FoodWorks is adding an important service to its regular consulting work. FREE!
There can be no doubt that the world is heading for a food crisis in the coming summer. Rising food prices drive more people into poverty and put brakes on the world's recovery from recession. Poor, hungry people lead to civil instability and a slower recovery means less jobs.
We need to act now!
Some of the major factors that have been pushing food price indices to their highest levels include:
Demand side
* Rising population – the world is adding 80 million people every year. Moreover, the majority of these people are in developing countries which have a limited agricultural resource base. As an aside, health programs, laudable as they are, impact more rapidly than food supply initiatives. So in countries where the population growth rate is highest, the Malthusian boundary is closer than we think.
* Rising incomes – the fastest income growth rates are also in those countries with large populations and above-average growth. Whereas the aim in the high income countries is to cut back on food consumption (we worry about obesity), a large proportion of the world’s population is moving towards increased consumption of eggs, meat and milk. All these commodities are poor converters of food adding pressure to the demand for staple foods.
* Bio-fuel – We are less concerned about bio-fuels. While the USA grew about 420 million tons of grain in 2009 and put 28 percent of that into bio-fuel, it is surely the case that without the ethanol program this amount of grain would not have been grown. It is disingenuous to take the bi-fuel grain and say “it could have fed millions of people”. Not so, without the demand for ethanol, at least a proportion wouldn’t have been grown. That said, this area of consumption represents a significant part of the demand for natural resources and has its own impact on the environment.
Supply side
* Water deficits – water is the elephant in the room. Aquifers are being depleted everywhere. Sanaa, the capital of Yemen, will soon have no water supply whatsoever. Melting glaciers in the Himalayas will first flood Pakistan (as they did last year) and then the absence of water will starve the largest irrigation system in the world.
* Climate change – however it is measured, and despite the skeptics, there seems enough evidence that the pattern of the world’s climate is changing with large dustbowls developing in Central Asia and Sub-Saharan Africa. Soil erosion and the damage to the eco-system from e.g., oil palm being grown in Indonesia also give huge cause for concern.
* Loss of land to non-farm use – as the human population grows people migrate to cities in search of jobs that are almost always more remunerative than agriculture. Mega-cities are consuming land for housing and industrial use at an enormous rate.
* Technical limits to productivity (yields) – the “Green Revolution” of the 1960s and ‘70s was based on large increases in land productivity. But the growth in yields cannot be exponential. Already many developed countries have reached the limits of what the land will yield. In the developing world yield increases, obtained at considerable cost, are frittered away because of lack of infrastructure, e.g., for storage and drying. Perhaps 40 percent of the production of food in these countries is simply wasted before it ever reaches the table.
All this has happened in the context of the public sector – national governments, multi-lateral aid agencies and the other donors – losing heart for agricultural development. Lack of investment in agriculture, its infrastructure and its skills has eroded the capability of many countries to deal with the crisis that is now on us.
With all the above in mind, FoodWorks has recognized that there are nevertheless opportunities. If governments will not or cannot act, then they should stand aside and let the private sector and the profit motive take over.
It's an urgent priority to mobilize capital and expertise and get it to work!
In this case, we at FW are developing a commodities market analysis service that not only looks at price and market trends in terms of the supply-demand balances of the major food and beverage crops, but points to related investment opportunities.
We will start with the basics of the food business, the staple crops, and focus on wheat, corn (maize) and rice. We will then add oilseeds and oils. As we progress we will include fertilizers and sugar and coffee and dairy.
We’ll do it (at least initially) free as a service to our clients and to facilitate the investment and development projects that are our bread and butter. We’ll bring to this not mere quantitative analysis, but the lengthy experience needed to see what changes in the numbers really mean on the ground with the farmers and those buying in the market.
And if you'd like to us to answer specific questions - free - by all means just email foodworks@quartermainesworld.com
Background note: FoodWorks staffers have had many years of experience of both public and private sector project work in every sector of agriculture and agribusiness. We are not academics, but people who have real world experience of how the markets work.
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