Thursday, September 09, 2010

World food production is way short of any practical ceiling

High profile scientists and economists have predicted a starving world, detailing problems but few solutions. This article suggests that the solutions are being developed a the same time as the academics pronounce their predictions of "blood in the streets" and "perfect storms". Farmers are responsive to changes in demand and supply, and agri-science and positive politics can make a huge difference - without the kind of financial support directed towards those farming in Europe. 

Productive land lies idle throughout the developed world. Owners don't see a sufficient return from cropping, and are happy for their acres, which over recent decades have had a tendency to increase in value, being a store of wealth and capital. In addition, farmland is a place which provides leisure activities and an enviable life style. That's why so many high earners are also farmers.

Farming in the developing world is divided into the subsistence, small scale and big agri-business. Each is capable of far greater levels of production given the right inputs such as political will, education and capital investment. Without this we find that breadbaskets like Zimbabwe have become agricultural deserts, and land areas in Eastern Europe is effectively abandoned. Here we find production diminished from what it was 20 years ago. Yet countries such as Brazil have moved from peasant to high-tech, and the increased output means they join the world's major agri exporters. Brazilian grain production has increased from 80m tonnes in 2000 to 150m t in 2010. It's ranked world #1 for orange juice, coffee and sugar production as well as beef and chicken exports, world #2 in soyabeans, beef production, maize exports. Farm subsidies accounted for 5.7% of total farm income in Brazil in 2005-07, which compares with 12% in the USA and 29% in the EU. Farm productivity has not been associated with de-forestation, but almost entirely with neutralising the acid soils of the cerrado, farm research, particularly in grassland production through cross breeding native greasses with the brachiaria from Africa, and by turning soyabeans into a tropical crop. Brazil has worked hard at no-till cultivations, which no grow more than 50% of the grain crop. Mixing arable with livestock and forest produces a farming system that keeps in balance without major chemical intervention. 

Spikes in farm commodity prices occur as a result of increased demand from new entrants into the food market as well as traditional buyers. The new entrants, call them investors, speculators, are rarely interested in the delivery of the commodity they are buying, and there's no spike in demand from people holding out their bowls for food aid, and little from the housewife pushing her Tesco trolley. But when investors see the price of a commodity 'moving north' to use the current City parlance, and they see good reasons why a short term marginal shortage might happen - they pile in, buying commodities on futures contracts. Companies set up and market funds which sell the concept to the punter in the street, creating further demand - not for the physical commodity but the 'uplift'.

Actual farmers producing these commodities have to time their marketing efforts to catch these waves and avoid the troughs which happen in between. So in 2010, farmers who have sold this season's grain forward will have missed the peak of the wave - and the decision in their minds now is how long the swell will last. Should they sell forward at today's price, or, they ask, is there a bigger peak to come in a few months time? Unlike the speculator, who can move funds out of wheat and into gold at the click of a mouse, the farmer is stuck with grain to sell.

In a recent BBC radio interview Professor Lang from the City University predicted "riots and blood on the streets" in a world which became increasingly hungry due to a "perfect storm" where food supplies are limited while the world population expands out of control. Others have been there before him. In 1967 the celebrated economist Paul Ehrlich said "the battle to feed all of humanity is over" and forecast that in the 1970s and 1980s 'hundreds of millions of people would starve to death". In 1972 the influential Club of Rome said the world was running out of resources and that societies would collapse into anarchy on the 21st century. 

Professors such as Lang are fortunate to be in a position where they can spread false rumour and create waves while remaining in a well paid public sector position. Unlike the farmer, who gambles on being able to sell produce at a profit, or the commodity trader, who backs predictions with buying and selling positions, the professor's position is immune from market fluctuations.  

The grotesque predictions from these 'experts' provide news channels with juicy headlines, expand the notoriety of their authors, and add fuel to the commodity spike which is taking place.