This is going to be a really big problem in the near future. The combination of ravenous demand for food crops from ethanol and biodiesel production, as well as major dietary changes going on in Asia and elsewhere as a big percentage of the world’s population begins to demand and be able to afford far more of crop-intensive foods such as meat as a larger percentage of thier diet, is going to cause serious consequenses for poorer food-importing nations. Most likely and serious ethical questions will begin to be raised about the use of most conventional biofuels that are derived from food crops or grown on land that would otherwise be used for food agriculture.
This will almost certainly bring dramatically raised awareness of the land-use impacts of alternative fuels production, leading to a call for biofuels, if they are to be produced on agricultural lands at all, to be produced from high-yielding low-input second-generation bioenergy crops such as miscanthus, (which we can very efficiently blend in with coal at our plant) or from high-yielding non-food crops that will be grown on nonagricultural lands, such as Jatropha. (See: our good friends at EDS Fuels www.edsfuels.com for Jatropha biofuels production. The bio-oil produced by these guys will be the savior of the US biodiesel refining industry.)
This issue will almost certinaly bring new focus to the question of the relative wisdom of using corn for ethnaol production. Interesting fact: to produce enough Ethanol from corn to fill the tank of an SUV one time, you would need to use 450 pounds of corn, which has enough calories in it to meet the basic dietary needs of one person for an entire year!
http://www.financialpost.com/story.html?id=213343
Friday, January 04, 2008
Forget oil, the new global crisis is food
BMO strategist Donald Coxe warns credit crunch and soaring oil prices will pale in comparison to looming catastrophe
Alia McMullen, Financial Post Published: Friday, January 04, 2008
Scott Olson/Getty Images
A new crisis is emerging, a global food catastrophe that will reach further and be more crippling than anything the world has ever seen. The credit crunch and the reverberations of soaring oil prices around the world will pale in comparison to what is about to transpire, Donald Coxe, global portfolio strategist at BMO Financial Group said at the Empire Club’s 14th annual investment outlook in Toronto on Thursday.
“It’s not a matter of if, but when,” he warned investors. “It’s going to hit this year hard.”
Mr. Coxe said the sharp rise in raw food prices in the past year will intensify in the next few years amid increased demand for meat and dairy products from the growing middle classes of countries such as China and India as well as heavy demand from the biofuels industry.
“The greatest challenge to the world is not US$100 oil; it’s getting enough food so that the new middle class can eat the way our middle class does, and that means we’ve got to expand food output dramatically,” he said.
The impact of tighter food supply is already evident in raw food prices, which have risen 22% in the past year.
Mr. Coxe said in an interview that this surge would begin to show in the prices of consumer foods in the next six months. Consumers already paid 6.5% more for food in the past year.
Wheat prices alone have risen 92% in the past year, and yesterday closed at US$9.45 a bushel on the Chicago Board of Trade.
At the centre of the imminent food catastrophe is corn - the main staple of the ethanol industry. The price of corn has risen about 44% over the past 15 months, closing at US$4.66 a bushel on the CBOT yesterday - its best finish since June 1996.
This not only impacts the price of food products made using grains, but also the price of meat, with feed prices for livestock also increasing.
“You’re going to have real problems in countries that are food short, because we’re already getting embargoes on food exports from countries, who were trying desperately to sell their stuff before, but now they’re embargoing exports,” he said, citing Russia and India as examples.
“Those who have food are going to have a big edge.”
With 54% of the world’s corn supply grown in America’s mid-west, the U.S. is one of those countries with an edge.
But Mr. Coxe warned U.S. corn exports were in danger of seizing up in about three years if the country continues to subsidize ethanol production. Biofuels are expected to eat up about a third of America’s grain harvest in 2007.
The amount of U.S. grain currently stored for following seasons was the lowest on record, relative to consumption, he said.
“You should be there for it fully-hedged by having access to those stocks that benefit from rising food prices.”
He said there are about two dozen stocks in the world that are going to redefine the world’s food supplies, and “those stocks will have a precious value as we move forward.”
Mr. Coxe said crop yields around the world need to increase to something close to what is achieved in the state of Illinois, which produces over 200 corn bushes an acre compared with an average 30 bushes an acre in the rest of the world.
“That will be done with more fertilizer, with genetically modified seeds, and with advanced machinery and technology,” he said.
