food staples. While he correctly points out that the cost increase is due to the rise in demand of corn for ethenol products, he appears to ignore the basic market process. The rise in price is due to the rise in demand: as demand increases prices goes up and as demand decreases, prices go down. Right now, we've had a spike in demand for corn that does not correspond with production. I would think that if the demand continues, corn growers will increase their production thereby decreasing the overall price.

As for using food as a weapon, I see international law concerns. Although food is certainly used by military forces, and international law does account for dual use when it comes to targeting (e.g. a bridge could be a lawful target since it allows an enemy to deploy forces despite the fact it is also used by civilians to take food to market), I doubt it would go this far. I don't really see a difference between carpet bombing a city and freezing food shipments to that city. The end result is the same: the targeting of the population as a whole by lethal means. But maybe I'm wrong. I'd be willing to consider arguments to the contrary.

[Penta]

You aren't, LawVol. That would be -classic- collective punishment.

Blowing up the enemy's shipping, thereby also happening to reduce his ability to bring food in, is one thing.

Specifically denying food to civilians? That's a war crime, IMHO.

That said: We're hearing a lot about higher crop prices. However, for reference...What do normal crop prices for the quoted crops look like?

[Watcher In The Middle]

Originally posted by LawVol:

...The rise in price is due to the rise in demand: as demand increases prices goes up and as demand decreases, prices go down. Right now, we've had a spike in demand for corn that does not correspond with production. I would think that if the demand continues, corn growers will increase their production thereby decreasing the overall price....

...that farmers are going to be able to vastly increase even more corn production. It's already happened (for the 2007 planting season; see below), and like the article points out, we've got corn running at over $4.50 a Bu. And nobody grows more corn than the US.

Just some numbers:
1) For 2006, the US grew 10.535 billion bushels of corn. The 2006 crop ended up 210 million bushels smaller than the November 2006 forecast and 579 million smaller than the September 2006 forecast.
2) In September, 2007, The USDA forecasted the 2007 U.S. corn crop at 13.308 billion bushels, 254 million (1.9 percent) larger than the August forecast and 2.773 billion (26.3 percent) larger than the 2006 crop.
3) Final 2007 crop numbers will be issued in January, 2008.

A good friend who farms 2300+ acres in central IL says that in the $3.55 to $3.75 per Bu. price range for corn, farmers start to make a pretty good buck. Costs vary by region, but the land they farm is highly productive, so that's their experience this year.

Also, one other point made to me is that the Congress just upped the Renewable Fuel Standard (recently passed 2007 Energy bill) to use a min. of 36 billion gal. of "Biofuels" by 2022, which is more than a 500% increase of the 2005 Standards. "Biofuels" = Ethanol, which here in the US, comes almost exclusively from corn. So there's going to be even higher demand, mandated Congressionally.

September, 2007 exports of U.S. corn during the current marketing year were projected at 2.25 billion bushels, 130 million larger than exports during the 2006-07 marketing year and the largest in 18 years. Info. From a Univ. of IL Cooperative Extension Researcher (http://www.ethanolmarket.com/PressReleaseUofI091707)

The lead article posted has an obvious slant to it (that's their business, so they got to push it hard), but the Economist article reminds me of a "Whistling past the graveyard" type of article, which is akin to saying "Well, if everything goes perfectly, we'll all be fine". Doesn't mean it's going to happen that way.

[selil]

Don't forget food needs water. Water is the short pole.

[Watcher In The Middle]

Originally posted by selil:

Don't forget food needs water. Water is the short pole.

why (in part) the wheat harvest has been substandard the last two years - drought. But the corn harvest (beans, also) has been good the last 2 years, because no drought.

My concern is that we are already seeing nations turn off the export tap to maintain the stability of their domestic food supply.

Imagine what would happen if our 2008 harvest doesn't grow at the same level (or anticipated levels) as for the prior two years, but demands continues to increase. That happens, we got problems right here, right now. You could easily get a 20% rise in base grain prices here in the US, and there's not a pol out there who could withstand the homegrown political pressure they'd be dealing with to cut back/limit food exports. Anything to get those food prices under control.

Look at what Argentina does (WSJ, Pg. C3, 12.26.2007) on grain exports. They limit exports to a percent of a base year (for beef, it's 2005), and only 70% of that year's exports. On grains, they add on a "per Bu." export tax of between 27.5% up to 35%.

Let's not kid ourselves - All the pols are looking for an extra source of cash to fund all their favorite programs - what better way to (a) raise additional cash to fund these programs by (b) taxing food exports, which people have to buy (c) with the end result of maintaining the stability of our domestic food prices.

For example, Argentina raised the export tax on soybeans from 27.5% to 35% in December, 2007, when the daily settlement price on the continuous front-month contracts went from around $8.70 a Bu. (09.01.2007) to $11.80 a Bu. (12.24.2007) for soybeans.

Anybody who thinks our pols aren't paying attention to all the additional rivers of cash that Argentina's government is bringing in with these export tariffs is crazy.

But think about what the consequences would be in the international relations arena if all the sudden the US starts treating food exports the same way as OPEC treats oil.

Thoughts?

[selil]

Anybody who thinks our pols aren't paying attention to all the additional rivers of cash that Argentina's government is bringing in with these export tariffs is crazy.

But think about what the consequences would be in the international relations arena if all the sudden the US starts treating food exports the same way as OPEC treats oil.

Thoughts?

Actually I was talking to a DHS planner about what would happen with an unknown "blight" of corn or wheat. An unexpected genetic drift in hybrids or a unknown/unexpected insect outbreak could wipe out harvests unlike anything in the past (it makes ag people nuts). I'm outside my area of expertise but I believe the issue is called something like uni-crops or something like that. The normal bio-diversity of crops isn't being done like it was in the past and the result is a larger volume of the harvest is effected by any single event since "everybody" is growing "everything" alike. The hybrid nature of some crops and a lack of multiple crops seems to be the issue.

Then there is salination of soil due to improper irrigation.

[Norfolk]

But think about what the consequences would be in the international relations arena if all the sudden the US starts treating food exports the same way as OPEC treats oil.

Thoughts?

An intriguing point, to be sure, and not absolutely out of the realm of possibility. It would be very interesting to see what the great food staples conglomerates (Cargill, Archer-Daniels Midland, etc.) would make of such a development.

As to genetic diversity in food staples crops, of course there's the little matter of the modern banana possibly going extinct within a generation or so due to genetic manipulation by humans. And many Third World people rely on bananas like we rely on grains.

[Jedburgh]

A couple of recent pieces from the Chatham House, focusing on the potential future impact to the UK:

A Jan 08 Briefing Paper: UK Food Supply: Storm Clouds on the Horizon? (http://www.chathamhouse.org.uk/files/10896_bp0108food.pdf)

Summary Points

 In an environment of increasing uncertainty, the ability of global food production to meet rising demand is becoming recognized as an issue of fundamental importance. Constraints on the availability of energy, water and land are identified as being of particular significance.

 The Chatham House Food Supply Project is studying the effects of global trends on the networks that supply two staples, wheat and dairy products, to the UK market. The issues addressed in this paper featured in a series of interviews and discussions undertaken in 2007 with leading players within and around Britain’s wheat and dairy supply networks. They are presented in six sections: global demand, global supply, rises in commodity prices, supply network opinion on implications for the EU/UK food system, scenario development and conclusions.

 These preliminary findings will influence the development of four global scenarios that could shape the future of the UK’s food supply. Some of the interactions involved would create only a limited degree of change in Britain’s food supply arrangements; others could indicate a shift to a quite different UK supply dynamic.

 Britain as a society will need to make the right policy choices if it is to secure the kind of food supply that best supports its interests.
From the Feb 08 issue of CH's The World Today:

Britain's Food Supply: Lunch as a Strategic Issue (http://www.chathamhouse.org.uk/files/10905_wt020810.pdf)

.....The dominant conventional view is that, as a rich society, Britain will always be able to buy the food it needs on world markets. But much will depend on the reaction of our competitors and trading partners to the emerging challenges. Could we identify new sources of supply if it became necessary? What would be the geo-political implications, particularly if faced by competitors who have already made food supply a strategic requirement and who may follow a foreign policy free of values regarded as essential for the west’s trade and development stance?

A fundamental change in the production and consumption of the last half-century may be in prospect. Food supply is once again on track to become a focus of international, and national, debate – and an issue of increasing political significance.

[Watcher In The Middle]

...rice also. WSJ article dated 12.15-16.2007 (Pg. B1).

Unfortunately the article is not available to non-subscribers.

Then there's this (from a different source):


The Russian government’s decree imposing a 40 percent export duty on wheat, meslin (wheat and rye mixed), and barley, but not less than EUR 0.105 per 1kg, will take effect on January 29, 2008. The document was signed by Prime Minister Viktor Zubkov on December 28. The measure, which almost quadruples Russia’s protective duties on grain exports, will apply until April 30, 2008.

On October 8, the Russian government decided to introduce export duties on wheat and barley, at the same time lowering import duties on milk, butter, cheese and sour cream. The export duty on grain was set at 10 percent of contract price but not less than EUR 22 per tonne, and at 30 percent for barley, but not less than EUR 70 per tonne. Link is Here (http://capital.trendaz.com/index.shtml?show=news&newsid=1106066&lang=EN)

[kehenry1]

I find these tariffs interesting since the probably outcome of reducing food stuffs from the global market to retain internally is -ta-da- sky rocketing prices.

But, just in case, I'm going to start investing in wheat futures. LOL

[JJackson]

More on rice shortages
Thais hold key to rice shortages
http://news.bbc.co.uk/2/hi/asia-pacific/7222043.stm

selil I think the term you were looking for is mono-culture and in the perpetual war between pathogens and our food crops the pathogens will always adapt faster (this is an inevitable result of the differences in their evolutionary genetic strategy). Loss of bio-diversity is a major long term problem and concern regarding pandemics not misplaced. The widespread use of infertile hybrids and genetic modification of food species giving improved yields will aggravate the problem as they promote a further curtailing in genetic diversity (only in the food crop not in the pathogen).

[selil]

More on rice shortages
Thais hold key to rice shortages
http://news.bbc.co.uk/2/hi/asia-pacific/7222043.stm

selil I think the term you were looking for is mono-culture and in the perpetual war between pathogens and our food crops the pathogens will always adapt faster (this is an inevitable result of the differences in their evolutionary genetic strategy). Loss of bio-diversity is a major long term problem and concern regarding pandemics not misplaced. The widespread use of infertile hybrids and genetic modification of food species giving improved yields will aggravate the problem as they promote a further curtailing in genetic diversity (only in the food crop not in the pathogen).

Thank JJackson... I believe mono-culture is exactly what they called it. The briefing I got on the topic and a subsequent video I was shown about Canada wheat really brought home the risks. I'd seen a few years back some stuff about pork and the risks of infection, but the feed crops really make me worry.

[JJackson]

The pig is very topical, in a pandemic context, at the moment. The HP AI A/H5N1 (AKA Bird Flu) needs to accumulate a few genetic changes in its RNA sequence to adapt to man. We do not really know what most of these are but one that we do know is a modification to the H (in H5N1). An area on the Hemagglutinin called the RBS binds to a sugar on the host cell surface before it can enter the cell. There is a small configurational difference between the versions of the sugar the virus binds in birds and humans, this makes it difficult for avian flus to infect people. The bad news – for us and the pigs - is that pigs have both isomers and can catch both human and bird flus. They can then act as mixing vessel recombining and reassorting the genetic material to create new flu strains.

[Jedburgh]

Don't forget food needs water. Water is the short pole.
RIA Novosti, 15 Mar 08: EU warns water shortage in Central Asia could spark conflicts (http://en.rian.ru/world/20080315/101390412.html)

The severe impact of climate change in Central Asia is causing water and food shortages that could lead to regional conflicts, EU foreign policy chief Javier Solana warned.

Solana delivered a climate change and security report from the High Representative and the European Commission to leaders at the European Union summit held on Thursday and Friday.

"An increasing shortage of water, which is both a key resource for agriculture and a strategic resource for electricity generation, is already noticeable" in Central Asia, the report said.....

[Jedburgh]

EIU Brief, 25 Mar 08: Egypt the pressure cooker: Soaring food prices lead to widespread protests (http://www.economist.com:80/daily/news/displaystory.cfm?story_id=10908738)

.....The government has sought to address the discontent in several ways. It is especially attempting to improve subsidy provision, separating the production and sale of subsidised bread—the main element in the Egyptian diet—in order to reduce corruption. Families were allowed to add children to their ration cards in February for the first time since 1988 (increasing the total number of beneficiaries from 40m to an estimated 55m). Nevertheless, as rising wheat prices force more and more people to rely on subsidised bread, the queues are lengthening and supplies are coming under strain. Similar problems have also arisen regarding diesel fuel, which is used to power machinery and farm equipment. Shortages have led to outbreaks of fights at petrol stations, and accusations that the government is deliberately keeping stocks hidden to boost prices.....

.....international commodity prices, especially for wheat and food oils, have increased strongly, by nearly 70% during 2007. This has forced the government to increase domestic wheat prices, from E£220 ($439)per bushel to E£320 ($639)per bushel—the price paid by the government to farmers for the 2008 crop, in the hope that more wheat will be made available for the domestic market. Egypt is the world's largest wheat importer, importing around 6m tonnes/year, about half the country's needs. Rising food prices led the government to increase subsidies by E£4.7bn ($9.4 bn)in the fourth quarter of 2007, taking total subsidies for fiscal 2007/08 to E£14.4bn ($28.75 bn).....

[JJackson]

Anybody who thinks our pols aren't paying attention to all the additional rivers of cash that Argentina's government is bringing in with these export tariffs is crazy.


Thoughts?

It would appear that US politicians are not the only ones to have noticed where the BA government is trying to raise its taxes.

Argentine farm taxes row deepens (http://news.bbc.co.uk/2/hi/americas/7314067.stm)

[Watcher In The Middle]

...and of all places, it's coming from (wait for it).... ETHIOPIA

Yep, that's right. Ethiopia.

They are (this month) opening the Ethiopia Commodity Exchange (Free market), primarily for grains and Ag products. Modeled after our own Chicago Board of Trade.

These Commodity Exchanges exist in places like India, China, & much of South America. But only South Africa has one in the entire African continent.

The biggest benefit to a place like Ethiopia with having a Commodity Exchange is that farmers (producers) can get broader access to markets than just their local market down the road.

The other part of this is that Ethiopia has spend a fair piece of change (for them) to build up a network of grain storage facilities, where farmers can store grain until ready to sell. This substantially reduces the "boom or bust" issues with crop production, because they no longer have to rush to sell everything.

Link (http://nazret.com/blog/index.php?title=market_approach_recasts_often_hung ry_eth&more=1&c=1&tb=1&pb=1)

Another Article (http://money.aol.com/news/articles/_a/ethiopia-taps-grain-exchange-in-its/n20080227110409990019)

Don't know if it will work or not, seeing how we've had occasional periods of rocky agricultural history in the markets right here in the US. But truth of the matter is, that in Ethiopia, they would be hard pressed to do worse than they have done in the past - so more power to them for trying something different.

If it's successful, more than just Ethiopia will benefit. Egypt might be the real major beneficiary of this.

[Watcher In The Middle]

Here's the link to the FT story about the spike in rice prices today. The US is one of the few rice export markets that is still functioning as a free market.


Jump in rice price fuels fears of unrest
By Javier Blas in London and Daniel Ten Kate in Bangkok
Published: March 27 2008

Rice prices jumped 30 per cent to an all-time high on Thursday, raising fears of fresh outbreaks of social unrest across Asia where the grain is a staple food for more than 2.5bn people.

The increase came after Egypt, a leading exporter, imposed a formal ban on selling rice abroad to keep local prices down, and the Philippines announced plans for a major purchase of the grain in the international market to boost supplies. Global rice stocks are at their lowest since 1976.

Link to article (http://www.ft.com/cms/s/0/d6f1cd74-fc29-11dc-9229-000077b07658.html)

Another Article (http://www.chron.com/disp/story.mpl/ap/fn/5653882.html)

Went back & checked federal crop acreage estimates (January, 2008) on amount of farmland in rice production, and there looks to be only a minimal increase over last year. There's just no overhang of supply in the marketplace.

[SWJED]

Watcher In The Middle, thanks for the links. With much of my attention devoted to other portions of the SWJ Empire of Knowledge, I am most deficient in following the great contributions of Council members.

Bottom-line, this one caught my attention on contributing - there are dozens of the same on many threads. To all who are making this thing work - thank you very much!

[Watcher In The Middle]

...that's interesting here:


Hedge funds raise profile in U.S. grain business
Thu Mar 27, 2008 3:47pm EDT
By Sam Nelson

CHICAGO (Reuters) - The presence of hedge funds in the U.S. agricultural sector expanded on Thursday with the sale of ConAgra Foods Inc's grain business to Ospraie, as speculators increasingly tie their futures trades to physical markets.

