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CRISIS: Food Security


World Food Crisis

In case you haven’t noticed, the world is on the verge of a horrific global food crisis.  At some point, this crisis will affect you and your family.  It may not be today, and it may not be tomorrow, but it is going to happen.  Crazy weather and horrifying natural disasters have played havoc with agricultural production in many areas of the globe over the past couple of years.  Meanwhile, the price of oil has begun to skyrocket.  The entire global economy is predicated on the ability to use massive amounts of inexpensive oil to cheaply produce food and other goods and transport them over vast distances.  Without cheap oil the whole game changes.  Topsoil is being depleted at a staggering rate and key aquifers all over the world are being drained at an alarming pace.  Global food prices are already at an all-time high and they continue to move up aggressively.  So what is going to happen to our world when hundreds of millions more people cannot afford to feed themselves?

Most Americans are so accustomed to supermarkets that are absolutely packed to the gills with massive amounts of really inexpensive food that they cannot even imagine that life could be any other way.  Unfortunately, that era is ending.

There are all kinds of indications that we are now entering a time when there will not be nearly enough food for everyone in the world.  As competition for food supplies increases, food prices are going to go up.  In fact, at some point they are going to go way up.

Let’s look at some of the key reasons why an increasing number of people believe that a massive food crisis is on the horizon.

The following are 20 signs that a horrific global food crisis is coming….

#1 According to the World Bank, 44 million people around the globe have been pushed into extreme poverty since last June because of rising food prices.

#2 The world is losing topsoil at an astounding rate.  In fact, according to Lester Brown, “one third of the world’s cropland is losing topsoil faster than new soil is forming through natural processes”.

#3 Due to U.S. ethanol subsidies, almost a third of all corn grown in the United States is now used for fuel.  This is putting a lot of stress on the price of corn.

#4 Due to a lack of water, some countries in the Middle East find themselves forced to almost totally rely on other nations for basic food staples.  For example, it is being projected that there will be no more wheat production in Saudi Arabia by the year 2012.

#5 Water tables all over the globe are being depleted at an alarming rate due to “overpumping”.  According to the World Bank, there are 130 million people in China and 175 million people in India that are being fed with grain with water that is being pumped out of aquifers faster than it can be replaced.  So what happens once all of that water is gone?

#6 In the United States, the systematic depletion of the Ogallala Aquifer could eventually turn “America’s Breadbasket” back into the “Dust Bowl”.

#7 Diseases such as UG99 wheat rust are wiping out increasingly large segments of the world food supply.

#8 The tsunami and subsequent nuclear crisis in Japan have rendered vast agricultural areas in that nation unusable.  In fact, there are many that believe that eventually a significant portion of northern Japan will be considered to beuninhabitable.  Not only that, many are now convinced that the Japanese economy, the third largest economy in the world, is likely to totally collapse as a result of all this.

#9 The price of oil may be the biggest factor on this list.  The way that we produce our food is very heavily dependent on oil.  The way that we transport our food is very heavily dependent on oil.  When you have skyrocketing oil prices, our entire food production system becomes much more expensive.  If the price of oil continues to stay high, we are going to see much higher food prices and some forms of food production will no longer make economic sense at all.

#10 At some point the world could experience a very serious fertilizer shortage.  According to scientists with the Global Phosphorus Research Initiative, the world is not going to have enough phosphorous to meet agricultural demand in just 30 to 40 years.

#11 Food inflation is already devastating many economies around the globe.  For example, India is dealing with an annual food inflation rate of 18 percent.

#12 According to the United Nations, the global price of food reached a new all-time high in February.

#13 According to the World Bank, the global price of food has risen 36% over the past 12 months.

#14 The commodity price of wheat has approximately doubled since last summer.

#15 The commodity price of corn has also about doubled since last summer.

#16 The commodity price of soybeans is up about 50% since last June.

#17 The commodity price of orange juice has doubled since 2009.

#18 There are about 3 billion people around the globe that live on the equivalent of 2 dollars a day or less and the world was already on the verge ofeconomic disaster before this year even began.

#19 2011 has already been one of the craziest years since World War 2.  Revolutions have swept across the Middle East, the United States has gotten involved in the civil war in Libya, Europe is on the verge of a financial meltdown and the U.S. dollar is dying.  None of this is good news for global food production.

#20 There have been persistent rumors of shortages at some of the biggest suppliers of emergency food in the United States.  The following is an excerpt from a recent “special alert” posted on Raiders News Network….

Look around you. Read the headlines. See the largest factories of food, potassium iodide, and other emergency product manufacturers literally closing their online stores and putting up signs like those on Mountain House’s Official Website and Thyrosafe’s Factory Webpage that explain, due to overwhelming demand, they are shutting down sales for the time being and hope to reopen someday.

So what does all of this mean?

It means that time is short.

For years, many “doom and gloomers” have been yelling and screaming that a food crisis is coming.

