2010 Food Crisis

Just curious if anyone has read anything like the article from Market Skeptics on the supposed 2010 food crisis.

http://www.marketskeptics.com/2009/12/2010-food-c…

It's a very long article but in summary it states "There is overwhelming, undeniable evidence that the world will run out of food next year. When this happens, the resulting triple digit food inflation will lead panicking central banks around the world to dump their foreign reserves to appreciate their currencies and lower the cost of food imports, causing the collapse of the dollar, the treasury market, derivative markets, and the global financial system. The US will experience economic disintegration."

Now obviously this is rather extreme opinion coming from the doomsayers. But, I was wondering if anyone puts any weight in the potential to have some form of a food crisis?

Jim Rogers has also said: "We're still going to eat, probably; we're still going to wear clothes, probably. Farmers cannot get loans for fertilizers right now. So the supplies of everything are going to continue to be under pressure" and he talks about food inventories being down and agriculture being one of the best industries in the future.

Just wondering if anyone can find some valid statistics on inventories or can speak on the topic. Thanks guys.

 

While the view is a little bit too extreme, there is much truth to it. Jim Rogers, in a recent interview with CNBC, argued that food inventories worldwide are hovering near a ten years' low. He said investing in wheat and other food commodities will be a good opportunity. However, I don’t agree with the view that dollar value will collapse as a result of food shortage. Even though increasing food costs will surely add a burden on other countries, they will not all collectively race to appreciate their countries’ currency. There are many countries that highly benefits from exports, and this will likely offset advantages gained from depreciation. I think some hedge fund managers and other people who can potentially benefit from price volatility are trying to disseminate these kinds of information to pocket some money. If the dollar collapse actually occurs, it will likely come from the fundamental problems embedded in the states and not from some sort of one-time event.

 

Food and water will continue to dwindle in the 3rd world. I watched an interesting special on the BBC a few months ago, and part of it was about Indian lettuce. A very large percentage of the lettuce the UK consumes comes from India. And lettuce is comprised almost 50% from water. So what's happening is that India is exporting it's fresh water in the form of lettuce, and the Indian water table is literally dropping about 3 feet per year.

There is some scary stuff on the horizon food and water-wise.

 

I agree with the above posts. I don't think you are going to see the doomsday scenario that the article was describing, but there will be an increasing pressure on the worlds food supplies as the population increases and the demand for food as a fuel source continues to grow. I believe that the resistance toward genetically altered crops will slowly fade as the need becomes obvious. Monsanto is developing crops that yield multiple times normal yields, crops that use less water, etc.

 

Some environmental groups have been coming out saying population is the biggest threat to the world and the environment. I read a book YEARS ago called Earth Our Crowded Spaceship by Isaac Asimov. Talk about carrying capacity and population growth. Most European countries, The US (minus immigration) all have replacement or negative birth rates. It is the developing nations which are exploding in population. It is politically infeasible to start being anti-children, growth, etc, but there is only so much land and although science can produce more from that land there gets to be a point where you can't squeeze anything else from the land and food becomes finite.

 

Some environmental groups have been coming out saying population is the biggest threat to the world and the environment. I read a book YEARS ago called Earth Our Crowded Spaceship by Isaac Asimov. Talk about carrying capacity and population growth. Most European countries, The US (minus immigration) all have replacement or negative birth rates. It is the developing nations which are exploding in population. It is politically infeasible to start being anti-children, growth, etc, but there is only so much land and although science can produce more from that land there gets to be a point where you can't squeeze anything else from the land and food becomes finite.

 

Let me throw my conspiracy theory into the ring.

The only purpose of the two world wars of the last century was to kill of the last of the Monarchies, in other words, what was left of agrarian economies in which farming was not just encouraged but arguably the only means of survival for most people.

Either way Rodgers was definitely right about suggesting all the investment bankers learn how to drive a tractor if they ever want to be able to afford another Maserati.