Trade sources said the sale was also a sign of tough times for grain companies which must find ways to protect against wild swings in the futures market and raise extra money for margin calls due to a credit crunch.

ConAgra said earlier Thursday it would sell its commodity trading and merchandising operations to Ospraie Special Opportunities fund, an affiliate of investment management firm Ospraie Management.

Link to full article (http://www.reuters.com/article/ousivMolt/idUSN2739676020080327?pageNumber=1&virtualBrandChannel=0)

Another viewpoint (http://www.bloomberg.com/apps/news?pid=20601087&sid=asc.GW4JwHZM&refer=home)

There's a whole lot of "talk" going on about this one. First off, there's other recent "new" hedge funds charging into the commodity biz, being that the mortgage and credit business profit opportunities have dried up. So, it's onward to commodities.

This market's going to be a whole lot more interesting, though. First off, we're already sitting at or near record highs in prices, and the market (in many commodities) may already be close to being fully priced. But, these hedge funds will ring much more liquidity into the commodities markets, and that tends to mean higher, and more volatile pricing. Means that nations buying food exports from the US, but also other nations, will find everything to be more costly.

Secondly, ConAgra appears to be betting that it's a great time to sell their Commodities merchandise and trading business, because (a) getting $2.1 bil US isn't pocket change, plus (b) there is no business disadvantage to them, because they are the only one of the majors which had a separate line of business for commodities trading. Looks like they think the assets they are selling today will be back on the market in a few years for less, and they can buy back if they so decide to.

But this has interesting potential considerations, because these hedge funds are out to make serious returns in commodities, and that means bottom line increasing prices for commodities. And the US is fast becoming one of the "suppliers of last resort" in terms of open market access for grain crops.

Imagine if wheat (Ex.: May, 2008 Wheat at CBOT closed right at $10 a Bu. this last week), goes up another 25%, which isn't out of the ballpark. Imagine $20 a bu. :eek:

This has real implications, because many of the nations which are major food importers are nations we have/had long standing negative balance of trade issues with. Those deficits may start to disappear, because (a) commodity food prices are going up rapidly, and (b) We've (the US) has the available food supply.

One immediate result would likely be that these nations will not want the US dollar to strengthen, because then acquiring the commodities will cost even more.

Game is going to get interesting....

Normally, this might not be a topic for SWJ. But food shortages can tend to create some interesting decision making among nations, and using armed conflict to establish future food supplies is one of those considerations, and it's not like it hasn't been a motivation in the past.

Btw, SWJ is "THE BEST". Love it here, because if you are into thinking, here's the place to be. If you are into "Talking Points", IMO, you best move on.

[jcustis]

On the micro level, this is a big problem in the Philippines. My wife just spent an hour or two talking to her mother who is in Pasig City (suburb of Manila) right now. It seems that the average price went from 18 pesos to 40 pesos is a short and sharp increase, and the result is many people are having a hard time getting access to the staple.

The news is getting significant airtime on the nightly news shows we can catch via the satellite channel back to home for her. Folks are getting worried. Don't know if this is unprecedented, but it is definitely becoming uncomfortable across the country.

[JJackson]

see also this thread on Ug99 wheat rust http://council.smallwarsjournal.com/showthread.php?t=5074&highlight=rust

[Norfolk]

Normally, this might not be a topic for SWJ. But food shortages can tend to create some interesting decision making among nations, and using armed conflict to establish future food supplies is one of those considerations, and it's not like it hasn't been a motivation in the past.


This is most definitely a topic for the SWJ, and a most important one at that. With food staples (and fuel) costs shooting up all over the globe, and real hardship affectling the lives of people across the world (even in the West it's hurting many people now), and growing political instability (people killing each other for cooking oil in China is just one sign of the stress that is building up), oh yeah, this is a topic for us. Great work, Watcher.:cool:

This is very unsettling news; and even Cargill has sold one of its operations to this hedge fund. I mean Cargill?!, the great-grandaddy of them all?:eek: I can't help but think that there ought to be laws against these sorts of acquisitions.:wry:

[selil]

Along this topic I thought this article was great at looking towards the food and water shortage issue. There are very few ways to create water and all of them cost orders of magnitude more than oil. All forms of food agriculture require water. Water is the future resource of conflict much like it has always been.


Link to story (http://www.guardian.co.uk/commentisfree/2008/mar/30/fossilfuels.water)



Those who control oil and water will control the world

History may not repeat itself, but, as Mark Twain observed, it can sometimes rhyme. The crises and conflicts of the past recur, recognisably similar even when altered by new conditions. At present, a race for the world's resources is underway that resembles the Great Game that was played in the decades leading up to the First World War. Now, as then, the most coveted prize is oil and the risk is that as the contest heats up it will not always be peaceful. But this is no simple rerun of the late 19th and early 20th centuries. Today, there are powerful new players and it is not only oil that is at stake.

It was Rudyard Kipling who brought the idea of the Great Game into the public mind in Kim, his cloak-and-dagger novel of espionage and imperial geopolitics in the time of the Raj. Then, the main players were Britain and Russia and the object of the game was control of central Asia's oil. Now, Britain hardly matters and India and China, which were subjugated countries during the last round of the game, have emerged as key players. The struggle is no longer focused mainly on central Asian oil. It stretches from the Persian Gulf to Africa, Latin America, even the polar caps, and it is also a struggle for water and depleting supplies of vital minerals. Above all, global warming is increasing the scarcity of natural resources. The Great Game that is afoot today is more intractable and more dangerous than the last.

MUCH MORE AT THIS LINK (http://www.guardian.co.uk/commentisfree/2008/mar/30/fossilfuels.water)

[Watcher In The Middle]

Corn Hits $6 a Bushel on Tight Supplies
Thursday April 3, 6:56 pm ET
By Stevenson Jacobs, AP Business Writer

Corn Prices Jump to Record $6 a Bushel, Driving Up Costs for Food, Alternative Energy

NEW YORK (AP) -- Corn prices jumped to a record $6 a bushel Thursday, driven up by an expected supply shortfall that will only add to Americans' growing grocery bill and further squeeze struggling ethanol producers.

Corn prices have shot up nearly 30 percent this year amid dwindling stockpiles and surging demand for the grain used to feed livestock and make alternative fuels including ethanol. Prices are poised to go even higher after the U.S. government this week predicted that American farmers -- the world's biggest corn producers -- will plant sharply less of the crop in 2008 compared to last year.

Link to article (http://biz.yahoo.com/ap/080403/corn_at_6.html?.v=6)

Article is ok, but doesn't fill in the pieces behind the real story - which is, Why the Drop in Acreage devoted to corn production?

Looks to be a number of reasons:

01 Crop rotation. Running continuous corn results in lower yields per acre, and even those yields require increased applied nitrogen per acre. Either a crop rotation of corn/alfalfa or corn/soybeans is a better bet, with more sustainable, higher yields, with lower applied nitrogen per acre requirements.

02 Applied nitrogen (per acre) costs are way up - no surprise there. So cost reduction is a big thing, and therefore, #1 comes back into play.

03 Virtually all the "bankable" farmland has already been put back into production. Where you (as the farmer) could grab 20, 30, or 40 acres out of "Bankable" land, now it's 1, 2, or 3 acres, and you are scraping edges of grass waterways, reclaiming old building sites, adding an extra crop row along roads. In other words, the farming community is "working the edges" for more crop production, because that's all that is left.

04 Upfront investment costs. Bottom line (and this is from some friends who farm)the upfront costs for corn (vrs. the cash return per acre, based upon historical per acre crop production & current day prices), is that other grain crops such as soybeans are a better deal in the marketplace right now.

In other words; (Upfront money/production costs per acre)/(total anticipated revenue per acre) for corn is higher than for other crops. At least right now, hopefully will change. We'll see.

Congress had better rethink the whole corn based ethanol push, because corn at $7.25+ a Bu. means REAL PAIN for the American consumer. And there will be a pushback.

[Stan]

Watcher, Thanks for some intriguing conversation !

Who'd of thought the USDA has a Corn Briefing Room (http://www.ers.usda.gov/Briefing/Corn/) :cool:

Tons of great data, lots of links for old NCOs to research ;), but the majority is far more optimistic than the recent articles.




Ethanol Expansion in the United States: How Will the Agricultural Sector Adjust (http://www.ers.usda.gov/Publications/FDS/2007/05May/FDS07D01/)? examines effects of the expansion in U.S. ethanol production. Market impacts extend well beyond corn, the primary feedstock for ethanol in the United States, to supply and demand for other crops, such as soybeans and cotton, as well as to U.S. livestock industries. As a consequence of these commodity market impacts, farm income, government payments, and food prices also change. See narrated slideshow (http://www.ers.usda.gov/Multimedia/#Bioenergy) for an overview; see related Amber Waves feature U.S. Ethanol Expansion Driving Changes Throughout the Agricultural Sector (http://www.ers.usda.gov/AmberWaves/September07/Features/Ethanol.htm).

More interesting is how Argentina simply stands back and watches our corn production (supply and demand) and adjusts "fire" errr production.


World Corn Trade

While the United States dominates world corn trade, exports only account for a relatively small portion of demand for U.S. corn—about 20 percent. This means that corn prices are largely determined by supply-and-demand relationships in the U.S. market, and the rest of the world must adjust to prevailing U.S. prices. This makes world corn trade and prices very dependent on weather in the U.S. Corn Belt. However, Argentina, the second-largest corn exporter in most years, is in the Southern Hemisphere. Farmers there plant their corn after the size of the U.S. crop is known, providing a quick, market-oriented supply response to short U.S. crops.

[Watcher In The Middle]

because the grain market seemingly is being driven by the negative news. And as a result, prices are going up.

As to Argentina, that's what has tended to occur in prior years. But Argentina has created a major self inflicted wound resulting in a nationwide agricultural strike, which has lots and lots of implications.


Argentina Bids To End Farm Strike
Apr 1, 2008 9:49 AM, By Richard Brock

In a bid to resolve a 19-day farm strike that has produced severe food shortages and a major political crisis, Argentina’s economy minister on Monday announced measures to compensate small-scale farmers for the effect of a recent controversial tax hike on soy exports.

Martin Lousteau says the government would offer refunds on export taxes equivalent to the loss that these smaller producers have incurred since the tax was raised under a new system introduced on March 11, when it provoked farmers to block roads and withhold supplies.

Vowing to challenge the heavy concentration of soy production in the hands of a few large producers, Lousteau says the measure would cover 80% of all producers – those who produce just 20% of the country's total output.

Additionally, special transport subsidies will be given to small producers in Argentina's more distant, poorer northern provinces.

Link to Article (http://cornandsoybeandigest.com/soybeans/news/0401-argentina-bids-end-farm-strike/)

There's another issue that's almost certainly going to come up, and that's the adoption and use of bio-engineered corn (like Bayer CropScience LibertyLink corn). All the activists say its unsafe, and they raise all the "Frankenfood" threats and issues. Here's a link to a more balanced outlook:

The other side of the story. (http://en.wikipedia.org/wiki/The_Frankenfood_Myth)

The real issue, long term, is that at least one, if not several options are going to have to start to occur in the near future to alleviate the food shortage issues. Bottom line, is that as in petroleum, food demand is and has been increasing greater than supply (for the last several years).

All the activists shout about "No War For Oil", but will they say the same thing about Food?:eek:

[marct]

All the activists shout about "No War For Oil", but will they say the same thing about Food?:eek:

I suspect that will depend on price rises in the fair trade vegan delicatessens :rolleyes:.

[Stan]

Wasn't it just last year American farmers asked Congress to consider the need to reinstate strategic grain reserves, in order to stabilize crop prices?

Did that ever go anywhere?

Much like our need for strategic petroleum reserves, policymakers will soon have to come to terms with/or acknowledge that having grain reserves has become just as urgent.

[Watcher In The Middle]

Originally posted by Stan:

Much like our need for strategic petroleum reserves, policymakers will soon have to come to terms with/or acknowledge that having grain reserves has become just as urgent.

You are probably quite correct, but tend to doubt that it goes anywhere, particularly after our experiences back in the 1960's and 1970's.

We used to have what you are talking about (Strategic Reserves), but it ended up being a giant boondoogle on a scale that was almost beyond imagination. It really was a mess, and if you talk to the guys who were active "back in the day", well they still tell stories about it. Let's just say that it tended to be a real life version of "The road to hell is paved with good intentions".

Seriously, it was bad, and then congress started using the program as "welfare for farmers", and honestly, that just made things worse - even for the farming community.

Remember all the "surplus cheese" owned by the USDA? It wasn't limited to just cheese.

You can only store crops for so long before they go bad (even under the best of conditions), so then you had storage issues, and then there was the program where the feds would provide subsidies for farmer's grain bins, storing federally acquired feed grain, and the audits, and the record keeping, and - what an overall, never ending nightmare.

One of the biggest problems you see today in the AG marketplace is that our storage capacity isn't up to the needs. Demand for building new grain storage has a backlog, and up into December, 2007 it was actually getting longer.

Tend to doubt they (and I mean the farming community in particular) wants to deal with that type of government program any more.

[bourbon]

All the activists shout about "No War For Oil", but will they say the same thing about Food?:eek:
I would argue that oil is food. And further argue that the activist “no war for oil” mantra is as misguided, as the center-right notion that oil (and thereby food) has nothing to do with this, and it is a war over religion/civilization/freedom/etc.

The lefty likes of Harper’s articles aside, I think this is a pretty good, systematic look at things:

'The Oil We Eat' Following the Food Chain back to Iraq (http://energybulletin.net/newswire.php?id=30), by Richard Manning. Harper’s, 31 Jan 2003.


Food is politics. That being the case, I voted twice in 2002. The day after Election Day, in a truly dismal mood, I climbed the mountain behind my house and found a small herd of elk grazing native grasses in the morning sunlight. My respect for these creatures over the years has become great enough that on that morning I did not hesitate but went straight to my job, which was to rack a shell and drop one cow elk, my household's annual protein supply. I voted with my weapon of choice--an act not all that uncommon in this world, largely, I think, as a result of the way we grow food. I can see why it is catching on. Such a vote has a certain satisfying heft and finality about it. My particular bit of violence, though, is more satisfying, I think, than the rest of the globe's ordinary political mayhem. I used a rifle to opt out of an insane system. I killed, but then so did you when you bought that package of burger, even when you bought that package of tofu burger. I killed, then the rest of those elk went on, as did the grasses, the birds, the trees, the coyotes, mountain lions, and bugs, the fundamental productivity of an intact natural system, all of it went on.

[marct]

CBC.ca has a decent story with some links in it here (http://www.cbc.ca/news/background/food/prices.html).

[jcustis]

Today's Wash. Post front pager on the Philippines rice issue referenced these folks: http://www.philrice.gov.ph/ and the lead article there provides some interesting context. Rice production, for wxample, is having problem keeping up with the "three babies a minute" birthrate.

[Watcher In The Middle]

FAO expects rice production to rise by 1.8 percent in 2008

Market situation remains difficult in the short-term – lower rice trade

2 April 2008, Rome – World rice production is expected to increase in 2008 by 12 million tonnes or 1.8 percent, assuming normal weather conditions, FAO said today. Production increases would ease the current very tight supply situation in key rice producing countries, according to the first FAO forecast for this year. International rice trade is expected to decrease, mainly due to restrictions in main exporting countries.

Sizable production increases are expected in all the major Asian rice producing countries, especially Bangladesh, China, India, Indonesia, Myanmar, the Philippines and Thailand, where supply and demand are currently rather stretched. Governments in these countries have already announced a series of incentives to raise production.

Link to Information (http://www.fao.org/newsroom/en/news/2008/1000820/index.html)

Well, yes and no. A 1.8% worldwide growth in rice production is certainly better than what has occurred for the last several years, but not good enough. And remember, this is just an advance prediction by FAO - it has to actually come true.

The one thing it (an actual production increase) might do is alleviate some price increases on the futures market, but not for short term deliveries.

The other issue here is that UN crop "predictions" tend to be treated as somewhat suspect, at least to players in the commodities market. The term "wishful thinking" tends to come to mind.

But, we sure can use the increased worldwide production, if it comes true.

Btw, the very recent US futures market in grains (particularly corn) is showing some interesting trends. Farmers are seeing a very, very strong market for grains up through May/June, but not so much for future deliveries past that. Why the discount? Interesting question there.

[Stan]

The rapid rise in food prices could push 100 million people in poor countries deeper into poverty, World Bank head, Robert Zoellick (http://news.bbc.co.uk/2/hi/business/7344892.stm), has said.

So, we have a new deal coming, but no money to fund it ?


The World Bank and the IMF have held a weekend of meetings that addressed rising food and energy prices as well as the credit crisis upsetting global financial markets. Zoellick's proposal for a "new deal" to tackle the international food crisis was endorsed by the World Bank's steering committee of finance and development ministers at a meeting in Washington.