Well, up to this point there hasn’t been much to get alarmed about.  Food prices have started to rise, but the truth is that our stores are still packed to the rafters will gigantic amounts of relatively cheap food.

However, you would have to be an idiot not to see the warning signs.  Just look at what happened in Japan after March 11th.  Store shelves were cleared out almost instantly.

It isn’t going to happen today, and it probably isn’t going to happen tomorrow, but at some point a major league food crisis is going to strike.

FOOD PRICES. Bloomberg. August 2012

If Jim Yong Kim was hoping for a honeymoon, the new World Bank president can forget it: To his headaches over Europe’s debt crisis he can add surging food prices.


Kim’s first month on the job was largely about gauging how Europe is affecting the plight of the poor. There are troubling signs that China and India are slowing, and that might leave Asia, which has the largest share of extreme poverty, devoid of growth engines.


That’s almost manageable compared with what’s confronting Kim in month No. 2: the worst U.S. drought in 56 years and dry weather in agricultural regions in India, KazakhstanRussiaand Ukraine. Coupled with exploding demand for food, the phenomenon is causing violent commodity-price volatility at the worst possible time for Asia.

Rising food prices limit how much central bankers can cut interest rates to safeguard growth. More troubling would be the potential setback to poverty-reduction programs for decades to come.


The last food crisis began amid the 2008-2009 crash of the U.S. economy. In the second half of 2010 alone, according to the World Bank, some 44 million people were pushed back below the extreme poverty line, defined as those living on $1.25 a day or less. Asia is home to the bulk of those who spend between 60 percent and 80 percent of their paltry incomes on food.


Price Spikes

“When food prices rise sharply, families cope by pulling their kids out of school and eating cheaper, less nutritious food, which can have catastrophic lifelong effects on the social, physical and mental well-being of millions of young people,” Kim says. “We cannot allow short-term food-price spikes to have damaging long-term consequences for the world’s most poor and vulnerable.”


Poverty isn’t an important metric for currency traders placing bets. It doesn’t figure readily into bond yields or stock valuations. Yet Asia is the latest and perhaps largest frontier for capitalism and opportunity. Multinational companies are counting on its swelling populations, growing cities and emerging middle-class consumer sectors for profits in the future.


Asians won’t consume if growth doesn’t reach them. They won’t buy cars, electronics, fancy handbags, imported beer or designer clothes if putting food on the table is at risk. More important, if too many Asians are preoccupied by the struggle to get enough to eat, that increases the threat of instability, never an ideal setting for a flourishing economy. Food inflation, remember, was among the crucial forces behind the Arab Spring protests.


The good news is that corn prices may already be easing, suggesting we might avoid a price spike as severe as that of 2010, when prices jumped 73 percent in just six months. Corn, of course, goes into everything from sweeteners to biofuel to feed for cows, pigs and chickens. Asia imports loads of it. The bad news, of course, is that any price increase means consumers will have to divert spending to food while the cost of other goods rises as well. This raises the specter of stagflation.


India is the most obvious candidate for that dreaded combination of weak growth and rising prices if its central bank tries to offset any slowdown by printing more money. Markets are already wary of inflation — up 7.25 percent in June alone — coming in above central-bank forecasts of 6.5 percent this year. India’s worst power crisis, one that left some 640 million people in darkness this week, bodes poorly for the inflation outlook. It’s emblematic of the nation’s infrastructure neglect.


China’s Exports

China has its own challenges as the era of cheap food ends. The recent 60 percent jump in corn to a record since June 15 is one problem. This year’s 35 percent surge in soybeans is another; China is by far the Asia-Pacific region’s biggest importer of soy. Wheat prices are zooming higher, too. China is already slowing rapidly as Europe’s mess depresses demand for its exports.


Asia’s policy makers also face a new dilemma. In recent years, the challenge was boosting growth. Even the food-price shock of the period was viewed as a cyclical phenomenon that would pass once farmers responded with increased supply.


What’s different this time is that demographic trends point to increasing demand for food as weather patterns undermine supply. As world temperatures rise, agricultural yields are becoming less predictable. And as U.S. droughts remind us, the world’s food chain has become more interconnected at a time when weather has rarely been so erratic. On top of it all, water is becoming scarcer. It’s the new oil.


The quickest fix is increased investment in infrastructure and smart government policies. The first remedy might be easy if not for the traumatized state of the world economy. Strapped nations want the private sector to step up, but market turmoil is reducing appetite for risk-taking.


The second would be more plausible if farsighted leadership were present. How many U.S. politicians are brave enough to end all the policies that encourage massive supplies of corn to be squandered making ethanol? And are Asian leaders willing in this environment to provide a broader safety net?


In terms of policy, it’s vital that Asia get the next six to 12 months right, and take measures to protect the poor. There’s also more to be done by the World Bank, which Kim pledges will be a “more flexible partner” than it has been in Asia’s recent past. If not, food costs might soon be wrecking too many lives in Asia.


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