 

I haven't read the article yet; however, I am in complete agreement that there will be a food & water shortage in the coming years. I don't believe it to be as soon as next year, but I do truly believe this crisis will occur in the time frame of the next 5 - 10 years.

The real question is how to play this opportunity. I haven't done too much research, but I do know that Monsanto and the Potash are major Ag investments. Do you guys know of any others that are flying under the radar?

 

Dupont is big in developing genetically altered crops. Also have a strong core business so it is a partial play. Monsanto has a great (and controversial) purchasing agreement with farmers. Basically if you want Monsanto seeds you have to use all the ones you buy and agree to buy them every year. Farmers that save seeds or hold out are basically cut off.

There was a recent article about scientists identifying the gene that tells a plant to open and close its pores and they have been able to make them more water efficient. I forget the name of the firm, but small companies like this could be real gold mines, but then you are basically making biotech type bets.

 
Best Response

This article is over-the-top and of course we are not "running out of food" in the near future. However, food inflation is absolutely picking up globally especially in Asia and the EM World. This is not the the first time in the last few years that we have seen food prices rise, so its not that hard to discuss the effects of a rise in food prices if they continue. Initially, a pickup in food inflation will create trading opportunities between the countries whose central banks respond to headline inflation and those who rely only on core inflation measures. The US Fed tries to look through spikes in headline inflation, a fact that Bernanke actually emphasized just this Sunday in his last speech, whereas countries in the emerging World take headline inflation very seriously because food and energy make up a much larger portion of their populace's spending. China in particular is very sensisitive to food prices because they are aways afraid that rising food inflation will cause civil unrest. The ECB also looks at headline inflation, not just core. For that reason, along with the general inverse correlation between commodities and the USD, means that food inflation is a definite negative for the dollar. It is also negative for EM equities relative to the US for the same reason...their central banks will begin tightening sooner to combat food prices.

Of course if the doomsday scenarios play out then "all bets are off"...

 

And BTW the idea of global over-population is one of the biggest loads of crap ever. Enviornmentalists have been talking about it for years...invariably they find a country that is in a sweet spot demographically and say "holy shit, if these people keep procreating at this pace we'll run out of food/land/water/whatever!". Right now the region of concern is the mid east, india, etc. But its all a mistake of extrapolating the present into the future...thirty years later all the young people grow up, get a bit more prosperity, and decide they'd rather watch TV then have sex and the population stabilizes and begins to fall...one can see this in Europe where the new concern is de-population not over-population....even the US would begin to drop in population soon if it werent for immigration. China also has a big demographic problem starting in about 10-15 years because of the 1 child policy...which not coincidentally was an absurd attempt to combat this non-problem.

Their is a famous book from the early 70s which i believe was called "The J-Curve" that made all the same wild predictions we are hearing today...and basically none of them came to pass in the countries they were screaming about.

 

I think saying over population is a load of crap might be naive. More people means more land for food, housing, production of goods and services. No one knows the exact number, but I think it is safe to say that eventually the earth cannot sustain a certain population level. The carrying capacity of the plant has growth with the advent of new technology,etc, but that doesn't mean that this will always happen.

China had a huge problem and their officials even admit this. The one child policy severely altered the ratio of male to female, but the alternative was allow people to starve. What is also being missed is ya, in 30 years population will stabilize, but only as standard of living increases. It has been said many times that the rest of the world could not all live at a USA standard of living. So either our standard of living declines or large amounts of people remain in poverty.

 

No one who has ever had to drive across Texas will ever believe in overpopulation. There is so much land out there, it is ridiculous. The same goes for China. The population is vastly concentrated in the cities where people live on top of one another, and the countryside has more space than even the Chinese could fill up. Overpopulation is a non-starter.