He also urged wealthy donor countries to quickly fill the World Food Programme's estimated $500m (£250m) funding shortfall.


Some intriguing video links such as this police raid in the Philippines at a warehouse suspected of hoarding rice (http://news.bbc.co.uk/2/hi/business/7342493.stm). Doesn't appear to be much of a rice shortage, the rice is just not getting to anyone.

Then finally this tidbit:There is no rice shortage (http://www.philrice.gov.ph//index.php?option=com_content&task=view&id=470&Itemid=2),

and the country’s rice supply is stable enough to last for 57 days, said Philippine Department of Agriculture Secretary Arthur Yap. If there’s no rice shortage, why is rice price abnormally high?

[Jedburgh]

In reference to the Argentine issue and others, two weeks ago The Economist published this brief piece (http://www.economist.com/finance/displaystory.cfm?story_id=10926502) on the impacts of export restrictions:

In the past two weeks Cambodia, Indonesia, Kazakhstan, Russia, Argentina, Ukraine and Thailand have taken the easy option, restricting food exports in an attempt to shore up domestic supplies.

Such curbs may be politically expedient, but they are economically self-defeating. They demotivate farmers, push them into growing the wrong crops and jeopardise their future access to markets. Moreover, the restrictions on supply send prices even higher on world markets.....

....Because of export quotas, Ukrainian growers, after harvesting more than they could sell at home, were forced to toss $100m-worth of rotten grain into the Black Sea earlier this year—just when world markets were desperate for supply. The measures can also be counter-productive, forcing growers to switch into new crops to avoid the export curbs. That can make local food shortages even worse.....
Another piece (http://www.economist.com/world/international/displaystory.cfm?story_id=10925518) is the same issue states that, "...most pundits, agree that the world now has plenty of food: last year saw a record cereal harvest. And the investments spurred by today's high prices promise even more food in future. Even if one allows for rising demand from Asia's middle classes, the real challenge is not the volume of food available; it is the problem of food being in the wrong place and at a price the poorest cannot afford.".

[Tom Odom]

Another piece is the same issue states that, "...most pundits, agree that the world now has plenty of food: last year saw a record cereal harvest. And the investments spurred by today's high prices promise even more food in future. Even if one allows for rising demand from Asia's middle classes, the real challenge is not the volume of food available; it is the problem of food being in the wrong place and at a price the poorest cannot afford.".

Ted,

Once upon a time I was married to a USAID officer who worked PL480 (Food for Peace) in Sudan and again in Haiti. The above point was widely in play in 1984 during the Sudanese drought of that period (which by the way was every bit as bad as the drought in Ethiopia; it just did not get the coverage as the Sudanese government clamped down on access). The same held true in the 1990s with Haiti; food was available if someone could pay for it and if the population at risk could either pay for it or get someone else to do the same.

There was a glib SOB on CNN this morning--I forget his name--and he had written a book on food. They had coverage on the screen about the Haiti food riots and this guy said we have to help the poor countries produce more food. I almost threw my cup at at the screen; we (the West)--despite all the BS spouted about using assistance to maintain dependency--have been trying to do just that since WWII. (Does anyone really think the US wants Haiti as a dependant?) Haiti is a stellar example; one only has to look at overhead imagery and see what has happened to Haiti to understand why they might not be such great farmers.

My point in this ramble/rant is two fold:

A. Saying we have food, we just need to move it is to me much like saying we need to readjust post-colonial borders to reduce ethnic warfare. It sounds simple because it is in its heart simplistic. It completely ignores reality as in political and/or economic reality.

B. Saying we need to help the Third World develop food production is another simple statement that is simplistic. They know how to produce food in Sudan. They know how to produce food in Ethiopia. What they do not know how to do is adjust their political, economic, and social structures to the reality of the Sudan or Ethiopia. The Haitians ar another matter; the oldest black republic and the second oldest repblic in the Western Hemipshere, Haiti is very much the longest running crisis. At some stage, the Haitians either fix it or nature will. Nature is a harsh task master. Nature coupled with political/ethnic agendas is devastatingly cruel.

best

Tom

[marct]

Hi Tom,


A. Saying we have food, we just need to move it is to me much like saying we need to readjust post-colonial borders to reduce ethnic warfare. It sounds simple because it is in its heart simplistic. It completely ignores reality as in political and/or economic reality.

I'm often amazed at how many people forget that "reality", at least in the sense of operational social reality, is layered. Years ago I read a science fiction book that gave me a really great way of looking at it (David's Sling by Marc Steigler if I remember correctly) - for any given action, the first question is "is it technically feasible?" (i.e. can we do it?), followed (in order) by "is it economically feasible?" (i.e. can we afford to do it?") followed by "is it politically feasible" (i.e. do we want to do it?").

The constant focus on production is, in many ways, a hangover from old worn-out Marxist economics. Production this, production that, but no freakin' consideration of distribution (a point that Karl Polanyi made which got him excommunicated from Orthodox Marxism). A lot of Orthodox capitalist economists make the same mistake, but at the level of money as an accountancy measure (they confuse the accountancy value of a crop with the supply and demand ["needs"] value of a crop).

To make matters worse, and Zimbabwe is an excellent example of this, the hierarchy of questions is actually in a reverse order of "power"!


B. Saying we need to help the Third World develop food production is another simple statement that is simplistic. They know how to produce food in Sudan. They know how to produce food in Ethiopia. What they do not know how to do is adjust their political, economic, and social structures to the reality of the Sudan or Ethiopia. The Haitians ar another matter; the oldest black republic and the second oldest repblic in the Western Hemipshere, Haiti is very much the longest running crisis. At some stage, the Haitians either fix it or nature will. Nature is a harsh task master. Nature coupled with political/ethnic agendas is devastatingly cruel.

Charles Darwin beats Adam Smith any day of the week :D!

Tom, you are absolutely correct when you say that these cultures know how to produce food. A lot of the crises in food production stem from socio-cultural changes imposed on them during the past 150 years. Consider, for example, the effects of introducing late Victorian public sanitation measures in Nigeria and, at the same time, stopping clan feuds (massive increase in birth rates and decrease in death rates). Adapting to changes like that is a long and hard process, especially when your agriculture has been set towards one or more forms of mono-cropping for export.

[TROUFION]

Btw, the very recent US futures market in grains (particularly corn) is showing some interesting trends. Farmers are seeing a very, very strong market for grains up through May/June, but not so much for future deliveries past that. Why the discount? Interesting question there.

What I hear (living in Iowa currently) is that the future (projected) cost of fuel to conduct harvesting and transport of corn and soybean will cut into the profit magin. The famers here are excited about increased value of the staple crops but are not looking forward to paying the fuel cost for combines and trucks.

Livestock farmers are likewise happy with increased value of their animals but are upset by the growing scarcity of feed grain. A lot of the corn and soybean farmers are going after the ethanol and bio-diesel markets that pay slightly higher at this time.

All this is subject to change as is always the case with commodities. However, increased commodity price seems to be the trend for now.

[jcustis]

NPR had another spot about the issue on the air today. The systemic problem of the poor competing against ethanol production was highlighted. Anyone know what Brazil uses to produce it's fuel?

[Jedburgh]

ISN Security Watch, 14 Apr 08: The Global Food Fight (http://www.isn.ethz.ch/news/sw/details.cfm?id=18857)

....The facts are stark: The global price of wheat has risen by 130 percent in the past year, and dairy prices have doubled since 2005. A combination of factors is making basic food and fuel too expensive for people in poorer countries - even as projected world cereal production for 2008 is a record 2,164 million tonnes, up almost 3 percent from last year.

But with across-the-board world food price rises averaging at over 80 percent during the last 24 months, this volatility could acquire a dangerous political counterpart, in countries where 60-75 percent of people's income is spent on food.....

....Another stark fact: Over 240kg of corn would feed one person for a year. This same amount is required to produce just the 100 liters of ethanol needed to fill a SUV tank.....

Anyone know what Brazil uses to produce it's fuel?
Sugarcane (http://www.ethanolstatistics.com/Market_Commentary/Unica/Brazils_Green_Energy_Revolution_280108_1.aspx)

[Stan]

French push for EU food response (http://news.bbc.co.uk/2/hi/europe/7346198.stm)


UN special rapporteur Jean Ziegler accused the EU of agricultural dumping in Africa.The European Union has set a target of providing 10% of its fuel for transport from biofuels by 2020, which its own environment advisers have said should be suspended.

There are fears that the use of farmland to grow crops for biofuels has reduced the scope for food production.

The EU is well aware of the risks of soaring food prices and, only last week, Development Commissioner Louis Michel warned of the crisis leading to a "humanitarian tsunami" in Africa.

France will take over the presidency of the EU in July and, in a statement on Friday, four ministers made it clear that the violent response to price rises in Haiti could easily be replicated in 30 other countries.

Protests because of a big increase in the cost of rice have led to a number of deaths in Haiti as well as the fall of the government.

[Stan]

A key goal of the Bush administration has been to boost supplies of renewable fuels (http://www.reuters.com/article/politicsNews/idUSN1516841620080415) to reduce the country's dependence on foreign energy.



Ethanol makers will consume about one-quarter of the 13.1-billion-bushel U.S. corn crop this year, according to the Agriculture Department, a forecast that is increasingly alarming world governments and food aid workers.

But corn prices are rocketing to record highs, which will raise prices for a variety of products as corn is widely used as feed for livestock. Corn for delivery in May rose 15-1/4 cents to $6.07 a bushel at the Chicago Board of Trade Tuesday.

Asked about the food crisis and how it related to biofuels, U.S. Secretary of State Condoleezza Rice said the two were related but there were a host of other issues involved, such as high transportation costs of food.

[M1911A1]

NPR had another spot about the issue on the air today. The systemic problem of the poor competing against ethanol production was highlighted. Anyone know what Brazil uses to produce it's fuel?

Sugar

[Surferbeetle]

Bloomberg has website (http://www.bloomberg.com/markets/commodities/cfutures.html) that provides a snapshot of commodities futures for those of you interested in keeping track. George Soros provided some predictions (http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aLSge4iZvG3g) today on the commodities market...


April 17 (Bloomberg) -- Billionaire George Soros said the boom in commodities is still in a ``growth phase'' after prices for oil, wheat and gold rose to records.

``You have a generalized commodity bubble due to commodities having become an asset class that institutions use to an increasing extent,'' Soros said today at an event sponsored by the Centre for European Policy Studies in Brussels. ``On top of that you have specific factors that create the relative shortage of oil and, now, also food.''

Commodities are in their seventh year of gains, with oil rising to a record $115.54 a barrel today as the dollar plunged to an all-time low against the euro. Rice has more than doubled in a year, while corn has advanced 68 percent and wheat 92 percent. Investments in commodities rose by more than a fifth in the first quarter to $400 billion, Citigroup Inc. said April 7.

[Watcher In The Middle]

Here's three charts of most recent numbers. There's some interesting information here:

The first chart is who consumes the most rice. No major surprises there:

Rice Consumption by Nation (http://www.nationmaster.com/graph/agr_gra_ric_con-agriculture-grains-rice-consumption)

But then we move on to who produces how much:

Rice Production By Nation (http://www.nationmaster.com/graph/agr_gra_ric_pro-agriculture-grains-rice-production)

Now, we are starting to see some "issues". Some consumers on the 1st list, have no measurable production capability (on the 2nd list). And other nations have some large gaps between their consumption and their production.

So let's take a look at the rice exporting nations:

Rice Exports By Nation (http://www.nationmaster.com/graph/agr_gra_ric_exp-agriculture-grains-rice-exports)

Now, we have some serious issues. By my count, at least five of those exporting nations have put some form of export controls/tariffs on their food exports, rice in particular.

And the latest is that 2 of the top 3 (Thailand and India; #1 and #3 respectively) have both just "indicated" (from the government, no less) that they expect that a new "base price" of $1,000 per ton will be the minimum price for rice exports. For comparison, at the end of 2007, price was around $360 a ton. This last week in Thailand, rice hit $760 a ton.

Exporters are literally having to break existing supply contracts left and right because the farmers and millers they buy from are simply refusing to supply the rice already contracted for at lower prices.

Btw, two of the bigger rice importers (Indonesia and Iran) are already squawking about prices and terms. Iran in particular.

That's going to be a fun set of negotiations to watch. Because truth of the matter is that the most open source of supply for rice right now is the US.

[Bill Moore]

We always notice a problem after it gets to a point where it becomes extremely challenging to deal with. Our government and others normally ignore the warning signs that point to trouble whether it is global warming, peak oil, or food shortages (translated as food prices) and call those who point them out as representing poor scientific method, and attempt to kill their credibility on Fox News. Then when the problem explodes beyond the manageable we react. Numerous experts pointed out the false profits who preached using corn for ethanol, but that is only one factor contributing to this problem.

The rapid inflation of oil and food prices has now touched many Americans, but not the ones who make policy or the ones who enjoy the SWJ for the most part. Unfortunately we won't feel it until there are riots in our streets, new grass root political parties form, etc.. Equally important (or perhaps more important in the short term) the food inflation is touching huge swaths of the population in South and Southeast Asia, South America, etc., where the population has enjoyed an increasing standard of living for years, now the rug is getting pulled out from under their feet. This will potentially serve as a catalyst for civil unrest and government initiated price controls (a short term fix that will probably make the problem worse in the long run). This is a great rallying call for some insurgent leaders who will exploit anything that makes the government appear illegitimate.


This is a global problem and will require a global response, which means we'll have to cooperate with organizations that we have marginalized in recent years. I think the second and third order effects on our political, social and economic systems will be greater than most assume.

[Watcher In The Middle]

Originally posted by Bill Moore:

This is a global problem and will require a global response, which means we'll have to cooperate with organizations that we have marginalized in recent years. I think the second and third order effects on our political, social and economic systems will be greater than most assume.

Don't see it happening. Certainly not with any high level of UN involvement. The whole UN "Oil For Food" program fiasco will immediately reappear in all it's full blown glory, and there isn't a US pol out there ready to grab for that one again, particularly with the US probably going to have to be a major source of food supply for any such effort. A total non-starter.

The other part of the problem is that honestly, both China and OPEC have had more of an negative influence on the overall psyche of the Commodities Marketplace than most people realize. It's an attitude like "So rice is a grand a ton. Oil's $120 a Bbl. You want Cheap rice? Then cheap rice = cheap oil. Otherwise ante up & pay the price".

And China comes across as willing to do business with virtually anybody. And it's been coming across to the general public as paying off for them. Now, if you look closely, it's not necessarily true, because China has quite a number of very serious issues. But the Marketplace is becoming increasingly desensitized to these issues in the developing nations. It's becoming a very harsh environment out there.

Just look at Zimbabwe as an example. If these "global organizations" want to really make a difference, get rid of Robert Mugabe and his thugs and get "Africa's Breadbasket" back into the food production business again. Because that's just going to be one of the type of steps required to realistically create long term price and supply stability in the commodities markets.

[Surferbeetle]

....The whole UN "Oil For Food" program fiasco will immediately reappear in all it's full blown glory, and there isn't a US pol out there ready to grab for that one again....

The other part of the problem is that honestly, both China and OPEC have had more of an negative influence on the overall psyche of the Commodities Marketplace than most people realize. It's an attitude like "So rice is a grand a ton. Oil's $120 a Bbl. You want Cheap rice? Then cheap rice = cheap oil. Otherwise ante up & pay the price".

And China comes across as willing to do business with virtually anybody. And it's been coming across to the general public as paying off for them. Now, if you look closely, it's not necessarily true, because China has quite a number of very serious issues. But the Marketplace is becoming increasingly desensitized to these issues in the developing nations. It's becoming a very harsh environment out there.



Watcher in the Middle,

Appreciate the links. No, I would agree that government intervention/price controls are not the answer, Argentina (http://en.wikipedia.org/wiki/Argentine_economic_crisis_(1999-2002)) provides a fairly recent Latin American example of why.

This week's Economist (http://www.economist.com/opinion/displaystory.cfm?story_id=11050146) offers an interesting analysis and solution


In general, governments ought to liberalise markets, not intervene in them further. Food is riddled with state intervention at every turn, from subsidies to millers for cheap bread to bribes for farmers to leave land fallow. The upshot of such quotas, subsidies and controls is to dump all the imbalances that in another business might be smoothed out through small adjustments onto the one unregulated part of the food chain: the international market.

For decades, this produced low world prices and disincentives to poor farmers. Now, the opposite is happening. As a result of yet another government distortion—this time subsidies to biofuels in the rich world—prices have gone through the roof. Governments have further exaggerated the problem by imposing export quotas and trade restrictions, raising prices again. In the past, the main argument for liberalising farming was that it would raise food prices and boost returns to farmers. Now that prices have massively overshot, the argument stands for the opposite reason: liberalisation would reduce prices, while leaving farmers with a decent living.

