Food Supply Catastrophe of 2009
October 28th, 2008You can stop driving and use less oil and gas. You can buy less things and use less copper, cotton and steel, but it is pretty hard to stop eating. It is in that simple thought that guides me to believe that we are heading to a global food catastrophe in 2009. How do I arrive at a conclusion that makes the energy crisis a walk in the park?
Let’s start with supply. Global inventories are at 30 to 40 year lows, despite the world having record harvests in 2008. Global inventories of grains (corn, wheat and soybeans) will be at 67 days of consumption before next year’s harvest.
Global demand continues to rise faster than production growth. It’s simple, world population keeps growing and large parts of the world are slowly starting to eat more like the Western world, with more meat and higher calorie content food.
Consider just China.
“If the Chinese people had consumed the same amount of meat, per person, in 2007 as in 1995, there would have been enough grain left over to support 927 million hungry people with enough grain for an entire year,” said Lane (Jim Lane is the editor of the Biofuels digest). The growth rate is so intense that, even if the US ethanol industry were completely shut down tomorrow, increased Chinese demand would soak up the excess grain by 2011.
“Even with all the growth, Chinese meat consumption is still 45 percent less than the average consumption in the US,” Lane warned. “An additional 277 million tonnes of grain would be needed to support China at parity with the US. That would take 68 million acres to grow. There isn’t that kind of arable land available anywhere is the world, whether we grow grains for renewable energy or not.”
This is from an article from Biofuelsdigest.com: China’s impact on corn
Now let’s get to why we may have a crisis next year. The credit crisis is hammering South American farmers, to the extent that they cannot get fertilizer. No fertilizer, no planting of crops.
Further, suppliers are asking farmers in the U.S. for more upfront money to make sure they aren’t holding delinquent debts, causing farming to be a bit more uncertain this year. Read all the details in a very important article from Bloomberg about how the credit crisis is affecting farmers in Brazil, Argentina and to a limited degree the US.
We had riots in dozens of countries in early 2008 due to shortages, what will happen with much lower production? What happens if combined with lower production, we have a drought? Markets aren’t exactly acting efficiently lately. I’m really getting worried that we could see a major spike in food prices in an awful world economy.
Starvation will become a major problem. Governments could easily fall when people can’t afford food. This may be the biggest issue of 2009, bar none. People have to eat.
October 29th, 2008 at 1:42 pm
Do you think that the credit crisis will limit farmers’ purchases of precision agriculture equipment too?
October 29th, 2008 at 7:31 pm
Internationally, yes, it might limit the short term uptake in precision ag. But on the whole this is becoming a must, best practice purchase, and it actually helps lower costs, so I don’t think it will be much affected.
If anything growth rates will slow a bit.
October 29th, 2008 at 8:03 pm
OK, that makes sense. Thanks.