 

Can you grow food in arid Texas? There is a lot of land in the Sahara desert, doesn't mean people can live there or grow food there. It is like people saying the earth is 3/4 water so we will never run out of H20. Problem arises when you look at the amount of fresh water and in today's world, un-poluted drinking water. Population growth is geometric expansion. Add on top of that the fact that a person might only need a small space to live and sleep, they need a much larger area to produce the food and drink required. Also figure that as people obtain wealth and a higher standard of living they eat higher food chain items. Take a look at the amount of grain it takes to raise on head of cattle and you will see what I am getting at. Overpopulation is and will continue to be an issue.

 
AnthonyD1982:
Can you grow food in arid Texas? There is a lot of land in the Sahara desert, doesn't mean people can live there or grow food there. It is like people saying the earth is 3/4 water so we will never run out of H20. Problem arises when you look at the amount of fresh water and in today's world, un-poluted drinking water. Population growth is geometric expansion. Add on top of that the fact that a person might only need a small space to live and sleep, they need a much larger area to produce the food and drink required. Also figure that as people obtain wealth and a higher standard of living they eat higher food chain items. Take a look at the amount of grain it takes to raise on head of cattle and you will see what I am getting at. Overpopulation is and will continue to be an issue.

Thomas Robert Malthus was wrong. You are wrong.

********************************* “The American father is never seen in London. He passes his life entirely in Wall Street and communicates with his family once a month by means of a telegram in cipher.” - Oscar Wilde
 

As developing countries experience economic growth overpopulation will cease to be a problem. Eventually in a few hundred years the world will stabilize, most countries will be at about the same capital per capita, population will reach a steady state, and most of the world's problems will stem from global warming or an ice age or some other crazy natural phenomenon. Wars, terrorism, mass immigration, poverty, etc. are all problems that we have simply because there are poor countries out there. Eventually there won't be.

 
zykke:
As developing countries experience economic growth overpopulation will cease to be a problem. Eventually in a few hundred years the world will stabilize, most countries will be at about the same capital per capita, population will reach a steady state, and most of the world's problems will stem from global warming or an ice age or some other crazy natural phenomenon. Wars, terrorism, mass immigration, poverty, etc. are all problems that we have simply because there are poor countries out there. Eventually there won't be.

I disagree about war and terrorism being problems that stem from poverty. War is unfortunately human nature and a quick look at history shows that rich countries often go to War against one another...in fact I think that in many cases richness leads to adventurism and empire building (ie more war).

 
Bondarb:
zykke:
As developing countries experience economic growth overpopulation will cease to be a problem. Eventually in a few hundred years the world will stabilize, most countries will be at about the same capital per capita, population will reach a steady state, and most of the world's problems will stem from global warming or an ice age or some other crazy natural phenomenon. Wars, terrorism, mass immigration, poverty, etc. are all problems that we have simply because there are poor countries out there. Eventually there won't be.

I disagree about war and terrorism being problems that stem from poverty. War is unfortunately human nature and a quick look at history shows that rich countries often go to War against one another...in fact I think that in many cases richness leads to adventurism and empire building (ie more war).

I recall reading a book by a historian who examined ALL of recorded history. For those thousands of years, less than 300 years had peace.

Also, poverty is NOT a cause of crime. We are living in a time of unemployment and we have the lowest crime in history.

The Great Depression was marked by societal dissatisfaction but still the peace held.

********************************* “The American father is never seen in London. He passes his life entirely in Wall Street and communicates with his family once a month by means of a telegram in cipher.” - Oscar Wilde
 

Over-population is junk science and a scare tactic for political purposes.

Europe is rapidly DE-POPULATING. Most Eurozone countries are reproducing BELOW replacement levels. Italians won't understand what an aunt or uncle is in 10 years (that's what happens when single child marries single child).

Food will not become scarce, however it IS possible that certains kinds of food become scare- mostly meat. Meat is incredibly demanding in terms of water and feed. Fortunately, our agricultural productivity/efficiency increases almost at the same rate of computer processor speed. We have not even scratched the surface of the ocean's potential for food production- both growing in oceania and harvesting fish.