There is an occasional exception to the rule that governments should keep out of agriculture. They can provide basic technology: executing capital-intensive irrigation projects too large for poor individual farmers to undertake, or paying for basic science that helps produce higher-yielding seeds. But be careful. Too often—as in Europe, where superstitious distrust of genetic modification is slowing take-up of the technology—governments hinder rather than help such advances. Since the way to feed the world is not to bring more land under cultivation, but to increase yields, science is crucial.

[Watcher In The Middle]

over food shortages is a complete non-starter:


UN Expert Calls Biofuel 'Crime Against Humanity'
By Edith M. Lederer, Associated Press
posted: 27 October 2007 09:40 pm ET

UNITED NATIONS (AP) -- A U.N. expert on Friday called the growing practice of converting food crops into biofuel "a crime against humanity,'' saying it is creating food shortages and price jumps that cause millions of poor people to go hungry.

Jean Ziegler, who has been the United Nations' independent expert on the right to food since the position was established in 2000, called for a five-year moratorium on biofuel production to halt what he called a growing "catastrophe'' for the poor.

Scientific research is progressing very quickly, he said, ''and in five years it will be possible to make biofuel and biodiesel from agricultural waste'' rather than wheat, corn, sugar cane and other food crops.

Link (http://www.livescience.com/environment/071027-ap-biofuel-crime.html)

Now, think of this "stupidity" from a political viewpoint here in the US (like in the Midwest). Explain to me exactly how you are going to get (a) Max Baucus (D-MT); (b) Tom Harkin (D-IA); Evan Byah (D-IN), or virtually any other US Senator from the Midwest (Democrat or Republican) to advocate working with the UN, and in effect just handing their potential opponents an issue over dissing their farming base of supporters.

You aren't going to get a one of them to support you, because imagine telling a farmer that because they support Ethanol, they are part of committing a "crime against humanity" - just because they FARM for a living.:mad:

I mean, how stupid can you get???

Ethanol production from corn just isn't an efficient idea. Ethanol from sugar cane is much better (than corn) from a production standpoint. But talking smack to the farming community is a sure-fire way to make sure you get nowhere fast.

/rant off

[Ron Humphrey]

It brings to mind how often I fail to expand my mental horizon's in considering strategic implication's.


Wonder how those non-state actor's did in counting on this type of thing?


That's going to be a fun set of negotiations to watch. Because truth of the matter is that the most open source of supply for rice right now is the US.

[bourbon]

Wonder how those non-state actor's did in counting on this type of thing?
I firmly of the believe that persons connected to bin Laden, and/or AQ, are profiting handsomely in commodity and financial markets. These are smart people, they've read Paul Kennedy's Rise and Fall of the Great Powers, they know high finance, they know oil. They could have readily anticipated the cascading effects of a surge in oil prices. I think it is likely that they did, and that they consider it a pillar in their strategy of defeating the US by leading it blindly to its fiscal demise.


"We -- with God's help -- call on every Muslim who believes in God and wishes to be rewarded to comply with God's order to kill the Americans and plunder their money wherever and whenever they find it."
- Fatwa Urging Jihad Against Americans, published in Al-Quds al-'Arabi on Febuary 23, 1998

[Watcher In The Middle]

Originally posted by Bourbon:

I firmly of the believe that persons connected to bin Laden, and/or AQ, are profiting handsomely in commodity and financial markets. These are smart people, they've read Paul Kennedy's Rise and Fall of the Great Powers, they know high finance, they know oil. They could have readily anticipated the cascading effects of a surge in oil prices. I think it is likely that they did, and that they consider it a pillar in their strategy of defeating the US by leading it blindly to its fiscal demise.

There's just way too much smart money out there for this to happen. Besides, the last time around where there was cascading oil prices worldwide, the whole ag community took it in the shorts. Not happening this time around. Actually, it's going 180 degrees this time around.

Looking back at the last 12 to 18 months, there were a few people who predicted this, but not many (I mean like a handfull). Most missed big time on the whole ag commodities market (too much time spent on Hedge funds, with all the CDO's and SIV's in the subprime markets).

Truthfully, we here at SWJ did a better job of seeing the effects even before the MSM starting running all their "scare" stories.

If this is their version of our "financial demise", well, they may hit Wall Street (although methinks Wall Street pretty much did it to themselves without a whole lot of outside help), but in the MidWest and the other ag production areas of the US, Main Street is doing pretty well, thank you. Not perfect, but pretty well.

[Stan]

Interesting this Bio Fuel web page (http://www.biofuelsummit.info/en/) and reading what took place just days prior to the St. Petersburg, Russia bio fuels summit last week. Russia's Itera Group just dumped 256 million into a project to produce bioethanol in Clearfield, Pennsylvania and further intend to build yet another plant in Louisiana by 2009 :eek:

Now the UK will perform the two-step with PM Brown having just addressed the UN on "tackling hunger "a moral challenge" for everyone", he's now set to address pro-bio fuels at the Madrid Summit today. The answer is apparently both calling for an agricultural revolution "involving technology that would help farmers in developing countries grow higher-yielding crops".

[Watcher In The Middle]

All sorts of little pieces out there, goings on..

The Philippines purchases rice through a national government body (NFA; National Food Authority) for imports. They just went out for a tender for 500k metric tons (approx. 2400 lbs per metric ton), due 05.05.2008, and it looks like they only got around 350k out of the requested 500k from the previous tender.

The Philippines is actually looking to change the methods they use to buy rice because of the escalating costs.

Now this next part is just beyond words:

Japan, the world's biggest net food importer, will ask the World Trade Organization as early as next week to introduce rules to stop countries restricting grain exports, Hiroaki Kojima, deputy director for international economic affairs at Japan's Agriculture Ministry, said on April 22.

Persuading the WTO to intervene may be tough for Japan, which protects its agriculture with subsidies and import tariffs as high as 700 percent on farm products. Developing nations are pressing Japan to cut the duties and open its market in the Doha Round of trade talks.

LInk to Article (http://www.bloomberg.com/apps/news?pid=20601013&sid=atyOUZapvr5Q&refer=emergingmarkets)

The really interesting part in the Commodities market is that the futures market is now showing a rise in the dollar against other currencies. It's seemingly having no real effect on base commodity (food) prices, though.

Also, this whole re-thinking of Ethanol subsidies by the political chattering classes is nice, but it's really only going to have an effect on corn and/or soybeans, and that's if any subsidy cutback actually is passed into law (odds are against). Reason is that it's not all of the sudden going to affect either wheat growing areas, or rice growing areas.

If the farming community doesn't plant corn, they rotate and plant soybeans. Crop rotation cycles has more to do with it than ethanol subsidies.

Today, the real fight is a battle over (a) Cut ethanol subsidies back home here so it's more corn/soybeans for food, or (b) Spend our money we allocate for food purchases in foreign markets, instead of here in the US. If we buy here in the US, we support our markets, but then we have to pay higher transportation rates to get the food to it's intended location.

That's the real behind the scenes fight going on right now, and it's a no-holds-barred fight. Funny thing is, if we spend that money in overseas markets, we'll probably end up lowering our commodity food prices here back home, because right now, the federal government purchases are just working as a little extra 'spike' in commodity food prices. In the past, it's been more of a 'floor' - now it's functioning as a jack to raise the ceiling.

The above is a short term 'fix'. We still need to address the whole corn production for Ethanol or for food issue.

Another aspect to this entire discussion is that the big AG operations (Monsanto, Dow AgroScience, Pioneer, Syngenta, Bayer Crop Science, and any number of others) are having a major benefit dropped in their laps, which is a renewed push for increasing acceptance of biotechnology in crop production.

For the Ethanol vrs. food debate, see the NCGA National Corn Growers Assoc. (http://www.ncga.com/) website for their (obviously biased) viewpoint, but they make a very valid point on their website:


“It’s Not Food, It’s Not Fuel, It’s China” (05-02-08)
A change in Chinese meat consumption habits since 1995 is diverting eight billion bushels of grain per year to livestock feed and could empty global grain stocks by September 2010, according to a new study from Biofuels Digest
Link to the article (http://www.biofuelsdigest.com/MeatvsFuel.pdf)

I guess my biggest problem is with the MSM as they cover the whole "food crisis", which is that they are big into hype and emotion (and with "gotcha journalism" being a requirement), and totally clueless on how to deal with the real underlying issues, much less explain the costs and benefits of the potential solutions.

[Stan]

Senagal's President Abdoulaye Wade dismissed the UN's food agency (http://news.bbc.co.uk/2/hi/africa/7383628.stm) as a "waste of money" days after the UN announced an emergency plan to bring soaring world food prices under control.


His comments came as Nigeria braced for a national strike by bakers over the cost of flour and sugar.

Some global food prices have nearly doubled in the past three years, provoking riots and other protests in Africa, Asia and Latin America.

Last week the UN unveiled a $200m (£100m) package to boost food production in the worst-affected countries.

Mr Wade said on Senegalese radio and television that the FAO's work was duplicated by other organisations that operated more efficiently.

[Stan]

World Food Crisis: Jewel in whose crown (http://english.pravda.ru/opinion/columnists/105063-0/)?

"The much-vaunted political and economic model the world has so readily adopted and whose virtues so many have for so long expounded, simply does not work."


... The market-based economy is based on fundamentals too easily swayed by speculation and Social Democracy would have all the ingredients for a perfect mix, but for the fact that it is neither democratic, nor is its social component minimally sufficient to meet the needs of the citizens of the world. The current food crisis is a shining example of the disaster this model has become.

However, how telling it is of today’s international community that the United Nations’ World Food Programme is currently struggling with a shortfall of some 755 million USD in funding, in a world more intent on wasting hundreds, if not thousands, of billions of dollars on wanton acts of butchery such as we see in Iraq than on providing public services on a global scale. Such is the wonderful capitalist-monetarist system the world has embraced as its economic and social Manna.

More than a feather in the cap, the world food crisis is a shining jewel in the crown of an economic and political system whose only raison d’être was from the beginning to be a thorn in the side of Socialism and which did not rest until trillions of dollars had been wasted in sabotaging the model.

Then there's this tidbit of hope, or is it ?

Russia may prevent global food crisis (http://english.pravda.ru/business/finance/04-05-2008/105067-russia_prevent_global_food_cris-0)


... the entrepreneurial zeal transforming the Russian agricultural landscape will only restore some equilibrium to a dynamic market. So, while wheat at $12 a bushel might prove to have been a temporary blip, $4.50 a bushel is unlikely to be seen any time soon - even if it rains again in Australia one day.

[Beelzebubalicious]

Great. Just what we need - to become dependent on Russia for food and energy. I'm sure they're also stockpiling women for the growing gender deficit...

[Stan]

Great. Just what we need - to become dependent on Russia for food and energy. I'm sure they're also stockpiling women for the growing gender deficit...

Hey Eric ! There are some intriguing links at the Moscow Times, and it wasn't too long ago that Nashi Summer camps were advertising pro-creation :cool:

Anyhoo, back to the thread. Now here's a unique opinion from Konstantin Sonin (http://www.moscowtimes.ru/article/1041/42/362409.htm), a professor at the New Economic School and a columnist for Vedomosti.


You should not worry too much about the 1.5 billion Chinese people. If the increase in prices is caused primarily by the increase in meat consumption in China, this means that the quality of life has improved there. If things had gotten worse for them because of their increased meat consumption, they would have ceased to eat meat. In that case, prices would have dropped, and they would have gone back to living as before. :eek:

You also should not worry about the people in the United States or Europe. All the U.S. government has to do to solve the problem is to reduce subsidies to its farmers, including payments for non use of farmland, and prices will drop substantially. To be sure, the agriculture lobby in the United States is very powerful, and even touching the issue is dangerous for Congressmen, but the overwhelming majority of Americans are not producers of grain, but consumers.

At some point, the rise in food prices will pressure the government to stop fulfilling the lobbyists' requests to limit agricultural supply. In this case, an increase in competition and production among producers will lead to sharply lower grain prices.

For countries that significantly depend on food imports -- including Russia -- this logic does not apply. :wry:

[Stan]

Consider the case of Uganda. (http://www.foreignpolicy.com/story/cms.php?story_id=4306) The country’s rice output has risen 2½ times since 2004, according to the Ministry of Trade.


Uganda’s importers, seeing the shift, have invested in new mills in the country, expanding employment and creating competition for farmer output, thereby improving prices. New mills, meanwhile, lowered the cost of bringing domestic rice to market. While people in developing countries across the globe are clamoring about the sharp rise in food prices, Ugandans are still paying about the same for rice as they always have. And Uganda is poised to start exporting rice within East Africa—and beyond.

The secret of Uganda’s homegrown success? Ignoring decades of bad Western advice.

[Watcher In The Middle]

From Foreign Policy article:

One of the leaders of Uganda’s rice revolution is Gilbert Bukenya, the country’s vice president and its leading advocate for the commercialization of agriculture. I first met Bukenya at his home on the shores of Lake Victoria, where he laid out the basic philosophy. “By farming smarter, Ugandans not only can grow more, they can earn more money,” he told me. An advocate of food self-sufficiency, Bukenya wants Ugandans to eat more homegrown rice, boosting local farmers and rice millers while at the same time freeing hard cash for other uses. Bukenya has long promoted a new African rice that grows in “uplands” (as opposed to wetland “paddies”) and requires less water.

Embracing a new variety is only part of the working-smarter formula. Once rice output began to expand, Bukenya and other Ugandan politicians played another card: They stumped for a duty of 75 percent to be imposed on foreign rice. The legislature passed the duty, which stimulated domestic rice production further.

There's the real meat of the article. The pols didn't create restrictions on imports until AFTER the output started to expand. Vital point, there, that at least IMHO, the article didn't do sufficient justice to. That's a lesson our pols here in the US need to learn.

You have to expand supply first, then you have got all sorts of options available to you. Good for Uganda for what they are doing - it's working for them, and probably will continue to do so. Now the key for them is to keep expanding/improving their infrastructure (roads, rail, mills, ports, storage facilities), so they can not just feed their own population, but also process exports.

Looks like they have some good, thoughtful leadership in place. Just be wise enough to use the tariffs on imported goods sparingly.

[bourbon]

The Last Bite: Is the world’s food system collapsing? (http://www.newyorker.com/arts/critics/atlarge/2008/05/19/080519crat_atlarge_wilson?currentPage=all), by Bee Wilson. The New Yorker, May 19, 2008.


Like Malthus, Roberts sees humanity increasingly struggling to meet its food needs. He predicts that in the next forty years, as agriculture is threatened by climate change, “demand for food will rise precipitously,” outstripping supply. The reasons for this, however, are not strictly Malthusian. For Malthus, famine was inevitable because the math of human existence did not add up: the means of subsistence grew only arithmetically (1, 2, 3), whereas population grew geometrically (2, 4, 8). By this analysis, food production could never catch up with fertility. Malthus was wrong, on both counts. In his treatise, Malthus couldn’t envisage any innovations for increasing yield beyond “dressing” the soil with cattle manure. In the decades after he wrote, farmers in England took advantage of new machinery, powerful fertilizers, and higher-yield seeds, and supply rose faster than demand. As the availability of food increased, and people became more prosperous, fertility fell.

Malthus could not have imagined that demand might increase catastrophically even where populations were static or falling. The problem is not just the number of mouths to feed; it’s the quantity of food that each mouth consumes when there are no natural constraints. As the world becomes richer, people eat too much, and too much of the wrong things—above all, meat. Since it takes on average four pounds of grain to make a single pound of meat, Roberts writes, “meatier diets also geometrically increase overall food demands” even in those parts of Europe and North America where fertility rates are low. Malthus knew that some people were more “frugal” than others, but he hugely underestimated the capacity of ordinary human beings to keep eating. Even now, there is no over-all food shortage when measured by global subsistence needs. Despite the current food crisis, last year’s worldwide grain harvest was colossal, five per cent above the previous year’s. We are not yet living on Cormac McCarthy’s scorched earth. Yet demand is increasing ever faster. As of 2006, there were eight hundred million people on the planet who were hungry, but they were outnumbered by the billion who were overweight. Our current food predicament resembles a Malthusian scenario—misery and famine—but one largely created by overproduction rather than underproduction. Our ability to produce vastly too many calories for our basic needs has skewed the concept of demand, and generated a wildly dysfunctional market.

[JJackson]

Since it takes on average four pounds of grain to make a single pound of meat

From The New Yorker article.

I could not quickly find a correct figure to rebut this but I will take bets it is far too optimistic. I will give you a cow, pig or chicken and 12 pound of grain and I bet you can not increase their weight by a pound each - if you manage can a couple of ounces between them I will be very impressed. My money says the cow will eat all 12 pounds and all you get in return is an impressive cow pat.

Edit:
I can not paste this in but the link is to Agroecology: The Ecology of sustainable food systems (http://books.google.co.uk/books?id=1ofOdCFaP5IC&pg=PT282&lpg=PT282&dq=biomass+conversion+grain+meat&source=web&ots=PXRcWsg8sj&sig=Cra7QJLwn2dbwZoaKx_7ck-VdjE&hl=en#PPT282,M1)and on page 256 it gives a conversion factor of 1 to 5% for 'confined livestock' i.e if they do nothing but eat to put on weight.

