by Charlie Edwards | Jan 29, 2008 | Climate and resource scarcity, Conflict and security
I’m not allowed to blog about the session I am currently in for reasons of commercial confidentiality (which raises a point about how we share information on risks on a practical day-to-day basis – which is what the presentation is about).
However – we had an awesome discussion in the break. According to people present we need to be aware of two things in the near and medium term (Alex has blogged on some of this before).
1) We face a food shock like that of the energy shock in the 1970s
2) The bio-fuels market is set to drop – big time. Lots of people are going to lose a lot of money.
by Alex Evans | Jan 26, 2008 | Africa, Climate and resource scarcity, Economics and development
The FT’s consumer industries correspondent, Jenny Wiggins – who along with commodities correspondent Javier Blas deserves a medal (or at the very least a rise) for excellence in covering the food prices story over the last year – is looking at changing patterns of food consumption in India in the paper’s Saturday magazine today. The whole story is a terrific piece of feature journalism, but it was this passage towards the end that got me thinking in particular:
India, which is still trying to lift millions of people out of poverty, is having problems satisfying its appetites. One of the reasons the Punjabi dairy farmers are doing so well is that demand for milk, and milk-derived products, is increasing so quickly that farmers can’t keep up. India, despite being the world’s largest producer of milk, temporarily halted exports of milk powder last summer to try and stop domestic milk prices from rising too fast after some dairy farmers were tempted by record high global prices and sold their product to exporters rather than local food producers.
Milk isn’t the only hot commodity. After restarting wheat imports in 2006, for the first time since the late 1990s, India banned wheat exports last year. The country can, of course, try and produce more food. But Ajay Shankar, a government secretary in the ministry of commerce and industry, says that while India wants to increase its agricultural yields (which are low compared with the rest of the world), expanding the amount of land farmed is difficult in a country already struggling to support more than one billion people. In Punjab, the state that produces a hefty chunk of India’s wheat, rice and milk, decades of intensive farming and heavy fertiliser use have taken a heavy toll on the land, and water tables are falling sharply.
Although India’s economy is expanding at about 9 per cent a year, its agricultural sector is slowing, with growth declining from 4.7 per cent between 1992-1997 to just 1.5 per cent between 2002-2006. If India can’t produce enough of its own food, it will have to import more. Shankar says it is unclear how much more food India will need, but acknowledges that significant increases in imports would affect the global economy. ”If we become a major importer of food grains as some fear, clearly it will have an impact on global prices,” he says over tea in his Delhi office.
And India is not the only country expected to import more food in coming years. Over the next decade, per capita income in China is expected to triple, which means the Chinese will be eating more – and better. They are already each eating twice as much meat as they were in 1990 and the country now accounts for one third of all meat eaten in the world, according to research by Goldman Sachs.
Now as Wiggins explains earlier in the article, it’s changing consumption in the BRIC countries, more than falling grain stocks or increasing government support for biofuels, that’s really been driving rising food prices. But if the two most populous of those four nations, India and China, are having to import more and more of their food, that raises the question: who’s going to be growing the supply to meet all this extra demand?
And the thing that struck me, as I pondered this, was that if there’s one region that by rights out to be making a mint out of rising food prices, it’s Africa. Africa, after all, is the continent that the green revolution forgot. While productivity was going through the roof in Asia in the 1960s and 1970s, African agriculture remains stubbornly unproductive. Now that agricultural commodities appear finally to be heading out of their interminable slump, there’s a powerful case for investors to tackle the productivity gap, you’d think. So is lady luck finally smiling on Africa’s people?
Well, a big part of the answer to that question depends on whether you’re looking at those of her people in her mushrooming cities, or alternatively those of her people still working the land. If you look at the global statistics on hungry people, most of them are in rural areas. Fully 50 per cent of the world’s undernourished people (400 million souls) are in low income farm households. Another 22 per cent, 176 million people, are rural landless and low income non-farm households; and a further 8 per cent, 64 million people, are poor herders, fishers or forest people dependent on community or public resources.