Everyone calling for population control, mandatory sterilization/contraception, etc. are incredibly dangerous. Such an attitude robs humanity of dignity.

While we are increasingly urban in the USA, there are still many cities experiencing de-population (i.e. Detroit and the California cities)

********************************* “The American father is never seen in London. He passes his life entirely in Wall Street and communicates with his family once a month by means of a telegram in cipher.” - Oscar Wilde
 

this is some super crackpotism ... do you know how much the us govt pays ppl not to farm their land? just throw some seeds in your back yard. the US has way bigger problems than food prices

 

Food is not a problem. -=) Last time I checked India and China are well fed and nourished, the British are eating their fish and chips and as for America, I don't know what to say!

please return to your seats and keep your trays in the upright position.

 

This looks more like a conspiracy theory than anything else. We export an insane amount of food, not to mention food makes up a small percentage of most Americans income, including eating out and so forth, so even if food prices tripled, people would just eat out less. I don't know where Jim gets the idea the whole world would go to hell in a handbasket. If anything, farmers in poorer countries would thank us since they would finally be able to make a profit as the dumping of underpriced food products in their countries would end.

 

Doesn't look like U.S. is going to be going through a food crisis. Still tons of fat asses when i walk down the street. Food crisis would probably benefit more than harm, maybe people will eat less.

 

Food shortage is coming. Major unbalance of supply and demand. I am not a gloomer but a fundamentalist and am not looking into a crystal ball for direction. Even the unbalance doesn't scare me as much, it is the fact it is coupled with the global financial crisis and credit crunch. Paying $10 for a bannana without a job and kids to feed will cause complete chaos. We have senn the best of times, have we seen the worst of times? It hasn't even started! The author of this story is without a doubt 100% right.

 

Ridiculous. The US is the Saudi Arabia of food. If there is a food crisis, US farmers and bankers will get rich as third world oil dictators get deposed.

A global food shortage would be the best thing to happen to the US- both in terms of the economy and foreign policy- since OPEC members started cheating back in the '80s. If we were to embargo Venezuela and Iran, US farmers would still make a killing and Chavez and Ahmanuttajob would likely be run out of office.

Food shortage is coming. Major unbalance of supply and demand. I am not a gloomer but a fundamentalist and am not looking into a crystal ball for direction. Even the unbalance doesn't scare me as much, it is the fact it is coupled with the global financial crisis and credit crunch. Paying $10 for a bannana without a job and kids to feed will cause complete chaos. We have senn the best of times, have we seen the worst of times? It hasn't even started! The author of this story is without a doubt 100% right.
So how do you explain how US farmers are going to starve when they produce 1/3 of the world's food and could feed 500 million people back in 1900 before modern farming and irrigation- even with droughts, locusts, and diseases in a very bad year?

If the rest of the world is starving, some Iowa farmer is making millions. Chances are, he's gonna wanna hedge the high grain prices, diversify, and send some business in the direction of us bankers.

Again, a worldwide famine is the best thing that could ever happen to middle-America. And what's good for middle America is ultimately good for the banks.

I would be concerned if I lived in the UAE. But I don't. If this really happens (And I'm sorta hoping this for the US's sake, though I'm sorta hoping against it for the sake of everyone else in the world), let's call up OPEC and offer a pound of grain for every barrel of oil they send us. Maybe they'll FINALLY understand what it's like after 35 years of extortion.

I've been a peak oiler for several years and I am a bit of a gloom and doomer, but a food crisis isn't a bad thing for America. It's like an oil crisis to Saudi Arabia or a manufacturing labor shortage to China.

 
MezzKet:
World Economic Forum - Global Risks Report 2010

http://www.weforum.org/pdf/globalrisk/globalrisks2010.pdf

Food Price volatility is one of the TOP 5 risks noted.

Again, how is this a bad thing?

You can't be both worried about both food prices and the debt. Either everyone is starving OR the country's bankrupt- unless farmers refuse to pay income taxes, you can't have both.