[Ron Humphrey]

From The New Yorker article.

I could not quickly find a correct figure to rebut this but I will take bets it is far too optimistic. I will give you a cow, pig or chicken and 12 pound of grain and I bet you can not increase their weight by a pound each - if you manage can a couple of ounces between them I will be very impressed. My money says the cow will eat all 12 pounds and all you get in return is an impressive cow pat.

Edit:
I can not paste this in but the link is to Agroecology: The Ecology of sustainable food systems (http://books.google.co.uk/books?id=1ofOdCFaP5IC&pg=PT282&lpg=PT282&dq=biomass+conversion+grain+meat&source=web&ots=PXRcWsg8sj&sig=Cra7QJLwn2dbwZoaKx_7ck-VdjE&hl=en#PPT282,M1)and on page 256 it gives a conversion factor of 1 to 5% for 'confined livestock' i.e if they do nothing but eat to put on weight.

How did cows, pigs, or chickens ever survive without farmers growing grain to feed them??

[JJackson]

eating what ever they could find, just like all their wild relatives still do. Our domesticated versions just get a helping hand to get fat - and dead - quicker.

[Jedburgh]

Fortune, 29 May 08: Wal-Mart Puts the Squeeze on Food Costs (http://money.cnn.com/2008/05/28/magazines/fortune/kapner_walmart.fortune/index.htm?postversion=2008052904)

With gas, grain, and dairy prices exploding, you'd think the biggest seller of corn flakes and Cocoa Puffs would be getting hit by rising food costs. But Wal-Mart has temporarily rolled back prices on hundreds of food items by as much as 30% this year. How? By pressuring vendors to take costs out of the supply chain.

"When our grocery suppliers bring price increases, we don't just accept them," says Pamela Kohn, Wal-Mart's general merchandise manager for perishables. To be sure, Wal-Mart isn't the only retailer working to cut fat from the food chain, but as the largest grocer - Wal-Mart's food and consumables revenue is nearly $100 billion - it has a disproportionate amount of leverage. Here's how the retailer is throwing its weight around.....
Wal-Mart is not just the largest single importer into the U.S. - it is also the largest single grocery importer. And the price impacts of pressuring vendors to reduce unnecessary packaging costs, etc. are not just felt in the US - Wal-Mart is present and similarly active in Mexico, Canada, all of Central America, Argentina and Brazil in South America, the UK, China, Japan, and is just entering the Indian market. However, even given all that leverage, the supply-chain is still hit hard by increasing transport costs. That is driving the concomitant rapid expansion of the locovore concept (global, not just in the US - as illustrated by the Guatemalan farmer project (http://guatemala.usembassy.gov/uploads/images/k34Dz36qg5yOUrqdLGT0sQ/IMAREReleaseEng.pdf)), despite the impact on selection and quality:

....Wal-Mart has been going green, but not entirely for the reasons you might think. By sourcing more produce locally - it now sells Wisconsin-grown yellow corn in 56 stores in or near Wisconsin - it is able to cut shipping costs. "We are looking at how to reduce the number of miles our suppliers' trucks travel," says Kohn. Marc Turner, whose Bushwick Potato Co. supplies Wal-Mart stores in the Northeast, says the cost of shipping one truck of spuds from his farm in Maine to local Wal-Mart stores costs less than $1,000, compared with several thousand dollars for a big rig from Idaho. Last year his shipments to Wal-Mart grew 13%....

[Jedburgh]

Chatham House, 29 May 08: Thinking About the Future of Food: The Chatham House Food Supply Scenarios (http://www.chathamhouse.org.uk/publications/papers/download/-/id/624/file/11622_bp0508food.pdf)

This briefing paper continues the Food Supply Project’s work on the strategic influences and factors that are changing the world’s food supply. It explains four scenarios that have been developed in order to understand the conditions being created and their possible effects on the EU/UK. Based on publicly available information and statistics, the scenarios illustrate a range of circumstances that food supply actors in both developed and developing countries must expect to face in the years to come.

These are not predictions of the future. But they are reasoned depictions that are being used to provoke thinking and engage stakeholders in debate. They are already helping to highlight a need for all the sectors involved to be ready to respond to significant change.....

[JJackson]

http://maps.maplecroft.com/loadmap?template=min&issueID=210&close=y

[Jedburgh]

http://maps.maplecroft.com/loadmap?template=min&issueID=210&close=y
Since that site states that they obtain most of their info from the FAO, its interesting to compare their site with the data on FAO's Global Information and Early Warning System on Food and Agriculture (http://www.fao.org/giews/english/index.htm)

[Fuchs]

I had some professional contact with FAO and had a look at one specific portion of their data sets.

Some of its statistics are guesswork, other figures were copied from the previous year since many, many years. Different FAO departments had conflicting information. FAO experts are often just from large trading organizations an incapable to offer the full picture. Some statistics origin in national customs statistics, which have very varying degrees of sophistication and are collected by non-expert personnel (which often means that unknown product are incorrectly added to better known categories).

FAO statistics should only be used if there's absolutely no other statistic available.

[Watcher In The Middle]

Article from Monsanto's annual meeting:


Monsanto's 2030 Goals
By Rachel Melcer, ST. LOUIS POST-DISPATCH
Dated: 06/05/2008

Monsanto Co. is offering to help farmers produce more crops while using less water, energy and land for every bushel of corn, cotton and soybeans they harvest using its technology.

The question is: Will the Creve Coeur-based company have many takers?

To succeed, Monsanto must win over biotechnology skeptics, address extremely complex global social, political and economic challenges — and convince naysayers that it should be at the head of the table.

But the company's leaders say they are prepared.

"The question of how do you produce more and conserve more is at the heart of what we're about. … And it's increasingly what the global challenge is about as well," said Hugh Grant, president, chairman and chief executive.

He laid out a three-point plan Wednesday morning during an employee meeting.

•Monsanto will develop corn, cotton and soybean seeds that double crop yields by 2030 over the level of production in 2000.

For example, the weighted average yield in the United States, Brazil and Argentina would reach 79 bushels of soybeans per acre by 2030, up 92 percent from last year's U.S. production; corn, 220 bushels per acre, up 46 percent; and cotton, 1,344 pounds per acre, up 53 percent.

In addition, Monsanto is donating $10 million over five years to fund public-sector research for improving yields in rice and wheat crops.

•The company also will help farmers conserve natural resources by developing corn, cotton and soybean seeds that require less energy, fertilizer and water to produce the same yield. Its goal is to reduce by one-third the amount of resources required per unit of output in 2030, versus what was needed in 2000.
Link to Article (http://www.stltoday.com/stltoday/business/stories.nsf/0/243FE34F9BC96C2E8625745F0009AB41?OpenDocument)

IF they can pull this off (and from what I'm hearing from talking to people in the community, they think it's likely, and it won't even take to 2030 to get it done), we're on the front edge of the Second Green Revolution.

Then there's the UN trying to horn their way into the debate:


United Nations Secretary-General Ban Ki-moon last week said the world needed to invest as much as $20 billion a year on agriculture to tackle soaring food prices.

Link to article (http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aQbf6P1pF8jQ)

Now, that's typical UN thinking (throw bucketfull's of somebody else's hard earned money at the problem, because they can't possibly change the way they do things).

But in any case, it's going to be a hard year in the marketplace for this year. Look at the numbers for planting this year. It's way behind previous years, primarily because of weather.

[Jedburgh]

IMF, 30 Jun 08: Food and Fuel Prices: Recent Developments, Macroeconomic Impact, and Policy Responses (http://www.imf.org/external/np/pp/eng/2008/063008.pdf)

This report provides a first broad assessment of the impact of the surge in food and fuel prices on the balance of payments, budgets, prices, and poverty of a large sample of countries. It reviews countries’ macroeconomic policy responses to date and also discusses Fund advice for managing the price increases. Policies should (i) ensure that food and finance reaches the most affected countries as quickly as possible, (ii) include targeted and scaled-up social measures, and (iii) avoid high costs in terms of macroeconomic instability or loss in future agricultural production. Collaborating with international partners, the Fund also stands ready to provide balance of payments assistance. As the paper presents an initial assessment of a still-evolving situation, the somewhat tentative nature of the analysis should be borne in mind.....

[Watcher In The Middle]

Drought stricken, Iran buys US wheat for first time in 27 years
Dated: Aug 25 2008 10:44 PM US/Eastern

Wracked by drought, Iran has turned to the United States for wheat for the first time in 27 years, marking a setback for Tehran's search for agricultural self-sufficiency.

According to a recent US Department of Agriculture report, Iran has bought about 1.18 million tonnes of US hard wheat since the beginning of the 2008-2009 crop season in June.

The number, which has been growing steadily all summer, already represents nearly 5.0 percent of US annual exports forecast by the USDA.

The last time Iran imported US wheat was in 1981-1982.

Link to Article (http://www.breitbart.com/article.php?id=080826024429.y9sbre3f&show_article=1)

This one has really hit the news Link (http://www.rttnews.com/Content/GeneralNews.aspx?Node=B1&Id=691824)

This was not an anticipated purchase - It's pretty clear that Iranian marketplace options for hard wheat (right now) were pretty limited. The interesting part is that the Iranian shortfall is estimated at around 4.5 mil metric tons, and this sale is for 1.18 mil metric tons. So it could grow even more. Depends on wheat harvests in places like Australia, which is still several months off.

I'd be interested in a geopolitical "read" on how this affects "other ongoing issues" between Iran and the US. Thoughts?

[Ron Humphrey]

Link to Article (http://www.breitbart.com/article.php?id=080826024429.y9sbre3f&show_article=1)

This one has really hit the news Link (http://www.rttnews.com/Content/GeneralNews.aspx?Node=B1&Id=691824)

This was not an anticipated purchase - It's pretty clear that Iranian marketplace options for hard wheat (right now) were pretty limited. The interesting part is that the Iranian shortfall is estimated at around 4.5 mil metric tons, and this sale is for 1.18 mil metric tons. So it could grow even more. Depends on wheat harvests in places like Australia, which is still several months off.

I'd be interested in a geopolitical "read" on how this affects "other ongoing issues" between Iran and the US. Thoughts?

Can't hurt might help, might not, not so sure, too many other related and unrelated interactions happening right now which may serve to heighten or dampen the effects of it???

[bourbon]

Moscow to seize grain export controls (http://www.ft.com/cms/s/0/debdb184-5f3f-11dd-91c0-000077b07658.html?nclick_check=1), By Javier Blas. Financial Times, July 31 2008.

Russia plans to form a state grain trading company to control up to half of the country’s cereal exports, intensifying fears that Moscow wants to use food exports as a diplomatic weapon in the same way as Gazprom has manipulated natural gas sales.

[Ron Humphrey]

Moscow to seize grain export controls (http://www.ft.com/cms/s/0/debdb184-5f3f-11dd-91c0-000077b07658.html?nclick_check=1), By Javier Blas. Financial Times, July 31 2008.

Well wadya know if bullyin gets ya what ya want in one instance why stop there:mad:

Who'da thunk it

[Sergeant T]

Excellent article (http://www.nytimes.com/2008/10/12/magazine/12policy-t.html?_r=2&oref=slogin&ref=magazine&pagewanted=print&oref=slogin)by Michael Pollan of The Omnivore's Dilema (http://www.amazon.com/Omnivores-Dilemma-Natural-History-Meals/dp/0143038583/ref=sr_1_2?ie=UTF8&s=books&qid=1224994119&sr=8-2)and In Defense of Food (http://www.amazon.com/Defense-Food-Eaters-Manifesto/dp/1594201455/ref=sr_1_1?ie=UTF8&s=books&qid=1224994119&sr=8-1) fame. Long but worth the time.


The impact of the American food system on the rest of the world will have implications for your foreign and trade policies as well. In the past several months more than 30 nations have experienced food riots, and so far one government has fallen. Should high grain prices persist and shortages develop, you can expect to see the pendulum shift decisively away from free trade, at least in food. Nations that opened their markets to the global flood of cheap grain (under pressure from previous administrations as well as the World Bank and the I.M.F.) lost so many farmers that they now find their ability to feed their own populations hinges on decisions made in Washington (like your predecessor’s precipitous embrace of biofuels) and on Wall Street. They will now rush to rebuild their own agricultural sectors and then seek to protect them by erecting trade barriers. Expect to hear the phrases “food sovereignty” and “food security” on the lips of every foreign leader you meet. Not only the Doha round, but the whole cause of free trade in agriculture is probably dead, the casualty of a cheap food policy that a scant two years ago seemed like a boon for everyone.

[120mm]

Excellent article (http://www.nytimes.com/2008/10/12/magazine/12policy-t.html?_r=2&oref=slogin&ref=magazine&pagewanted=print&oref=slogin)by Michael Pollan of The Omnivore's Dilema (http://www.amazon.com/Omnivores-Dilemma-Natural-History-Meals/dp/0143038583/ref=sr_1_2?ie=UTF8&s=books&qid=1224994119&sr=8-2)and In Defense of Food (http://www.amazon.com/Defense-Food-Eaters-Manifesto/dp/1594201455/ref=sr_1_1?ie=UTF8&s=books&qid=1224994119&sr=8-1) fame. Long but worth the time.

Of course, it's entirely possible that expensive food might do something completely counter to Conventional Wisdom, and assist native economies in developing agriculture, providing MORE, not LESS food.

There is a certain line of thought that considers cheap food to be a major contributor to hunger in agrarian nations.

[Ron Humphrey]

Of course, it's entirely possible that expensive food might do something completely counter to Conventional Wisdom, and assist native economies in developing agriculture, providing MORE, not LESS food.

There is a certain line of thought that considers cheap food to be a major contributor to hunger in agrarian nations.

Bingo

[Bullmoose Bailey]

Bingo

Have been opining that water would take the place of petroleum in future wars.

As far as food & water are related, particularly in agri-business, fear great correctness to prior statement. Also fear GMOs/Frankenfoods which will be part of this.

[Watcher In The Middle]

Little bits and pieces floating around out there...

First Argentina. 3rd largest soybean producer in the world, Brazil is #2, US is #1. Both Argentina and Brazil are having drought issues, Argentina more so than Brazil. 11.2008 Story on Argentina (http://stormwire.stormexchange.com/2008/11/argentina-drought-spurs-soybean-prices.html) It's gotten worse since then, although they might have just gotten enough rain this last week to bail them out of having a bad crop year.

USDA in 11.2008 was projecting 2-3% increase in soybeans for Brazil and Argentina. The smart money is now betting than it's more likely in the 0-1% increase range, but now the farmers are having an increasing difficult time raising capital to plant their crops. That's going to be a concern for here in the US, also - but less of a concern than in other producing markets. Link to Article (http://www.minnesotafarmguide.com/articles/2008/12/31/ag_news/markets/mark11.txt)

Don't be at all surprised if there isn't a couple of bil $$$$ of our next bailout set aside for the farming community, specifically farm equipment and farm suppliers. There's logic there, in that apart from keeping the manufacturers and suppliers afloat, the money will also push the farming community to produce, and hopefully start to reverse some of last year's food price increases going forward into 2009. Smarter thinking, there - IMO.

If this happens, watch the market for productive farmland. When you've got a truly crippled up RE market, got to start the recovery somewhere. Start with that tiny corner of the RE market called "productive farmland".

Watching both the rice and wheat markets. Going to be interesting.

[Jedburgh]

CH, 26 Jan 09: The Feeding of the Nine Billion: Global Food Security for the 21st Century (http://www.chathamhouse.org.uk/publications/papers/download/-/id/694/file/13179_r0109food.pdf)

Global food prices have eased significantly from their record highs in the first part of 2008. As a worldwide economic downturn has gathered pace, commodity markets have weakened significantly. By October 2008, the UN Food and Agriculture Organization’s Food Price Index (http://www.fao.org/worldfoodsituation/FoodPricesIndex/en/) stood at 164, the same level as in August 2007, and 25% lower than the Index’s high of 219 in June 2008.

However, this does not mean that policy-makers around the world can start to breathe a sigh of relief. For one thing, even at their somewhat diminished levels current prices remain acutely problematic for low-income import dependent countries and for poor people all over the world. The World Bank (http://www.worldbank.org/html/extdr/foodprices/) estimates that higher food prices have increased the number of undernourished people by as much as 100 million from its pre-price-spike level of 850 million.

Looking to the medium and longer term, moreover, food prices are poised to rise again. Although many policymakers have taken a degree of comfort from a recent OECD/FAO report (http://www.fao.org/es/ESC/common/ecg/550/en/AgOut2017E.pdf) on the world’s agricultural outlook to 2017, which argued that food prices would shortly resume their long-term decline (even if they remained on average higher than their pre-spike levels), it largely overlooked the potential impact of long-term resource scarcity trends, notably climate change, energy security and falling water availability.

