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03/10/2011

The Food Crisis...looking out to 2050

It’s all about commodities prices these days, food and oil. Regarding the former, The Economist had one of its extensive special reports titled “The 9 billion-people question” regarding the prospects for feeding a world that will grow from 7 billion to 9 billion by 2050. Following are just a few excerpts. What shocked me was there was zero talk in the piece of the impact of speculators on the commodities markets, which is hugely important, but nonetheless The Economist makes some great points and I was particularly struck by the last passage on how much food we waste.

“At the start of 2011 the food industry is in crisis. World food prices have risen above the peak they reached in early 2008. That was a time when hundreds of millions of people fell into poverty, food riots were shaking governments in dozens of developing countries, exporters were banning grain sales abroad and ‘land grabs’ carried out by rich grain importing nations in poor agricultural ones were raising awkward questions about how best to help the poor.

“This time, too, there have been export bans, food riots, panic buying and emergency price controls, just as in 2007-08. Fears that drought might ruin the current wheat crop in China, the world’s largest, are sending shock waves through world markets. Discontent over rising bread prices has played a part in the popular uprisings throughout the Middle East. There are differences between the periods, but the fact that agriculture has experienced two big price spikes in under four years suggests that something serious is rattling the world’s food chains.”

“An era of cheap food has come to an end. A combination of factors – rising demand in India and China, a dietary shift away from cereals towards meat and vegetables, the increasing use of maize as a fuel, and developments outside agriculture, such as the fall in the dollar – have brought to a close a period starting in the early 1970s in which the real price of staple crops (rice, wheat and maize) fell year after year.

“This has come as a shock. By the 1990s most agricultural problems seemed to have been solved. Yields were rising, pests appeared under control and fertilizers were replenishing tired soil. The exciting areas of research in life sciences were no longer plants but things like HIV/AIDS.

“The end of the era of cheap food has coincided with growing concern about the prospects of feeding the world. Around the turn of 2011-12 the global population is forecast to rise to 7 billion, stirring Malthusian fears. The price rises have once again plunged into poverty millions of people who spend more than half their income on food. The numbers of those below the poverty level of $1.25 a day, which had been falling consistently in the 1990s, rose sharply in 2007-08. That seems to suggest that the world cannot even feed its current population, let alone the 9 billion expected by 2050. Adding further to the concerns is climate change, of which agriculture is both cause and victim. So how will the world cope in the next four decades?”

“In his 1981 essay, ‘Poverty and Famines,’ Amartya Sen, an Indian economist, argued that the 1943 Bengal famine, in which 3 million people died, was not caused by any exceptional fall in the harvest and pointed out that food was still being exported from the state while millions perished. He concluded that the main reason for famines is not a shortage of basic food. Other factors – wages, distribution, even democracy – matter more….

“Indeed, the world produces more than just enough to go round. Allowing for all the food that could be eaten but is turned into biofuels, and the staggering amounts wasted on the way, farmers are already producing much more than is required – more than twice the minimum nutritional needs by some measures. If there is a food problem, it does not look like a technical or biological one.”

“(One) of the simplest steps to help ensure that the world has enough to eat in 2050 would be to scrap every biofuel target. If all the American maize that goes into ethanol were instead used as food, global edible maize supplies would increase by 14%.

“But that is not going to happen. Biofuels have not only diverted crops to fuel but have also diverted public subsidies to farmers without provoking too many objections. Governments are unlikely to abandon biofuels merely because they are inefficient and damaging. ‘We can’t produce biofuels and feed the world’s increased population,’ says Peter Brabeck, the chairman of Nestle. ‘But for the moment we will have to.’”

Land isn’t an issue when it comes to world agriculture.

“Water, on the other hand, is crucial. At the moment it is probably agriculture’s critical limiting factor. 

“According to Nestle’s Peter Brabeck, roughly 4,200 cubic kilometers of water could be used each year without depleting overall supplies. Consumption is higher, at about 4,500 cubic kilometers a year, of which agriculture takes about 70%. As a result, water tables are plummeting. The one in Punjab has fallen from a couple of meters below the surface to, in parts, hundreds of meters down. The rivers that water some of the world’s breadbaskets, such as the Colorado, Murray-Darling and Indus, no longer reach the sea.

“By 2030, on most estimates, farmers will need 45% more water. They won’t get it. Cities are the second-largest users of water, and those in the emerging world are growing exponentially. They already account for half the world’s population, a share that will rise to 70% by 2050. In any dispute between cities and farmers, governments are likely to side with cities. Agriculture’s share of the world’s water used to be 90%, so it has already fallen a long way. It will surely decline further.

“The reason water matters so much is that irrigated farming is so productive. It occupies only one-fifth of the world’s farmland but contributes two-fifths of the world’s food output. Rice, the world’s most important crop in terms of calories, is mostly irrigated, and is especially sensitive to shortage of water, stopping growth at the first sign of getting dry.

“Water problems will worsen both because irrigated areas will suffer disproportionately from the effects of climate change and because diets are shifting towards meat, which is ‘thirsty.’ Arjen Joekstra, of the University of Twente, says it takes 1,150-2,000 liters of water to produce 1kg of wheat, but about 16,000 liters of water for 1kg of beef. As more people eat more meat, rising demands by farmers will collide with contracting water shortages.”

“Far too much food never reaches the plate”

“Mancur Olson, an American economist, talked about $100 bills lying on the sidewalk to express the idea of easy gains. The amount of food that is wasted represents a gigantic stack of $100 bills. Both in rich countries and poor, a staggering 30-50% of all food produced rots away uneaten. According to Josef Schmidhuber of the Food and Agriculture Organization (a U.N. agency), in Africa the post-harvest waste largely explains why many smallholders are net purchasers of food even though they grow enough for their families to eat.

“In poor countries most food is wasted on or near the farm. Rats, mice and locusts eat the crops in the field or in storage. Milk and vegetables spoil in transit. These might be considered losses rather than waste. Kanayo Nwanze, the head of the International Fund for Agricultural Development, reckons that such losses could be reduced by half. That would be the equivalent of a rise in output of 15-25%, which would go a long way to providing the extra food needed by 2050.

“Unlike in rich countries, much of the waste in poor ones is a matter of money, not behavior. Grain is often heaped on the ground and covered with a sheet: no wonder the rats get at it. Losses could be reduced by building new silos and better roads and providing more refrigeration, but those things are expensive. The African Development Bank is financing a seven-year program to reduce waste by 3% a year. Given the scale of the losses, says Divine Njie of the FAO, who worked on the scheme, ‘we were surprised at how modest the targets were.’ But 3% a year adds up to a 20% reduction in waste over seven years, a good start….

“Rich countries waste about the same amount of food as poor ones, up to half of what is produced, but in quite different ways. Studies in America and Britain find that a quarter of food from shops goes straight into the rubbish bin or is thrown away by shops and restaurants. Top of the list come salads, about half of which are chucked away. A third of all bread, a quarter of fruit and a fifth of vegetables – all are thrown out uneaten. In America this amounted to 43 million tons of food in 1997; in Britain to 4 million tons in 2006.

“If all rich countries waste food at the same rate as Britain and America, very roughly 100kg per person per year, the total waste adds up to 100 million tons of food a year, equivalent to one-third of the entire world’s supply of meat – an astonishing quantity. If Western waste could be halved and the food distributed to those who need it, the problem of feeding 9 billion people would vanish.

“But it can’t. Western spoilage is a result of personal habit and law. Education or exhortation might make a difference, but the extent of waste is partly a reflection of prices: food is cheap enough for consumers not to worry about chucking it out, and prices seem unlikely to rise by enough to change that attitude.”

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