A Chinese perspective on the matter: http://news.bbc.co.uk/2/hi/programmes/from_our_own_correspondent/7171625.stm
China’s farms struggle to meet growing demand
By Quentin Sommerville
BBC News, Henan |
I stood in Zhang Meidi’s cabbage patch, kicking the dirt with my boots.
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Urbanisation and the creeping desert in the north mean China is losing 25m acres of farmland a year
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The first frosts would arrive soon but for now the soil was dark, crumbly and rich.Not like the hard mud around Shanghai or the dry, sandy soil of Beijing. This is China’s bread basket. Wheat has been grown here for thousands of years.
But Zhang Meidi has given up on it.
She laughed, her heavy, gold earrings catching the light.
The prices in the market were good these days, she said, but not for wheat.
Her feet are planted firmly at the bottom of China’s great towering economy, but the breadth of her vision would have put a team of Beijing economic planners to shame.
Zhang Meidi could see for miles.
She started by giving me a lesson on China’s food chain.
First, she explained, people in China now had more money so they wanted to eat better things, more meat and more fruit and vegetables.
That is why she is growing cabbages.
Her little handkerchief of land would grow enough wheat to earn about £200 ($395) but, by planting cabbages, she had almost trebled her earnings.
And, in the summer, she would grow tomatoes and earn almost £700 ($1,300).
Her husband - wrapping the cabbages against the coming chill - looked on, nodding in agreement and admiration.
All her neighbours were doing the same, she said.
Growing demand
And, sure enough, the little patchwork of plots spreading out around us was a confused jumble.
Wheat was still being grown, but increasingly it was being crowded out by cabbages and other crops too.
And that was not the only change taking place around us.
What was once farmland, outside the city of Zhengzhou, was now a suburb.
It still felt rural but now it was - well, more crowded.
There were more homes and roads. Further along the road, there were even fish farms and a huge highway.
Sure, plenty of Chinese are leaving their farms for the city but this was different.
Zhang Meidi and her neighbours were being swallowed up by the city. Urbanisation and the creeping desert in the north mean that China is losing 25 million acres (10m hectares) of farmland a year.
And just as the amount of land is shrinking, the demand for food is getting greater.
When she was younger, Zhang Meidi explained, her family would only have meat on special occasions.
Pork would be served when guests arrived or during China’s big national holidays. Now it was on their dinner table two or three times a week.
Move to the cities
And another reason why she is selling so much at the market these days is because of that growing urban population.
Over the next 12 years, an estimated 320 million people will move to cities.
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There just is not enough to go around, so prices are rising - and will keep going up - until farmers plant more
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As one analyst put it, a country larger than the United States will be created by new urban Chinese by 2020.
And when they come to the cities, these new arrivals - almost instantly - start eating more protein.
Now that they no longer grown their own food, and with more wages in their pocket, their diet changes.
So Chinese people are eating less wheat and fewer grains in general because they are upgrading to meats, especially pork.
But that pork comes from hungry pigs who consume a lot more grain.
Of course, yields are getting better, so the same patch of land is growing more corn (maize), rice and soya bean than it once did.
But there is another problem - in China, farms are still just patches of land.
Farmers do not own the land they work - and they cannot sell it - so larger, more efficient farms have not been created.
Acutely aware of the political consequences of landless farmers, rural land reform seems to be one step too far for the leaders in Beijing.
Already, the country that discovered the soya bean has to import most of its needs.
And other crops will follow.
The days of food self-sufficiency in China are numbered.
Rising prices
So, like the rest of us, China will turn to Australia, Africa and South America to fill its belly.
It is small wonder that food prices are climbing everywhere, not just here in China.
There just is not enough of it to go around, so prices are rising - and will keep going up - until farmers plant more.
These changes mean that the coming years will be years of plenty for Zhang Meidi, but she has had it with being a peasant farmer.
She has two sons. One is in university and the other will go there soon.
They will live off their learning, she told me, rather than their labour.
Education is something she did not have but for them it will be different, she said.
Their connection with the land will be broken, they will move to the city and to a wealthier life - a life with more meat, more fruit and more vegetables.
The transformation in China is not just taking place in the factories of Guangdong or the streets of Shanghai.
Changes are taking place here in the very bones of the people and in every last atom of Chinese soil.
From Our Own Correspondent was broadcast on Saturday, 5 January, 2008 at 1130 GMT on BBC Radio 4. Please check the programme schedules for World Service transmission times.
Published: 2008/01/05 12:35:53 GMT