This Chatham House Report, by contrast, argues that these trends – together with competition for land and higher demand resulting from increasing affluence and a growing global population – represent a major challenge for global food security......
Complete 61-page report at the link.

[Watcher In The Middle]

IMO, the marketplace is starting to tell us a story. The "known" part of the story is:

Farmers await USDA plantings report



Among a series of upcoming USDA reports, more attention may be focused on the Prospective Plantings report, said a University of Illinois Extension marketing specialist.

"At the annual outlook conference, the USDA used a 2009 corn planting estimate of 86 million acres to construct the projected supply and consumption balance sheet for 2009-10," said Darrel Good. "That projection is equal to 2008 plantings. The USDA used an estimate of 77 million acres for soybeans, 1.3 million more than planted in 2008.

"The combined acreage of corn and soybeans appears low given the 4.2 million acre reduction in winter wheat seedings already reported and the expected two million acre reduction in total cotton, rice, and spring wheat acreage. However, the USDA expects total crop land acreage to decline in 2009 as a result of prospects for lower returns and fewer opportunities for double-cropped soybeans."

Good's comments came as he reviewed two upcoming USDA reports to be released on March 31. The March 1 Grain Stocks and Prospective Plantings reports each could have important implications for corn and soybean prices.
Link to Article (http://www.farmtalknewspaper.com/crops/local_story_076110816.html?keyword=secondarystory)

The part that is just being talked about hasn't been reported yet, because there's no official numbers. Farmland isn't selling (course, that's pretty much real estate these days), but farmland cash rents are also down, and trending downward. Farmers are pulling back for this crop year, not just making shifts in the "crop bucket".

Unofficially got a very detailed understanding of crop production prices, and beans (soybeans) right now ($9.95 a Bu. for May, 2009; dated 04.03.2009) are maybe $.25 a Bu. above actual production costs (a 2.5% return). Corn is way under water ($4.05 a Bu. for May, 2009; dated 04.03.2009) - literally, prices are a substantial sum below cost to produce.

Now, grain stockpiles are back to being higher going into this year, but what's being told to me is that the farming community is really retrenching, because their "asset value" (just like in the general populace) of their primary assets are lower, so they are cutting back. And that is going to affect this year's crop production.

We'll see.

[Watcher In The Middle]

was worried about grain prices back then, with Jan. 2008 beans and January, 2008 corn at prices I thought were outrageous back then. Well, 18 months later, guess where grain prices are today, and it's starting to look kind of tense out there.


The ministry now predicts that 57.6 million metric tons of soybeans will be harvested in Brazil compared to 58.1MMT forecasted on April 7th. Last year, growers produced 60MMT of soybeans.

This dimmer outlook comes on the heels of severe drought in Argentina lowered some soybean production estimates to 32MMT, 30% less than last year. With Brazil and Argentina the second and third biggest producers of soybeans in the world respectively, decreased production may send soybean prices even higher. Over the next 7 days, heavy rain is possible in southern Brazil. However, with over two-thirds of the soybean crop already harvested, the rain is likely to late to improve crop prospects.
Link (http://www.stormx.com/agriculture/wake-up-report/2009/05/brazil-soybean-production-estimate-reduced-on-drought/)

Btw, Argentina (#3 in the world) had a December, 2008 projection of right around 50 mil. Bu. of beans. Due to a prolonged drought, it's estimated production is now between 31 to 34 Mil Bu. for beans.

Then, there's this:


Illinois Soybean Production May Suffer From Delayed Planting
Dated: Tuesday, May 19, 2009

If corn planting is seriously delayed in Illinois then what will happen to soybean planting intentions? Soybean acreage may be cut, if growers run out of time to plant in late May and June. Delayed sowing dates would translate into a shortened growing season that may reduce the yield, especially in a cool summer. Illinois is the second biggest US soybean state behind Iowa growing 17-18% of the national crop.

We found 5 years when soybeans were planted very late delaying the onset of blooming and pod setting. The years with extremely slow development were 1990, 1993, 1995, 1996 and 2008, each having a very delayed pod set, the state average being less than 32% podding on August 1. Typically in late years, the Illinois soybean yield was depressed.
Link (http://www.stormx.com/agriculture/goodnight-report/2009/05/illinois-soybean-production-may-suffer-from-delayed-planting/)

When you look at the different reporting on planting and weather conditions, it's going to be a tight year. The current probability is that global corn and beans (soybeans) production will be lower than last year.

The interesting question right now is how much will the PRC import - they have already been importing US produced beans at a higher level than in prior years, which explains current pricing (July, 2009 at $11.75 a Bu. for soybeans; $4.24 a Bu. for Corn). Much of it is because the US has the highest amount of supply.

In June, 2008, we were a little over the $15.00 a Bu. price for beans. We could be going back to those levels, and maybe then some.

Good News For US Farming Community (http://www.bloomberg.com/apps/news?pid=20601086&sid=aHQJTqUh6wPg)

Not so much for consumers, and certainly not for export buyers. But at least the grain/food production side of the US economy isn't suffering through a systemic depression, and that's a good thing.

[bourbon]

A 'time bomb' for world wheat crop (http://www.latimes.com/news/nationworld/nation/la-sci-wheat-rust14-2009jun14,0,1661589.story), by Karen Kaplan. Los Angeles Times, June 14, 2009.

Crop scientists fear the Ug99 fungus could wipe out more than 80% of worldwide wheat crops as it spreads from eastern Africa. It has already jumped the Red Sea and traveled as far as Iran. Experts say it is poised to enter the breadbasket of northern India and Pakistan, and the wind will inevitably carry it to Russia, China and even North America -- if it doesn't hitch a ride with people first.

[Clinkerbuilt]

On the original topic, using food-denial as a strategic weapon is a lot more common than most would like to admit -- just look at Ethiopia in the 80's: sure, the government eventually lost, anyway, but they stuck around far longer than they would have otherwise.

On the current situation, growing food isn't really the issue -- moving the food grown to those who need it is. Case in point, Somalia: the 'bandit of the month club' will do all it can to steal donated food supplies at gunpoint at dockside, to distribute to their own clans, or sell at (local) "starvation" prices; if they have boats, they'll try to bag it on the high seas.

Unfortunately, food isn't sexy enough for most people to wrap their brains around when they're sitting stuffed at a $3000/plate fundraiser...or stuffing their face at a McDonald's. It's too existential.

All in all, though, from a strictly operational viewpoint, the starvation gambit is pretty tricky to implement, unless you can convince your own people that forcing your enemy's children to starve to death is a good thing...worrying about world opinion comes in a distant second.

[Rick M]

This was posted today re peak oil and our agri-food system.
I think that the situation in Canada applies equally to USA: the first farmer is looking at biofuels, the second at local food supply.
My comments re. Canada's energy dept being in denial on PO apply equally to your DoE.
My comments re Agriculture Canada apply equally to your USDA.
Until DoE sounds the alarm, USDA is unlikely to examine how US agri-food might function in a world without cheap energy.

Here is the link... please let me know what you think:
http://www.energybulletin.net/node/50800

[Rick M]

This was published yesterday in Winnipeg:

http://www.winnipegfreepress.com/business/another-decade-down-80129047.html

It's an assessment of major trends in the agri-food sector.
A response was submitted at the end (re agri-food and peak oil).
I think Ms. Rance did a good job of identifying the key points.

Best wishes to you all for the next decade.

rm

[Rick M]

Matt Simmons continues to do excellent work on global energy supply.
His most recent presentation is entitled Twin Threats to Resource Scarcity: Oil & Water and was presented three weeks ago in Dubai.

Clearly, both water and fuel are vital to food supply chains (both local and global).

This slide deck is shorter than most (32 slides) and of course I don’t know the oral content which accompanied it.
But one underlying theme is this: nothing could unravel global security of energy supplies faster than disorder and conflict, and Simmons points to water supply as a growing threat to both civil order and oil supply.

Simmons begins by pointing out our inability to substitute for water or oil (slides 1-7), long-term concerns over oil supply (8-11), and the looming threat of water scarcity (12-16).

He then focuses on the Middle East for several reasons: its growing population, its precarious water supply, and its surging internal demand for energy… all of which point in one direction: diminishing export capacity (17-21).
If we factor in the underlying potential for disorder (eg. conflict with Iran, terrorist damage to major oil infrastructure), there is little justification for complacency, especially in import-dependent regions such as ours.

As for solutions, Simmons mentions two: proper pricing (slides 7 & 22) and ocean energy (24-29).

This presentation is available here:
http://www.simmonsco-intl.com/files/Marsh.pdf

Simmons’ focus on the nexus between energy and water provides an effective complement to the ongoing work of the U.S. Government Accountability Office, which has undertaken a multi-stage (and quite detailed) analysis of this nexus.
Part one on biofuels was reviewed here (Dec. 09):
http://www.energybulletin.net/node/50988

The GAO’s study of water and oil shale should be released soon.

[Rick M]

The National Intelligence Council has released a report on the expected effects of climate change to the Caribbean region.

This 21 page report is entitled Mexico, The Caribbean and Central America: The Impact of Climate Change to 2030: Geopolitical Implications (NIC Conference Report., Jan. 2010).
The report is authored by a team of private research contractors under the Global Climate Change Research Program contract with the CIA’s Office of the Chief Scientist.

The prognosis of these analysts is bleak.
They see considerable potential for “civil unrest and internal conflicts leading to increased migration” (p. 3).
The source of these tensions is both predictable and (apparently) intractable: increasing population, energy consumption, rising sea levels, fresh-water scarcity and land degradation, coupled with declining food production and an overwhelming dependence on oil imports.

The plight of Mexico City is particularly concerning: it is already “experiencing severe water scarcity and aquifer depletion…. With a population of more than 20 million, the city must pump water from great distances and has had to ration water at least three times in 2009” (p. 12).

Almost all countries in the region have inadequate health services and limited emergency response capability.

The authors are to be commended for their honest and direct assessment.
At the top and bottom of every page is the disclaimer, “This paper does not represent US Government views,” which is entirely understandable.

The full report is available here:
http://www.dni.gov/nic/PDF_GIF_otherprod/climate_change/cr201003_MexicoCaribCentralAm_climate_change.pdf

[Rick M]

One of Canada’s finest journalists is Steve Paikin at TV-Ontario.
In October 2009 he interviewed Gen. Wesley Clark (Ret) on the topic of energy security (28 mins).
This interview is currently posted at the Journal of Energy Security.

Gen. Clark has an excellent grasp of these complex issues and some very clear ideas about what we can and should do about them.
He is particularly optimistic about corn ethanol (at a time when many analysts of food & fuel issues see it as the wrong way to go).

The topics discussed (with start-times) are:

1m – history of US oil supply
5m – resource nationalism
10m – role of Canada (tar sands, etc)
13m – nuclear
16m – ethanol, transport fleet
19m – corn production
20m – US total energy consumption, alt energy, transportation vs stationary
24m – Clark’s investments & interests
25m – opposing interests & political change
27m – climate change threat

Here is the link:
http://www.ensec.org/

[Fuchs]

He is particularly optimistic about corn ethanol (at a time when many analysts of food & fuel issues see it as the wrong way to go).

That's an understatement.

Everyone who wants to check the advantages and disadvantages of corn ethanol AND has basic math skills can CALCULATE that it's a dumb approach.


The solar energy efficiency of photosynthesis is less than a per cent, the solar energy efficiency of technical solar power harvesting (such as photovoltaics of solarthermal power) is two orders of magnitude better.

The area efficiency of dedicated bio energy is thus perfectly suitable to kill mankind through food deprivation. We couldn't produce enough bio energy products to supply our industry, homes and cars with energy even farmers stopped food production altogether.


Bio energy is a clever strategy of the pro-farmer lobby in developed countries. They want their nations to subsidy bio energy in order to artificially increase demand for agricultural products, thus creating a supply shortage that benefits exclusively the landowners. This strategy is being used in parallel in many developed countries and it's despicable.

Even the use of agricultural by-products (corn straw) is highly questionable because we deprive the soil of organic components if we carry away too much organic material from the field per year. It makes only sense economically if the economy is screwed up with subsidies (such as indirect bio energy subsidies).


The situation regarding bio energy in Germany looks like this:

research ministry: It's crappy idea!
economy ministry: It's a crappy idea!
fiscal ministry: It's a waste of taxpayer money!
environment ministry: It's a dangerous idea!
agriculture ministry: Yippiiee! Next big thing!

[Rick M]

I agree.
I can see why proponents wanted to try corn ethanol, especially farmers who struggle to get a decent return for their crops.
If gov't would subsidize things, so much the better from their point of view.
I farm, as do my two brothers-in-law, but we do not sell corn for ethanol.

But the evidence seems very clear: the net energy return is marginal (and minimal compared to fossil fuels), the risk to human food is considerable, and the increased cost to livestock producers is hurtful.
In short, a bad idea.

Your point about the cellulosic component needing to go back to the soil is also correct... cellulosic ethanol may be more commercially viable, but topsoil does need to be fed... we cannot remove its primary source of nutrients & humus, which is crop residue.

But I'm glad you took the time to watch the video.
I disagree with Clark on ethanol, but I do agree with most of his other observations, and I did think that his perspective & expertise might be of interest to this audience.

Although I have my own set of concerns, I think it's useful to offer alternative perspectives from time to time, just to see what people think of them.

Thanks for contributing your observations, Fuchs.

[Rick M]

In addition to the ongoing drought in southwestern China, now this (yesterday's NYT) about water woes in SE Asia:
http://www.nytimes.com/2010/04/02/world/asia/02drought.html

[Rick M]

First, this morning's very concerning report on the bleak future for bluefin tuna:
http://www.nytimes.com/2010/06/27/magazine/27Tuna-t.html?th&emc=th

Second, the dispersant being used in the Gulf is a possible explanation for the mysterious leaf damage in one area of Mississippi:
http://www.sfgate.com/cgi-bin/blogs/ybenjamin/detail?entry_id=65552

This article argues that 'dispersant rain' would be unlikely:
http://www.csmonitor.com/Science/2010/0625/Raining-oil-in-Louisiana-Not-likely.

On the other hand, this guy is pretty convinced by what is landing in his rain-barrel:
http://monkeyfister.blogspot.com/search/label/Airborne%20BP%20Oil%20Experiment

Time will tell....

[slapout9]

Fish processing plants are being hit hard in Alabama. Dosen't matter if the catch is good or not, fish buyers from acorss the country want take the risk of buying it.

[Rick M]

Slapout, speaking of the mess in the Gulf...

This powerful documentary by 60 Minutes in Australia was aired, then the video link was suddenly dropped from the archive, although the transcript remains.
There is much speculation as why the video portion has been removed....

The video is available in two parts on YouTube:
http://www.youtube.com/watch?v=rphEV...eature=related
and
http://www.youtube.com/watch?v=tC-tYZ7tbYM

An earlier version (very small screen, but it gives the the complete documentary in one piece) is here:
http://sixtyminutes.ninemsn.com.au/mobile/media/100613_oilspill_9msn_16x9_Mobile.3gp

[Rick M]

This article was published today in Hamilton, Ontario:
http://www.thespec.com/Opinions/article/803793

The author is right-on in warning of the danger of oil price shocks (which quickly turn into affordability issues for food), the perils of our just-in-time food supply chain, and the decades-long time-frame which is required to change energy infrastructure.

[Rick M]

US ag policy is administered in 5-year chunks.

Wes Jackson and others say that we need a longer-term vision and are suggesting a 50 year Farm Bill, which prompted this discussion:
http://campfire.theoildrum.com/node/6728#more

[Rick M]

Yesterday's article and subsequent discussion my be of interest.
The main themes are surging energy demand within OPEC, their rising population & food requirements, and the matter of export decline (re oil).

http://www.theoildrum.com/node/6862#more

[Rick M]

FYI, this appeared this morning:
http://environmentalresearchweb.org/blog/2010/09/peak-oil-from-a-security-studi.html

I've gone through the doc but it's in German so of course there is much that I don't understand yet.
However, it is clear that the authors take PO seriously (with graphs from Oil Drum, etc and a couple of pages on EROI/net energy) and have a good deal to say about agri-food.
Apart from some of the war college studies (and they are "only" the opinion of the analyst) this appears to be the most detailed military analysis of PO yet (at least among those that are publicly available).

I've asked a couple of German friends to assist, so I hope to have some details in the next few days.
If any of you can read German, please help us out.

[Rick M]

First, this from Norm at Oil Drum yesterday (in normal English):

Choice quotes and conclusions:


Oil becomes a crucial factor of shaping international relations": scarcity leads to a deliberalization of oil markets which in turn leads to more bilateral supply relationships. A window of opportunity opens for oil-exporting nations to pursue their economic, political, and ideological goals in regard to industrialized [importing] nations.

- Western foreign policy (e.g. towards Africa, MidEast) will have to become more "pragmatic" -- China et al. are already "pragmatic" and therefore better positioned. "Military interventions will become more selective - actors are overstrained". A new focus on one's own problems.