In fact, only 20 per cent of the world’s undernourished people are in low income urban households – 176 million people – and a great many of them are to be found in China and India rather than Africa. [All stats from John Shaw’s masterly World Food Security: a history since 1945.] So presumably, rising prices for agricultural goods ought to spell good news for all those rural poor in Africa, especially if rising prices also incentivise investment in improving productivity – right?
As I blogged back in October last year, development economist legend Dani Rodrik’s answer is that it depends – but that “it depends in predictable ways on household and country characteristics”:
…it depends on whether a poor household is a net seller or buyer of food (that is, whether it grows more or less food than it consumes). This means that the rural poor generally tends to benefit from higher food prices, whereas the urban poor generally get hurt. How large the impact is depends, in turn, on the size of the food account as a share of total expenditures or income of a household. And whether the change is good or bad for a nation’s poor as a whole depends on the geography of poverty in a country.
But there’s a factor that Rodrik overlooked: climate change. While northern latitude global breadbaskets like Canada and Russia stand to be net beneficiaries from climate change in the short to medium term, the outlook for Africa is not good at all. Falling yields as a result of climate impacts risk increasing Africa’s needs for imported food, rather than its opportunities to export food. For countries already dependent on imported oil – which, as I noted in December, have already seen all their increases in aid and debt relief from the last three years wiped out by higher fuel import costs – it’s a vicious spiral, especially given that biofuels mean that energy and food prices are now linked.
The irony and injustice here is heartbreaking. Just when one major global trend – rising food prices – looks set finally to offer Africa some kind of a break, we find that in fact other trends – climate change and energy scarcity – may convert higher food prices instead into yet another problem, that despite being created elsewhere, somehow ends up in Africa’s lap.
(For more on the international implications of rising food prices, see my briefing note from December last year.)
Update: see also
– On collision course: scarcity and African patronage systems – 5 March 2008
– Food prices: where to get briefed – 2 March 2008
– Third world debt (the sequel) – 1 March 2008
by Alex Evans | Jan 26, 2008 | Climate and resource scarcity, Europe and Central Asia
Nick Butler – treasurer of the Fabian Society, chair of the Centre for European Reform’s advisory board, erstwhile chief of staff to BP’s former CEO John Browne – is a worried man. Europhile though he is, the omens look not good:
The European economy is just beginning to feel the impact of Chinese growth, which will add to the pressures already created by America’s powerful and accelerating lead in the development of innovation and intellectual property. In a world where both low and higher value added goods and services are traded through open competition based on price and quality, Europe’s comparative advantage is unclear. We are losing on both sides of the playing field.
The risk for Europe in the next ten years is not one of war or starvation, but of gradual and steady decline, with growing structural unemployment, rising public sector deficits, and an expanding gap between the sense of entitlement felt by ordinary people and the capacity of the European economy to meet those entitlements. The image which comes to mind is the gradual descent to shabbiness of a once beautiful country house whose needs have outstripped the means of its owners.
So in a new think piece for CER, he sets out five ideas for Europe’s future. One of them goes like this:
Given the magnitude of the challenge of climate change, Europe should lead the response, not just through rhetoric and support for environmentally dubious products such as biofuels, but through the development of the science, engineering and technology that will cut hydrocarbon consumption.
To underline its determination, the EU should establish a 100 per cent tax credit for all investment, personal and corporate, in all activity which reduces emissions. The credit should be enduring and would stimulate research, development and application. The businesses created would have the chance to be world leaders and contributors to the necessary global solutions. The cost would be minimal, because of the positive impact on employment and activity, and would be a worthwhile investment when set against the eventual costs of unconstrained global warming.
Know what? He’s exactly right. Europe is, as ever, full of talk and targets and short on radical implementing action – whether you’re looking at Afghanistan, the Lisbon agenda, climate change, connecting Europe with its citizens or whatever. And on climate change, as David Steven and I noted in Climate change: the state of the debate, the problem narrative still isn’t commensurate with the solution narrative.