 
IlliniProgrammer:
MezzKet:
World Economic Forum - Global Risks Report 2010

http://www.weforum.org/pdf/globalrisk/globalrisks2010.pdf

Food Price volatility is one of the TOP 5 risks noted.

Again, how is this a bad thing?

You can't be both worried about both food prices and the debt. Either everyone is starving OR the country's bankrupt- unless farmers refuse to pay income taxes.

We can't be worried about both, but the way things are going, both can occur at the same time... Fighting government debt will place further pressure on the individual, especially with rising taxes. This will constrain spending and force another crisis... I understand we can't worry about both, but that doesn't mean that when either one rears its head, the other will remain dormant.

This is clearly the issue facing governments, tackle economic growth or tackle rampant inflation...

Now how is rampant food volatility bad?!? I looked at a deal in the prepared meal service to schools, a company that served thousands of national education complexes; should this company have gone under because of massively erroding margins, the cost burden of higher food costs, on average 8-10% increases in 6 months (food accounts for a good portion of school budgets), would have constrained the educational system further and forced more gov't debt issuance to solve the problem... To think that food volatility is ok is a preposterous statement and unfortunately ripples through the system... Think about the amount of food provided by gov't funded programs that are sustained by constant debt issuance, things like hospitals, schools, prisons, homeless shelters etc.

 

From what I've read America's corn crop is going to be large this year: 13.5 billion bushels, which would be a new record. Perhaps not using corn in our gas tanks might change things a bit. Anyway, isn't the biggest problem regarding world hunger not the quantity of food available, but the distribution of it to individuals in need?

looking for that pick-me-up to power through an all-nighter?
 
<span class=keyword_link><a href=//www.wallstreetoasis.com/finance-dictionary/what-is-london-interbank-offer-rate-libor>LIBOR</a></span>:
From what I've read America's corn crop is going to be large this year: 13.5 billion bushels, which would be a new record. Perhaps not using corn in our gas tanks might change things a bit. Anyway, isn't the biggest problem regarding world hunger not the quantity of food available, but the distribution of it to individuals in need?
Bear in mind that corn typically isn't grown for human consumption- it's for animals. Yes, we eat animals, too, but it takes 3 calories of corn to make one calorie of egg or chicken; 10 calories of corn to make one calorie of beef or milk.

What I would be concerned about is wheat and rice production- those are the staples that humans eat. How are we doing on those fronts for the year?

 
IlliniProgrammer:
<span class=keyword_link><a href=//www.wallstreetoasis.com/finance-dictionary/what-is-london-interbank-offer-rate-libor>LIBOR</a></span>:
From what I've read America's corn crop is going to be large this year: 13.5 billion bushels, which would be a new record. Perhaps not using corn in our gas tanks might change things a bit. Anyway, isn't the biggest problem regarding world hunger not the quantity of food available, but the distribution of it to individuals in need?
Bear in mind that corn typically isn't grown for human consumption- it's for animals. Yes, we eat animals, too, but it takes 3 calories of corn to make one calorie of egg or chicken; 10 calories of corn to make one calorie of beef or milk.

What I would be concerned about is wheat and rice production- those are the staples that humans eat. How are we doing on those fronts for the year?

Based on crop progress reports, %planted for rice is greater than 5 year average. I'm not in the business (Im a UG student), but I guess this means the crop is ahead of schedule. Anyway this is for one year outlook only: I'm sure within our lifetimes we will most definitely have some sort of food/water crisis.

http://www.usda.gov/nass/PUBS/TODAYRPT/prog1910.pdf

As for your post about corn, absolutely true. Has anyone read The Omnivore's Dilemma by Michael Pollan? The book discusses the corn industry in depth and the way corn is used as a main feed for animals. If you are interested in the corn/agricultural industry this book offers a different perspective.

looking for that pick-me-up to power through an all-nighter?
 

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