- "The transformation to a post-fossil-fuel society leads to economic and political crises": unemployment, food scarcity, less market-based distribution of oil products (rationing). Ultimately there is a "loss of trust" in public and governmental institutions which will possibly lead to more extremism and fragmentation on a national and international level.

- "Systemic risk of a 'Tipping Point'":
In the short term, oil production decline leads to reduced economic activity and trade. Loss of income for some actors, loss of livelihood for others. National budgets come under extreme pressure because of reduced tax revenue and higher spending on unemployment, food, and alternatives to oil.

- "In the medium term, the global economic system and every market-based economy breaks down. [...] Tipping Point: In an economy that is shrinking for the foreseeable future, savings are not invested anymore [...] banking sytem, stock markets, financial markets collapse [...] a completely new system status [...] Banks lose their reason to exist... since they can't earn interest [...] Loss of trust in currencies [...] Collapse of [international] value chains. Mass unemployment [...] National bankruptcies [...] Breakdown of critical infrastructure [...] Famines [...]

- It is probable that a high number of nations will not be able to make necessary investments in a timely and adequate manner. A high systemic risk is a given regardless of Germany's own energy policy because of its high grade of globalization."

- "Even if society's faith in market-based systems is big, its understanding of complex matters small, and its assumption of rational economic actors questionable, one can expect [...] uncertainty to give way to the realization that a critical point has been passed.


Also, here are some auto-translations which are pretty garbled, but some of the points are clear.

1. This one from Peak-Oil:

http://translate.google.com/translate?js=n&prev=_t&hl=de&ie=UTF-8&layout=2&eotf=1&sl=de&tl=en&u=http%3A%2F%2Fpeak-oil.com%2Fpeak-oil-studie-bundeswehr.php

2. from Spiegel:

http://www.spiegel.de/international/germany/0,1518,715138,00.html

3. from Welt:

http://translate.google.com/translate?u=http%3A%2F%2Fwww.welt.de%2Fpolitik%2Fd eutschland%2Farticle9308286%2FPeak-Oil-Was-tun-wenn-das-Oel-zu-teuer-wird.html&sl=de&tl=en&hl=&ie=UTF-8

- Rick

[jcustis]

I have seen firsthand how water and access to it for farming use is a critical component of life in rural Third World areas. Seems that violence has broken out across the border in Pakistan in the wake of a tribal dispute over such access:

http://http://www.cnn.com/2010/WORLD/meast/09/19/pakistan.water.dispute/index.html?hpt=T2

[Rick M]

Custis,
Thanks for your info... I was not aware of the recent fighting over water.
I'm not surprised, though, and it looks like Asia must anticipate more of the same... the decline of the Himalayan glaciers seems unstoppable (same here in Canada with our Rocky Mtn ice-fields, whose Athabaska River flow is vital to tar sands extraction which is now the #1 source of USA imports).

-- Rick

[Rick M]

This should be worth watching:
http://channel.nationalgeographic.com/episode/collapse-based-on-the-book-by-jared-diamond-4436/Overview?#tab-Videos/08608_00

[Rick M]

The UK Soil Association continues to do excellent work.
Their concise (13 pg) analysis of global phosphorus supply has just been released.
It is highly readable and addresses another critical (and rather neglected) aspect of resource depletion:
http://www.soilassociation.org/Default.aspx?TabId=1259

[Rick M]

This concise article by Lester Brown in Foreign Policy warns of converging trends leading to "The Great Food Crisis of 2011:"

http://www.foreignpolicy.com/articles/2011/01/10/the_great_food_crisis_of_2011

[slapout9]

This concise article by Lester Brown in Foreign Policy warns of converging trends leading to "The Great Food Crisis of 2011:"

http://www.foreignpolicy.com/articles/2011/01/10/the_great_food_crisis_of_2011

Cannot find the article but Gerald Celente said food riots would be one of the things government has to contend with in his predictions for 2011.

[davidbfpo]

Slap,

The link to the FP article is working here.

[Michael Vredenburg]

Finally, a topic I feel a bit versed in enough to post a comment.

From where I sit, 2500 miles southwest of Hawaii, I can say with some confidence that food security is a very big issue for fisheries-owning and still-developing Pacific Island nations as well as the industrialized countries that exploit those fisheries. For Japan, China, Taiwan and even the U.S., fishing access, development assistance and diplomacy go hand in hand. Japan by far is the most aggressive and most invested country when it comes to tying fisheries access to their aid policies in the Pacific Islands. Forget about beef, pork, poultry and other land-based animals; the protein of choice for many coastal countries is fish and other seafood.

Fisheries stocks are collapsed or near-collapse in many areas of the world's oceans. The western and central Pacific fishery remains one of the last healthy areas, yet is under huge pressure from traditional actors as well as new entrants from Europe and South America. The piracy problem in Somalia has its roots in illegal fishing. Some of the recent clashes between Japan, the Koreas and China occurred over fishing rights. Fishermen in the Philippines and Indonesia drape the gunwales of their boats with spikes and concertina to keep naval and coast guard forces from boarding when they are caught in other countries' waters illegally.

Add fishing to the list of actual and potential conflict-generating issues around the world.

http://www.japantoday.com/category/national/view/china-should-rein-in-violence-illegal-fishing-by-its-boats-sengoku
http://eprints.utas.edu.au/3239/1/Policy_response_IUU.pdf
http://www.nytimes.com/interactive/2010/12/12/weekinreview/12shanker.html

[Rick M]

Hi, Michael

Thanks for your post... nothing there that I would disagree with.

I'm not sure where you are (NZ?) but here in Canada we've had our own experience with the sudden collapse of the Atlantic cod off Newfoundland two decades ago, from which we (and of course, the cod) still have not recovered.

On both land and sea, we need to change our ways, and quickly....

[selil]

Fisheries stocks are collapsed or near-collapse in many areas of the world's oceans. The western and central Pacific fishery remains one of the last healthy areas, yet is under huge pressure from traditional actors as well as new entrants from Europe and South America. The piracy problem in Somalia has its roots in illegal fishing. Some of the recent clashes between Japan, the Koreas and China occurred over fishing rights. Fishermen in the Philippines and Indonesia drape the gunwales of their boats with spikes and concertina to keep naval and coast guard forces from boarding when they are caught in other countries' waters illegally.

Add fishing to the list of actual and potential conflict-generating issues around the world.

http://www.japantoday.com/category/national/view/china-should-rein-in-violence-illegal-fishing-by-its-boats-sengoku
http://eprints.utas.edu.au/3239/1/Policy_response_IUU.pdf
http://www.nytimes.com/interactive/2010/12/12/weekinreview/12shanker.html

I was hoping somebody would make a movie of this but it seems to be a bit to esoteric. The Cod Wars (http://en.wikipedia.org/wiki/Cod_Wars)were pretty epic. If you get past the funny name. We're not talking about third world countries either. Well England is pretty close... :)

[AdamG]

Overheating emerging markets, in China in particular, pose the biggest threat to the market and political situation in 2011 according to Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.

http://www.cnbc.com/id/41089972



Like many environmentalists, Lester Brown is worried. In his new book "World on the Edge," released this week, Brown says mankind has pushed civilization to the brink of collapse by bleeding aquifers dry and overplowing land to feed an ever-growing population, while overloading the atmosphere with carbon dioxide.

If we continue to sap Earth's natural resources, "civilizational collapse is no longer a matter of whether but when," Brown, the founder of Worldwatch and the Earth Policy Institute, which both seek to create a sustainable society, told AFP.


http://www.breitbart.com/article.php?id=CNG.999426eed38d24123132435f3d30386 7.31&show_article=1

[Rick M]

Thanks for your interest and for your contribution, Adam. Again, there is nothing that I would disagree with.

Post Carbon (Richard Heinberg, etc) did an excellent study on peak oil & agri-food two years ago:
http://www.postcarbon.org/report/41306-the-food-and-farming-transition-toward

[Watcher In The Middle]

It's starting up again....

Link to zerohedge.com on rice futures (http://www.zerohedge.com/article/rice-two-cents-away-limit-second-day-row-highest-price-over-year)

Yes, it's the hedge funds gossip column, and it's full of spin, pitches, and probably outright falsehoods, but they have a tendency to hit the stories days, if not weeks before the rest of the MSM even wakes up from their seemingly eternal snoozefest.

And when they start talking about rice future almost going up the limit 2 days in a row, time to take notice and pay attention.


...sending rice from $15.60 to $15.99 in seconds. And since Rice previously closed at $15.51, we were literally two cents away from a second limit up day in the world's most popular food. Since we speculated that rice is the next commodity bubble on Monday morning, the grain has surged nearly 7%. Incidentally, this is the highest price for rice in the last twelve month period. Lastly, if Hoenig is indeed telegraphing QE3 as we suspect, look for rice to double six months from now. It is now only a matter of time before some momo chasing idiot on CNBC "discovers" what a great investment rice is, and the thing trades limit up for the indefinite future.

If rice prices go up only 40% to 50% (nowhere near "double"), there's going to be governments everywhere in serious trouble. Forget "Democracy" - when governments can't feed people their most basic staple of their diet, that's a primer case for political instability.

[slapout9]

Link to MSNBC, The Ed Show with a nice peace on how Wall Street is causing Food Shortages in Egypt, which helped inspire the Revolution. Egypt is the largest importer of wheat in the middle east....manipulate the price of bread through Wall Street-Goldman-Sachs speculation and you get....revolution.


http://www.msnbc.msn.com/id/3096434/

[Rick M]

The frigid weather in Mexico has been the most severe in half a century, which prompted Sysco and The Packer to issue alerts a few days ago:
http://digitaljournal.com/article/303583

Small stuff compared to larger issues like fish, rice and wheat woes in China & India, but this is something that we North Americans will experience first-hand, if only for a few months.

[Rick M]

This graph was provided this evening by Dave Hughes, Canadian geoscientist and peak oil analyst:
1413

The implications should be obvious (for both farmers and consumers) if oil price volatility should continue.

[slapout9]

The frigid weather in Mexico has been the most severe in half a century, which prompted Sysco and The Packer to issue alerts a few days ago:
http://digitaljournal.com/article/303583

Small stuff compared to larger issues like fish, rice and wheat woes in China & India, but this is something that we North Americans will experience first-hand, if only for a few months.

Lettuce, a very well known grocery store chain where I live ran out of Lettuce and could NOT get another source for a couple of days. The produce managers explanation was the weather in Mexico which was affecting their main supplier.

[Dayuhan]

This graph was provided this evening by Dave Hughes, Canadian geoscientist and peak oil analyst:
1413

The implications should be obvious (for both farmers and consumers) if oil price volatility should continue.

Three questions...

1. How is the "food" figure generated? What commodities, in what markets?

2. Did he explain why the 2011 projection disassociates the two lines so dramatically?

3. What's the basis for projecting $140 oil in 2011? That doesn't seem to be any kind of consensus figure. We're having a spike at the moment, yes, but that looks to involve a risk premium, not supply/demand issues...

[Rick M]

Hi, Steve

re your questions:
1. Dave used the International Monetary Fund index of Primary Commodities:
http://www.imf.org/external/np/res/commod/index.asp
The year 2005 equals 100 for the index.

2. The marked dissociation occurs in the latter half of 2010 and only Jan in 2011. Dave and I both presume this is due in large part to climate issues: the ongoing drought in China's wheat-growing provinces and the drought in SE Asia's rice regions:
http://www.atimes.com/atimes/Southeast_Asia/LG02Ae01.html
Also Russia's brutal summer:
http://en.rian.ru/analysis/20100920/160654461.html

India in particular has seen severe food price increases, as have several Arab nations.

3. I think you confused the two lines: the black line is for food, which corresponds to the Index on the left. Dave correctly has oil at around $90, but when the stats for Feb are in, that line will continue its upward trend.

By the way, are you still in the Philippines? If so, can you please give us a brief update of things there re food & fuel, political stability, etc.

[Dayuhan]

Yes, I read that one backwards, bit too quick a glance.

Pretty normal here. Politics is as stable as it gets, barring the usual perpetual insurgency. No special price spikes in progress. The Philippines imports a lot of rice, but retail prices don't seem to fluctuate nearly as much as the futures index... possibly long-term deals with Thailand and Vietnam, would have to look into that to say.

It would be interesting to compare the futures index with a graph of farm prices in exporting countries. I suspect you'd find that middlemen are making the money.

[Rick M]

You are correct re middle-men, and that is very much an issue for Canadian family farmers, where net farm income remains at Depression levels in several sectors.
Should fuel prices continue to escalate, I fear that farmers will be forced to cut back on their activities. This would of course be counter to everyone's need, since food imports would also become more expensive and the market for them could shrink as well.
I have yet to see a plan for fuel emergencies which has a viable arrangement to ensure that the food supply chain is maintained during a supply/price shock.

If farmers are not assured that they can recoup their expenses from the marketplace, they will be reluctant/unable to up-front the money. The last time we filled our diesel tank, it was over $1,000. What farmers will do when it costs $2,000 is not clear.
We need a plan....

[slapout9]

We need a plan....

You better believe it .......except in America planning is Communism and we don't do that.

[AdamG]

The term "global security" often evokes images of guns and nuclear weapons. "We have inherited a definition of security from the last century, which was dominated by two World Wars and the Cold War," Lester Brown, author and president of the Earth Policy Institute told PRI's Here and Now. "What we're now faced with is a need to re-define security."

The biggest threats to our future aren't coming from invading nations, according to Brown. "It is climate change. It is population growth. It is falling water tables. It is rising food prices. It is failing states."

http://www.pri.org/world/population-food-prices-and-global-security2643.html

[Rick M]

Thanks, Adam

I have been a great fan of Lester Brown/Worldwatch for decades, and of course he is correct.
But in addition to CC, pop'n, water & food, I would also add fossil fuel depletion. It is central to the other four: it's a major source of GHGs, it's allowed the ongoing population explosion, it is a factor in water supply, and it provides the fertilizer & the bull-work in our 21st Century food supply chain (from field to fork, as they say).

[Rick M]

Steve,
I thought of you this morning while watching BBC.
They suddenly had a show on the Philippines, and the first 10 mins was on their rice terraces which I'd heard about but never seen.

They certainly are amazing, but that segment ended on an unhappy note because of two things:
- the incursion of giant earthworms (which have moved in thanks to nearby deforestation)... their oversized tunnels destabilize the soil.
- the reluctance of the current generation to do the hand labour that their ancestors have done for millennia.

The result has been the collapse of various sections, a situation which could quickly snowball if water is allowed to flow full-force down the mountainside.

This link mentions some of this:
http://en.wikipedia.org/wiki/Banaue_Rice_Terraces

[AdamG]

Considering the headlines in Minitrue's current news cycle, this is appropriate :


The 1st of September marks the anniversary of the opening of the major stage of Libya's Great Man-Made River Project. This incredibly huge and successful water scheme is virtually unknown in the West, yet it rivals and even surpasses all our greatest development projects. The leader of the so-called advanced countries, the United States of America cannot bring itself to acknowledge Libya's Great Man-Made River. The West refuses to recognize that a small country, with a population no more than four million, can construct anything so large without borrowing a single cent from the international banks.
http://poorrichards-blog.blogspot.com/2011/03/virtually-unknown-in-west-libyas-water.html#comments

[davidbfpo]

The title of an IISS Strategic Comment:
Record food prices have been just one ingredient in the unrest in the Arab world. However, they are causing major concern across the globe for the second time in three years. Structural shifts have led to a tightening of the international food-supply system, magnifying the effect of disruptive events such as weather-related crop failures in 2010. With no quick relief in sight, an era of cheap food appears to be over.

Link:http://www.iiss.org/publications/strategic-comments/past-issues/volume-17-2011/march/bread-and-protests-the-return-of-high-food-prices/

On a quick read I was intrigued by the links and especially:
Nomura's Food Vulnerability Index puts Asian countries such as Bangladesh and Sri Lanka at the top of its list.

Link to the cited index:http://www.nomura.com/research/getpub.aspx?pid=390252

[Rick M]

Hi, David

Thanks very much for the IISS study, which I had not seen.

I presume that you spotted this from your home town (re threat from rising fuel prices):
http://www.birminghampost.net/birmingham-business/birmingham-business-news/other-uk-business/2011/03/14/rising-fuel-prices-could-be-final-straw-for-struggling-businesses-65233-28329533/

[davidbfpo]

Rick,

I'd not read the B'ham Post (which is not a regular read), but conversation often turns to the cost of petrol. Individuals and families are clearly having to think harder about driving, commuting and long-distances. Motor insurance premiums have shot up, so the pressure is building up. Buying cars is a key economic indicator; reflected in almost nil cost of car loans.

Peering into the distance regarding fuel security is a rare public topic. Just look at the silence over the falling North Sea oil & gas production.

[bourbon]

Commodity index speculation was up $70 billion last year to around $400 billion; close to 20x what it was before 2003. Structural problems exist, but the speculation is out of hand. This is 2008 all over again, it is sick.