If Europe really wants to be taken seriously on climate change, it needs to be thinking of actions on a different order of magnitude. David and I were talking just last weekend (at an event chaired by Nick Butler, oddly enough) about just this problem – and concluding that the kind of signal needed would be the abolition of corporation tax, to be replaced by a carbon tax. Just think what that would do to inward investment – and to the EU’s emissions.
by Alex Evans | Jan 17, 2008 | Climate and resource scarcity
Chris Haskins knows a bit about food. He’s the former chairman of Northern Foods and Express Dairies, acted as Tony Blair’s ‘rural tsar’, and he used to run the government’s Better Regulation Task Force. So it’s rather arresting to find him in the pages of this month’s edition of Prospect asking if we’re seeing the return of Malthus (full article only available to subscribers, unfortunately):
Over 200 years ago, Thomas Malthus argued that population would outrun food supply, and that without stern limits on reproduction the world was heading for disaster. So far, he has proved utterly mistaken; the world’s population has increased tenfold and there is less starvation than in his day. But the global population will probably rise from 6.5bn to 9bn by 2050, which will require the world’s farmers to produce more food in the next 40 years than in the past 200. The Malthusian predictions were wrong for 200 years, but might prove right in the next 50.
So what, Haskins goes on, must be done to avoid a “Malthusian catastrophe”? Three things. First, science and technology must be harnessed to improve the output of existing land – and yes, that includes GM crops. Second, we should take a long hard look at policies designed to promote biofuels. And third,
…we, as individuals, must stop using energy at the rate we do, and wasting food to the extent that we do. At present we waste nearly half of the food we produce, throwing perfectly good food away in our kitchens, restaurants and shops. The most virtuous and responsible step of all would be to become vegetarian. About three quarters of the world’s wheat, maize and soya is fed to animals who then convert this, very inefficiently, into meat for us to eat. Something else to bear in mind is that our consumption of milk products maintains demand for millions of cows, each of which, through its burping and farting, does more environmental damage than the average family car.
Just as with climate change, where there’s a heated debate about the difference between ‘luxury’ emissions (trips to St Lucia) versus ‘essential’ emissions (methane from rice paddies), the issue of equity is starting to emerge with food. Water will be next, as scarcity worsens and the concept of virtual water becomes more widely understood. It’s about fair shares, stupid.
by Alex Evans | Dec 20, 2007 | Climate and resource scarcity
While we’re on the subject of food, two interesting things to report from the Brussels conference that I mentioned a couple of posts ago:
First, it looks as though there may be pressure in Brussels for the EU to revisit its (extremely ill-advised) target for 10% of transport fuels to come from biofuels by 2020. Avril Doyle, an MEP who sits on the EP’s Environment and Climate Change Committees, was especially blunt about this, having returned from Bali apparently horrified by the revelation that the amount of corn it takes to fill a fuel tank with ethanol could feed someone for a year (a stat I can’t vouch for, not having come across it before). The EU’s target was, she said, a policy commitment made in good faith, but loooked now like it had been a mistake.
Interestingly, Tom Spencer – a former MEP who used to chair the EP Foreign Affairs Committee and who remains a leading light of GLOBE, the global network of green-minded Parliamentarians – flatly rebutted the notion that Brussels had set the target on the basis of a sustainability case that was sincere if perhaps flawed. In fact, he said, GLOBE had made it abundantly clear to MEPs throughout the policy development process that a biofuels target of the kind that was set would have serious, negative repercussions for global food security; but, he went on, the EP had backed the target anyway, not on the basis of a sustainability case, but purely and simply because of pressure from agricultural lobbies.
The other interesting point on food was in remarks made by a USAF Colonel representing EUCOM, the US military command for Europe. In an arrestingly forthright presentation, he led on the argument that in years to come, the real scarce resources were not, as policymakers were starting to think, oil and gas: instead, it would be food and water.
