Food Worries

We're all a little bit embarassed, here at SICMoney, at our low output as of late. Its finals time, and I think Bellz is having a meltdown. And we all know how DLight deals with stress *cough*. I'll be backpacking through Brazil soon, so you won't see another post after this one for a wee while. Once we're all working this summer, you'll see post rate pick up again.

Anyway, the Financial Times columnist Martin Wolf recently wrote about the new food crisis emerging. Why is there rioting over food in Haiti, Somalia, Yemen, the Philippines, Egypt, and others? Lets look at the players:

-The emerging countries are growing rapidly, causing their standards of living to rise, and along with that demand for more expensive food like meat.
-Increased demand for meat has caused farmlands to be replaced by grazing land for cattle, which decreases the supply of cereals like wheat
-A strong strain on the world's energy supplies is dramatically increasing the cost of production and distribution of foodstuffs.
-Simultaneously, increased demand for corn as a biofuel substitute has shot up the price of corn, which has spilled over into other commodities. The IMF noted that “although biofuels still account for only 1½ per cent of the global liquid fuels supply, they accounted for almost half of the increase in consumption of major food crops in 2006-07, mostly because of corn-based ethanol produced in the US”

And, as drinking water grows more scarce, we're going to see that become a bigger and bigger problem. An even bigger problem on the rise, which the article does not touch on, is crop disease. Now, certainly disease amongst people is also going to become a bigger and bigger deal, as our planet becomes more urban, and more people live closer together, and commute across the world in our ever-developing infrastructure. But crop disease is also a fantastically frightening growing concern. In today's agriculture, farmers use mass produced seeds, and the variety of crops produced and consumed is in a freefall. If a new disease develops in one of these super crops, it has the potential to wipe out food from all over the planet. This incredible 60 minutes article describes the issue: "These resources stand between us and catastrophic starvation on a scale we cannot imagine. And we now have, I think, kind of a perfect storm hitting agriculture." Another issue is crop resilience against drought, which is going to grow greatly in the coming decades.

"If you think about the Dust Bowl in the U.S., and you think 'Well there was a decade where you had on the average of maybe five percent reduction in precipitation, you know, for the growing season,'" he says. "Southern California, the Caribbean, Southern Europe, Northern Africa, Central Asia, all these places, 100 years from now, will typically experience on average 20 to 30 percent reduction in precipitation, right? So that’s five times the Dust Bowl."

Thankfully, millions and millions of dollars of research is being put into combating this growing problem. A side note for investors, this is why Jack Welch keeps harping that biotechnology still remains a sector with incredible growth opportunity.

Things look especially depressing in Haiti, where people who had been literally eating dirt now can't even afford to buy that!

We've had shocks like this in the past, and saw incredible solutions, like the Green Revolution, And we've seen groundbreaking innovations like Golden Rice, a scientific breakthrough that is a beacon of success that the 60 minutes article described as being so important.

Back to that FT Column, other issues that need to be tacked include increasing in humanitarian aid, and fixing the broken infrastructure and bureaucracy that plagues the countries that need help the most.

It looks like we have a long road ahead of us...