We need a plan....
We can start by establishing position limits on certain commodity derivatives.

[stanleywinthrop]

Commodity index speculation was up $70 billion last year to around $400 billion; close to 20x what it was before 2003. Structural problems exist, but the speculation is out of hand. This is 2008 all over again, it is sick.


We can start by establishing position limits on certain commodity derivatives.

Bourbon, I think you're right here. It's basically another bubble which will pop at some point just like other bubbles including the housing market. The 'global pool of money' has been sloshing around looking for new places to park since 2007-2008. As you point out, some of that money has landed in the commodities market driving up prices. The real question is who gets hurt when the bubble pops. Obviously the poor world round will benefit from cheaper food prices. Farmers will be hurt, of course. Remember the 80s? Farm aid?

[Rick M]

David
You are correct re British silence on your post-peak decline. It is surely a watershed moment in UK history, bound to make the history books.
Energy is not just another commodity to be sold... it provides work, and in the case of oil & gas, very fundamental work (mobility, heating and electricity).

I agree with comments re speculation... the problem applies not only to food 'commodities' but also to oil & gas... they are much too essential to be a play-thing for speculators.

[Sergeant T]

How Goldman Sachs Created The Food Crisis (http://www.foreignpolicy.com/articles/2011/04/27/how_goldman_sachs_created_the_food_crisis).


It took the brilliant minds of Goldman Sachs to realize the simple truth that nothing is more valuable than our daily bread. And where there's value, there's money to be made. In 1991, Goldman bankers, led by their prescient president Gary Cohn, came up with a new kind of investment product, a derivative that tracked 24 raw materials, from precious metals and energy to coffee, cocoa, cattle, corn, hogs, soy, and wheat. They weighted the investment value of each element, blended and commingled the parts into sums, then reduced what had been a complicated collection of real things into a mathematical formula that could be expressed as a single manifestation, to be known henceforth as the Goldman Sachs Commodity Index (GSCI).

[AdamG]

The most water-stressed nations on Earth are all in the Middle East and North Africa. Add surging populations and food and energy costs, and trouble seems inevitable

http://www.guardian.co.uk/environment/damian-carrington-blog/2011/may/19/water-climate-change


Water usage in north Africa and the Middle East is unsustainable and shortages are likely to lead to further instability – unless governments take action to solve the impending crisis

http://www.guardian.co.uk/environment/2011/feb/20/arab-nations-water-running-out

[Rick M]

Hi again, Adam

This morning CBC Radio had a half-hour thing on droughts: wheat-growing regions of China and Russia still seem to be struggling with their prolonged dry spells.
And much of the Mississippi Valley and southern Manitoba have too much water.

But the show's main focus was on the sudden and severe drought in western Europe: France and Germany (#1 & 2 in wheat production) and UK are all in a 90-day drought right at germination time.
And Texas is really dry.
What I did not know is that there is a Centre for drought analysis & info in Nebraska.

http://www.cbc.ca/thecurrent/episode/2011/05/19/severe-droughts-texas-france-china/

[davidbfpo]

Rick,

Yesterday on BBC Radio 4 a farmer was interviewed on the impact of a dry Spring and he estimated that his crop would be halved if not less:http://news.bbc.co.uk/today/hi/today/newsid_9490000/9490705.stm

Not sure what the impact of that will be on global supply.

[AdamG]

Rising food prices are tightening the squeeze on populations already struggling to buy adequate food, demanding radical reform of the global food system, Oxfam has warned. By 2030, the average cost of key crops could increase by between 120% and 180%, the charity forecasts.

http://www.bbc.co.uk/news/world-13597657

[Rick M]

David,
Sorry, my old Mac won't accommodate the new FlashPlayer which is needed to see your BBC video.

Adam,
I agree, we seem headed for a major supply & price squeeze with droughts in UK and mainland Europe, Russia and especially western China:
http://www.chinadaily.com.cn/business/2011-05/28/content_12597124.htm

Add in wet conditions in southern Quebec, central Manitoba and Missouri/Mississippi watersheds, and we may have a very significant supply problem by October.

- rick

[davidbfpo]

Rick,

Catching up, an IISS event in February 2011 'The IISS Transatlantic Dialogue on Climate Change and Security: Final Report':http://www.iiss.org/events-calendar/2011-events-archive/february-2011/the-iiss-transatlantic-dialogue-on-climate-change-and-security-final-report/

Hour long podcast and a link to a PDF of the report.

[AdamG]

Agriculture is topping the G-20 agenda for the first time as agriculture ministers from the world's largest economies gather in Paris beginning Wednesday. Ever since a dramatic spike in world food prices in 2008 sparked panic and deadly riots in countries across three continents, agriculture and food security have become issues of global, political importance. And crop shortages this year have some experts already predicting another rise in grain prices like that of 2008.

http://www.npr.org/2011/06/22/137324767/volatile-food-prices-grab-g-20s-full-attention

[Rick M]

Jeremy Grantham is the Chief Investment Strategist (and co-founder) of GMO, a major asset management firm.
In April he published an excellent analysis of Peak Oil in GMO Quarterly (19 pgs):
http://www.gmo.com/websitecontent/JGLetterALL_1Q11.pdf

This week Part 2 of Resource Limitations was released which focuses on agri-food (15 pgs):
http://www.gmo.com/websitecontent/JGLetter_ResourceLimitations2_2Q11.pdf

Grantham's expressions of concern are particularly helpful since they come from a respected veteran analyst within the financial community.

[jcustis]

Somalia is entering into an old, yet still unique (considering the state of the warring factions there) phase with the current drought.

A lot of bell-ringing was going on today on CNN.

Having spent a tour there, I am not so sure the US needs to get itself tied up into a knot over trying to push aid in there. A huge package of give and take needs to be thought through and applied before fools rush in.

[AdamG]

Nations will cut off rivers to prevent their enemies having access to water downstream, terrorists will blow up dams, and states that cannot provide water for their citizens will collapse. This is the future - as painted by a top US security report.

#The Office of the Director of National Intelligence (ODNI), the organization that oversees US intelligence agencies such as the CIA and FBI, was commissioned by President Barack Obama to examine the impact of water scarcity worldwide on US security.

And while the prospect of “water wars” has been touted for decades, it may start to become reality within a decade. The ODNI predicts that by 2040 water demand will outstrip current supply by 40 per cent.

https://rt.com/news/water-conflict-terrorism-rivers-239/

[davidbfpo]

AdamG,

One example of the issue of water resources is the SWJ article in 2011 'Nile Basin Conflict: Perspectives on Water Sharing, Food Shortages, Civil Wars and Terrorism':http://smallwarsjournal.com/blog/nile-basin-conflict-perspectives-on-water-sharing-food-shortages-civil-wars-and-terrorism

I thought the issue of water had its own thread, no on a quick search.

[Surferbeetle]

David,

Water in the Middle East (http://council.smallwarsjournal.com/showthread.php?t=10274), was a start here at SWC

[Watcher In The Middle]

Just spent the last two days getting my head bombarded with new research angles and areas of interest....

Graphene filters for water.
Graphene supercapacitors for energy storage.
Red wine induced iron-based superconductors.
LED (light-emitting diode) technology which emits more light energy than it consumes in electrical energy - basically a functional "Optical heat pump".
Home 3-D printing (Additive manufacturing).
Home CNC workstations/Visual open source based CNC programming.
Algae based wastewater treatment (not for energy like TOTUS wants, but for far more practical and immediately useful applications).

But the really interesting 'key' was that we always ended up comming back to "Water" over and over and over. And this wasn't a bunch of 'enviro wacko' types at all - maybe 1 or 2 at most in the group.

Old rule: You can live a while without food - but you can't live a day without water.

[Surferbeetle]

Hey Watcher,

You might like:

Water, the epic struggle for wealth, power, and civilization (http://www.amazon.com/Water-Struggle-Wealth-Power-Civilization/dp/0060548304) by Steven Solomon

Salt, a world history (http://www.amazon.com/Salt-World-History-Mark-Kurlansky/dp/0142001619) by Mark Kurlansky

...and perhaps for a bit of light reading :rolleyes: :wry:

Wastewater Engineering, Treatment & Reuse (https://www.e-wef.org/Home/ProductDetails/tabid/192/Default.aspx?ProductId=4318), by Metcalf and Eddy

Biological Nutrient Removal (BNR) Operation in Wastewater Treatment Plants (http://www.amazon.com/Biological-Nutrient-Operation-Wastewater-Treatment/dp/0071464158), WEF & ASCE

So are ya a surface water (downstream) or groundwater recipient? :eek: :D

[Watcher In The Middle]

Here, it's being a groundwater recipient. Sanitary District water source for potable water, deep aquifer (about 1300 ft.) source. For around here, that's a deep well.

If I go east about 25-30 miles, it's surface water (Chicagoland area; DuPage Water Commission) from Lake Michigan.

Oh, and I forgot one item to add to my list - kept coming up as part of the discussions. The Khan Academy. If you don't know what it is, here's a short link (Hint: The future of education). Link To Talk About Khan Academy (http://www.youtube.com/watch?v=gM95HHI4gLk)

[JJackson]

We are currently using fresh water at a rate beyond that at which it is being produced. This is only possible as we are draining fossil water aquifers to make up the difference. The scale of this problem is being masked by a one-time increase in glacial flows into the rivers whose basins’ provide the food for a large chunk of the worlds populations. These include the Mekong, Ganges, Yellow, Yangtze and Brahmaputra all of whom rely on the Himalaya/Tibetan Plateau for seasonal stabilisation. Current estimates put China’s 2030 water need at 25% above supply (and 20% is so polluted it not even suitable for agricultural use) and for India this becomes 50% and India is already very reliant on its non renewable aquifers.

Also for further reading you could try
Charting our water future (A McKinsey Institute report on water to 2030 with some solutions) http://www.mckinsey.com/App_Media/Reports/Water/Charting_Our_Water_Future_Full_Report_001.pdf

[davidbfpo]

I think water supply deserves a separate thread, because of it's strategic and impact in specific geographical areas. Maybe this week I shall look around this thread.

[Fuchs]

We are currently using fresh water at a rate beyond that at which it is being produced.


Two remarks;

a) it may be correct English, but "produced" is not really a good choice of words.

b) Water is a local, at most regional (along rivers or in water pipeline projects as known in Libya) resource.

An important consequence is that the solutions/adaptions need to be local or at most regional.

This is similar to the firewood sustainability problem, which can best be addressed on the local level.

Desertification and soil erosion problems are usually regional as well and require local (in)action.



Global(-sounding) discussions on subjects like these are not worthwhile in my opinion.

[Surferbeetle]

b) Water is a local, at most regional (along rivers or in water pipeline projects as known in Libya) resource.

An important consequence is that the solutions/adaptions need to be local or at most regional.

Arbitrary lines on maps have a history of causing problems....

Local boundaries are often a political definition, while the concept of drainage basins and aquifers are technical definitions. Rarely do their boundaries conicide. Effective problem solvers have to balance political, economic, and technical concerns in order to find lasting solutions...:wry:

Drainage basin (http://en.wikipedia.org/wiki/Drainage_basin) by wikipedia


A drainage basin (also known as a watershed) is an extent or an area of land where surface water from rain and melting snow or ice converges to a single point, usually the exit of the basin, where the waters join another waterbody, such as a river, lake, reservoir, estuary, wetland, sea, or ocean. In closed drainage basins the water converges to a single point inside the basin, known as a sink, which may be a permanent lake, dry lake, or a point where surface water is lost underground.[1] The drainage basin includes both the streams and rivers that convey the water as well as the land surfaces from which water drains into those channels, and is separated from adjacent basins by a drainage divide.[2]

Aquifer (http://en.wikipedia.org/wiki/Aquifer) by wikipedia


An aquifer is a wet underground layer of water-bearing permeable rock or unconsolidated materials (gravel, sand, or silt) from which groundwater can be usefully extracted using a water well. The study of water flow in aquifers and the characterization of aquifers is called hydrogeology. Related terms include aquitard, which is a bed of low permeability along an aquifer,[1] and aquiclude (or aquifuge), which is a solid, impermeable area underlying or overlying an aquifer. If the impermeable area overlies the aquifer pressure could cause it to become a confined aquifer.

[JJackson]

I won't quibble about the 'produce' but I was referring to planetary fresh water production when I wrote it (or at least the precipitation that falls on the land). The paragraph was taken from a post on another site which has quite a lot more information about the planet's water situation. In post 3 at the link I have included a graph, from the above linked report, which shows almost no countries are expected to be in credit by 2030. As watcher said "And this wasn't a bunch of 'enviro wacko' types at all" This report was commissioned by the likes of Nestle, Coca-Cola, Standard Chartered and similar 'greenies'. I agree that the problems are local but the problem is all the local problems have now 'keyholed' into a global one.
Over 50% of the worlds fresh water is now used for agriculture and over 50% of the worlds food comes from irrigated crops.
The planet has a lot of water but only 0.03% is accessible to terrestrial plants and animals.
More data, and more links, at the link (http://www.flutrackers.com/forum/showthread.php?t=151485) (posts 3, 5 & 8 are most relevant to water others cover population and more general resource depletion)

Edit:
I was looking at the World Economic Forum 'Global Risks Report 2012' (http://www3.weforum.org/docs/WEF_GlobalRisks_Report_2012.pdf) and noted an interesting change. The report collates risk data and graphs risks by plotting 'event likelihood' against 'event impact'. If you look at page 12 you will see another graph giving the top five risks for each of the last 6 years. This year 'water supply crisis' has appeared for the first time and is placed No.2 by impact and No.5 by likelihood. Another first time entry is 'food crisis' at No.3 by impact.

Fuel, food and water are in fact, to a degree, interchangeable in that fuel can be used to make fertilisers (5% of all natural gas goes into ammonia for nitrates) which with water can be used to grow plants for food or bio-fuels with which you can desalinate sea water or make fertiliser etc.

[Watcher In The Middle]

Just got hit upside the head by a 'wise olde owl' (no, not Ken - different 'wise olde owl'). One who is a forth generation farmer overseeing the running of a very large operation.

We were talking 'Commodities' (in general), and impacts of what we are seeing in the marketplace - copper, oil, metals of all types, grains, etc. He told me to really pay attention to Soybeans going forward, because they have pretty much decoupled from the other grains (like corn, wheat, etc.).

This is going to have some interesting side effects. South American (Brazil & Argentina) soybean production is down, and initial US reports are that farmers are actually planning on planting lower soybean acreage than last year. We'll see. Have my doubts based on current bean prices.

Here's an interesting table:
World Supply & Demand Table (http://www.spectrumcommodities.com/education/commodity/statistics/soybeantable.html)

Btw, there are differences in production numbers. The 2009 numbers for the US soybean production was 91.4 mil metric tons, from a different source. The link is: http://en.wikipedia.org/wiki/Soybean

We produce 600% more than what China produces, about 60% more than what Brazil produces, and about 295% more than what Argentina produces.

And as a little aside, Argentina, with their expropriation of YPF, the Argentine petroleum company majority owned by Repsol (a Spanish firm), has just made their ability to export Soybeans much more difficult. You will likely see an army of lawyers at work claiming that all sales are actually being made by the Argentine government, and the proceeds from those sales could be held up in court as payment for the expropriation of YPF. Fun times!

As a point, if there is a soybean supply squeeze on both the #2 and #3 soybean suppliers, basic food prices in China are likely to increase. And rising food prices in China can create instability.

And China's trade surplus with the US has been shrinking, and they are not buying Treasuries anymore.

This is going to get interesting.

[davidbfpo]

I have re-opened this closed thread, to enable the next post. This thread started in 2008 and the last post was in 2012. It had 158 posts and 47,868 views.

[davidbfpo]

Found a link to this 2014 podcast by Professor Paul Rogers, from Bradford University, whose approach to security is different: Human Security and it is a broad brush analysis - which includes the role of food.
Link:http://www.tansey.org.uk/news/PRtalk.html

Food production and climate change starts at 14:54. To be fair the more I listen, it is interesting and just about fits here!:wry:

Since 2012 there have been a small number of posts on the purchase, development and sometimes using imported labour on agricultural land. IIRC with China and Saudi Arabia to the fore.

[davidbfpo]

A BBC News pointer to a Chatham House report; it starts with:
The world's food security is increasingly reliant on 14 "chokepoints" for trade, a think-tank report has warned.
UK-based Chatham House says (https://www.chathamhouse.org/publication/chokepoints-vulnerabilities-global-food-trade) more needs to be done to protect key transport routes such as the Panama Canal, the Suez Canal and the Turkish Straits.
Almost 25% of the world's food is traded on international markets.
This, the report says, makes food supply and prices vulnerable to unforeseen crises or climate change.Link:http://www.bbc.co.uk/news/world-40415756


https://ichef.bbci.co.uk/news/450/cpsprodpb/64D2/production/_96701852_global_chokepointsv2.png