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by Jennifer Barry
In December 2008, I discussed the rebound in world food stocks. Excellent
weather in the second half of the 2008 growing season led to near-record
yields. The fall saw a bountiful harvest, especially in grains. At the
same time, the global economic slump had crushed crude oil futures,
dampening the associated biofuel demand. Most agricultural commodities,
including the grains, fell sharply in price.
Nevertheless, I thought the sentiment was too bearish, and there was
reason to predict a rebound in the agricultural sector in 2009. The ending
stocks in corn were expected to be the tightest in three decades. Some
experts deduced that old crop soybeans would be nearly gone by the time
the fall harvest occurred, due to stockpiling by China and drought in
the Southern Hemisphere. Wheat also was affected by poor weather and
historically low supply.
My essay seemed prescient, as the grains formed a bottom just a few days
after publication. The soybeans, corn, and wheat rallied vigorously into
the new year.
However, these gains were not to last. The grains were dragged down by the
sell-off of assets in generalized market anxiety in March 2009. After a
spring recovery, growing conditions for the grains improved. A shockingly
higher USDA forecast caused corn, wheat and soybeans to drop.
Unfortunately for global households, I doubt these low prices will
last. India seems to be overly optimistic about its wheat stocks, and
will probably need to import grain next year. China has a near-insatiable
demand for US soybeans, buying in eleven weeks nearly as much as they
purchased all 2008/9 crop year. Cocoa and sugar have already reached
multi-decade highs this year, spurred by bad weather and disappointing
yields. If these trends continue, a big harvest in the Southern Hemisphere
will be required to keep prices from surging.
No Real Relief
While food production is currently meeting global needs, the fundamental
problems in agriculture I’ve written about have not been fixed. Even
though wheat yields increase 1% per year on average, this progress
doesn’t keep up with demand which rises 1.5% annually. Recessions
around the world are currently dampening per capita demand for more
expensive foodstuffs, but the global population is exploding, expanding
the need for food overall. The Earth will hold 7 billion humans in less
than three years, and surpass 9 billion before 2050.
As the population soars, arable land is shrinking. National Geographic
highlighted many of the difficulties in its June issue. Monoculture
cropping has made formerly productive areas infertile. Intensive
cultivation in dry areas causes steep drops in the water table and as well
as salty soils. Fully 40% of global farmland is “seriously degraded,”
and desertification in Africa is projected to make the continent 75%
dependent on food imports by 2025 if this trend is not checked.
The population boom was made possible by the “green revolution,”
as famines used to regularly kill millions in agrarian nations. This
revolution was largely spearheaded by one man, Dr. Norman Borlaug, whose
innovative breeding techniques developed high-yielding, disease-resistant
wheat and rice varieties. Along with better seeds, Dr. Borlaug encouraged
the adoption of modern agricultural methods such as the use of machinery,
irrigation, fertilizers and pesticides. His revolution in farm output is
calculated to have saved over a billion people from starvation, an amazing
accomplishment and a feat for which he received the Nobel Peace Prize.
Unfortunately, this revolution wasn’t very “green” as it relied
on cheap fossil fuels for inputs from fuel to chemicals. As petroleum
becomes scarcer and more expensive, poor farmers in undeveloped nations
will find it difficult to maintain production. The G8 has promised aid
to African agriculture, but this won’t prevent over 1 billion people
from suffering from malnutrition in 2009.
Mysterious microbes are an uncontrolled threat to food stocks as well,
attacking pollinators which are necessary for 9.5% of total agricultural
output. A new species of fungus was identified as the cause of white nose
syndrome in bats, but no cure is in sight. Another fungus, Nosema ceranae,
is suspected to contribute to Colony Collapse Disorder in honeybees,
but the full cause is not known.
Although demand for ethanol and biodiesel have dropped due to lower energy
prices and economic contraction in the West, government mandates will
still cause food to be diverted to transportation needs. In the United
States, the biofuel industries have strong advocates in Congress, insuring
continued subsidies. Both the EU and India have committed to obtaining 10%
of their vehicle fuel from biological sources. Malaysia plans to require
all the nation’s diesel be blended with 5% palm oil-based fuel by 2010.
Agricultural Black Swans
Since December, new threats to food security have emerged. The El
Niño-Southern Oscillation (ENSO) developed during the Southern Hemisphere
winter, and strengthened in October. ENSO conditions occur every 3-8
years, and usually last 9-12 months. This weather pattern involves
warmer water in the Eastern and Central Pacific Ocean, and the decrease
or reversal of prevailing easterly winds. This phenomenon predictably
causes droughts in Australia, India, Southeast Asia and southern Africa.
by Jennifer Barry
In December 2008, I discussed the rebound in world food stocks. Excellent
weather in the second half of the 2008 growing season led to near-record
yields. The fall saw a bountiful harvest, especially in grains. At the
same time, the global economic slump had crushed crude oil futures,
dampening the associated biofuel demand. Most agricultural commodities,
including the grains, fell sharply in price.
