SEVERE GLOBAL FOOD CRISIS EXPECTED

Submitted to Shelton Blog by Clear Cut Mason County Progressive

Excerpts from:

Welcome to Dystopia!*
Entering a long-term and politically dangerous food crisis
By Jeremy Grantham

"Them belly full but we hungry...
A hungry man is a angry man...
A hungry mob is a angry mob."
--- Bob Marley,"Them Belly Full"

"Anyone who believes exponential growth can go on forever
in a finite world is either a madman or an economist."
--- Kenneth Boulding, Economist

Summary of the Summary

We are five years into a severe global food crisis that is very unlikely to go away. It will threaten poor countries with increased malnutrition and starvation and even collapse. Resource squabbles and waves of food-induced migration will threaten global stability and global growth. This threat is badly underestimated by almost everybody and all institutions with the possible exception of some military establishments.

Summary

1. Last year we reported the data that showed that we are 10 years into a paradigm shift or phase change from falling resource prices into quite rapidly rising real prices.

2. It now appears that we are also about fve years into a chronic global food crisis that is unlikely to fade for many decades, at least until the global population has considerably declined from its likely peak of over nine billion in 2050.

3. The general assumption is that we need to increase food production by 60% to 100% by 2050 to feed at least a modest sufficiency of calories to all 9 billion+ people plus to deliver much more meat to the rapidly increasing middle classes of the developing world.

4. It is also widely assumed that at least the lower end of this target will be achieved. I believe that this is substantially optimistic. At very best, if we reach that level we will not be able to hold it. Much more likely, we will not come close because there are too many factors that will make growth in food output increasingly difficult where it used to be easy:

• Grain productivity has fallen decade by decade since 1970 from 3.5% to 1.5%. Quite probably, the most efficient grain producers are approaching a "glass ceiling" where further increases in productivity per acre approach zero at the grain species' limit (just as race horses do not run materially faster now than in the 1920s). Remarkably, investment in agricultural research has steadily fallen globally, as a percent of GDP.

• Water problems will increase to a point where gains from increased irrigation will be offset by the loss of underground water and the salination of the soil.

• Persistent bad farming practices perpetuate land degradation, which will continue to undermine our long-term sustainable productive capacity.

• Incremental returns from increasing fertilizer use will steadily decline on the margin for fertilizer use has increased five-fold in the last 50 years and the easy pickings are behind us.

• There will be increased weather instability, notably floods and droughts, but also steadily increasing heat. The last three years of global weather were so bad that to draw three such years randomly would have been a remote possibility. The climate is changing.
  

• The costs of fertilizer and fuel will rise rapidly.

5. Even if we could produce enough food globally to feed everyone satisfactorily, the continued steady rise in the cost of inputs will mean increasing numbers will not be able to afford the food we produce. This is a key point that is often missed.

6. On the positive side, scientists are now very optimistic that they will be able to engineer more efficient photosynthesizing "C4" genes (corn belongs to that family) into relatively inefficient but vital "C3" plants such as rice and wheat, in 20 to 30 years. If successful this would increase output up to 50% and would buy time for a less painful transition to a sustainable population.

7. Many of these increasing difficulties were reflected in the original 2008 food crisis and the 2011 rebound. The last six weeks' price rise is more threatening because it occurred despite very much larger plantings than were available in 2008. Global demand is now so high and rising so fast and reserves are so low that price sensitivity to weather setbacks has become extreme.

8. It seems likely that several countries dependent on foreign grain imports have in fact never recovered from the 2008 shock. Countries like Egypt saw the percent of their consumer budget for food rise to 40%. At this level, social pressures may be at an extreme and probably have already contributed to the Arab Spring. Any price increases from here may cause social collapse and a wave of immigration on a scale never before experienced in peacetime. Another doubling in grain prices would be catastrophic.

9. Strong countermeasures to prevent a food crisis would be effective in curtailing the current crisis and preventing the development of a much greater crisis, but these measures will likely not be taken. This is because the price signals for the rich countries are too weak -- they can afford the higher price -- and there is inertia in all parts of the system. Also, the problems of malnutrition in distant countries are not generally felt as high-order priorities in the richer countries.

10. If food pressures recur and are reinforced by fuel price increases, the risks of social collapse and global instability increase to a point where they probably become the major source of international confrontations. China is particularly concerned (even slightly desperate) about resource scarcity, especially food.

11. The general public, the media, the financial markets, and governments badly underestimate these risks. Only the military of some countries, including the U.S. and the U.K., seem to appreciate them appropriately.

12. Natural gas supply increases buy some time, mainly for the U.S., but seem more likely to create complacency and continued dependence on hydrocarbons. The energy situation is less pressing globally in the short term than is the food problem. Supplies are suffcient to cause merely a slow and erratic price increase. The main problem with oil is in its contribution to the food problem through higher farming costs and generally increasing cost pressures on poorer countries.

13. In the longer term, in contrast, energy costs and absolute shortage in the case of oil form a serious problem second only to food shortages and will result in prices so high that they will impact global growth and even the viability of modern, rather fragile, economies.

14. On paper, though, the energy problem can be relatively easily addressed through very large investments in renewables and smart grids. Those countries that do this will, in several decades, eventually emerge with large advantages in lower marginal costs and in energy security. Most countries including the U.S. will not muster the political will to overcome inertia, wishful thinking, and the enormous political power of the energy interests to embark on these expensive programs. They risk being left behind in competitiveness.

15. Availability of metals is, in contrast, a minor problem in the next few decades. The prices will steadily rise but the consequences will be less. In the long run though, metals are the most intractable problem. There is no brain-intensive solution as there is for agriculture (i.e., organic farming), nor is there any capital-intensive or technology-intensive solution as there is for energy. We will just slowly run out and prices will rise.

16. The results of these problems will be felt mainly as price pressure in rich countries. The need to obtain adequate resources will squeeze national budgets, profit margins, and economic growth. For poor countries, though, it is literally a matter of survival. . .

* Dystopia: a society characterized by human misery, disease, oppression, and overcrowding.

Link to complete article:
http://www.gmo.com/websitecontent/GMOQ2Letter.pdf