Nevertheless, I thought the sentiment was too bearish, and there was
reason to predict a rebound in the agricultural sector in 2009. The ending
stocks in corn were expected to be the tightest in three decades. Some
experts deduced that old crop soybeans would be nearly gone by the time
the fall harvest occurred, due to stockpiling by China and drought in
the Southern Hemisphere. Wheat also was affected by poor weather and
historically low supply.
My essay seemed prescient, as the grains formed a bottom just a few days
after publication. The soybeans, corn, and wheat rallied vigorously into
the new year.
However, these gains were not to last. The grains were dragged down by the
sell-off of assets in generalized market anxiety in March 2009. After a
spring recovery, growing conditions for the grains improved. A shockingly
higher USDA forecast caused corn, wheat and soybeans to drop.
Unfortunately for global households, I doubt these low prices will
last. India seems to be overly optimistic about its wheat stocks, and
will probably need to import grain next year. China has a near-insatiable
demand for US soybeans, buying in eleven weeks nearly as much as they
purchased all 2008/9 crop year. Cocoa and sugar have already reached
multi-decade highs this year, spurred by bad weather and disappointing
yields. If these trends continue, a big harvest in the Southern Hemisphere
will be required to keep prices from surging.
No Real Relief
While food production is currently meeting global needs, the fundamental
problems in agriculture I’ve written about have not been fixed. Even
though wheat yields increase 1% per year on average, this progress
doesn’t keep up with demand which rises 1.5% annually. Recessions
around the world are currently dampening per capita demand for more
expensive foodstuffs, but the global population is exploding, expanding
the need for food overall. The Earth will hold 7 billion humans in less
than three years, and surpass 9 billion before 2050.
As the population soars, arable land is shrinking. National Geographic
highlighted many of the difficulties in its June issue. Monoculture
cropping has made formerly productive areas infertile. Intensive
cultivation in dry areas causes steep drops in the water table and as well
as salty soils. Fully 40% of global farmland is “seriously degraded,”
and desertification in Africa is projected to make the continent 75%
dependent on food imports by 2025 if this trend is not checked.
The population boom was made possible by the “green revolution,”
as famines used to regularly kill millions in agrarian nations. This
revolution was largely spearheaded by one man, Dr. Norman Borlaug, whose
innovative breeding techniques developed high-yielding, disease-resistant
wheat and rice varieties. Along with better seeds, Dr. Borlaug encouraged
the adoption of modern agricultural methods such as the use of machinery,
irrigation, fertilizers and pesticides. His revolution in farm output is
calculated to have saved over a billion people from starvation, an amazing
accomplishment and a feat for which he received the Nobel Peace Prize.
Unfortunately, this revolution wasn’t very “green” as it relied
on cheap fossil fuels for inputs from fuel to chemicals. As petroleum
becomes scarcer and more expensive, poor farmers in undeveloped nations
will find it difficult to maintain production. The G8 has promised aid
to African agriculture, but this won’t prevent over 1 billion people
from suffering from malnutrition in 2009.
Mysterious microbes are an uncontrolled threat to food stocks as well,
attacking pollinators which are necessary for 9.5% of total agricultural
output. A new species of fungus was identified as the cause of white nose
syndrome in bats, but no cure is in sight. Another fungus, Nosema ceranae,
is suspected to contribute to Colony Collapse Disorder in honeybees,
but the full cause is not known.
Although demand for ethanol and biodiesel have dropped due to lower energy
prices and economic contraction in the West, government mandates will
still cause food to be diverted to transportation needs. In the United
States, the biofuel industries have strong advocates in Congress, insuring
continued subsidies. Both the EU and India have committed to obtaining 10%
of their vehicle fuel from biological sources. Malaysia plans to require
all the nation’s diesel be blended with 5% palm oil-based fuel by 2010.
Agricultural Black Swans
Since December, new threats to food security have emerged. The El
Niño-Southern Oscillation (ENSO) developed during the Southern Hemisphere
winter, and strengthened in October. ENSO conditions occur every 3-8
years, and usually last 9-12 months. This weather pattern involves
warmer water in the Eastern and Central Pacific Ocean, and the decrease
or reversal of prevailing easterly winds. This phenomenon predictably
causes droughts in Australia, India, Southeast Asia and southern Africa.
