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The Great Grain Drain: A Note from Aaron Edmonds

Hi Jennifer,

Globally grain stocks have shrunk to levels not seen since the early 1970s. Now to most this may seem like a seemingly unimportant fact. But this reality needs to be put into perspective.

In 1970 when the world was feeding itself out of the same sized grain inventories there were 3.7 billion people. Today there are over 6.5 billion people meaning the world is carrying near an extra 3 billion hungry mouths to 1970. We also now have a significant portion of the global crop being turned into biofuels – cereals and sugars for ethanol and oilseeds and tallows for biodiesel.

Once these biofuel plants are built they generally do not stop consuming feedstock. Shareholders do not make money from plants sitting idle. Other end users that have emerged are combustible stoves and water heaters in grain producing areas where low prices have encouraged feedstock substitution away from fossil fuels.

There are over 2 million corn stoves in North America alone that consume close to 25kg each per day in the cooler months – a total loss of 50,000 tonnes a day. What this serves to highlight is that grain prices have been too slow to appreciate to discourage waste in non food sectors. Once end using infrastructure is in place and consuming it generally will take significant grain price inflation to stop this consumption. Grain values in effect need to reach and in fact surplus energy parity values to prevent loss to biofuel end uses.

On the other end of the grain chain are the producers who are facing severe limitations in their ability to actually increase let alone maintain production. Depleting water aquifers, drought affected irrigation sources, competition for water and reduced rainfall are issues that are real and impacting on production output today.

And with an anticipated ‘grain boom’ there are also some such as myself who are predicting capacity constraints. For example, an inability for the fertilizer supply chain to be able to cope with demand from an agricultural sector keen to capitalise on rising prices. Potash fertilizer may be especially short moving forward. Hyperinflation in such inputs in itself is damaging to the output potential of third world cropping systems. Competition for land resources by staple food crops will be fierce and ‘illogical’ crop choices of the past (eg fruit crops) will be swept aside for fields of wheat, rice, corn and soybeans.

Output driven technologies such as transgenics will need to be embraced worldwide and embraced with fervour. Most would argue it is better to be fed than dead and anyone disagreeing with this is likely unwilling to be the first to go without as shortages unfold.

Environmentalism has failed for there is not one so called green group with a truly sustainable model of food production to promote today.

2007 will be a critical year for the world’s staple food supply. Because a willingness to try and produce our way out of an approaching deficiency in grain supplies may be overriden by constraints out of everyones hands – weather and water. There are already early signs that China’s 06-07 winter wheat areas are showing the effects of drought and areas within the Midwestern wheatbelt of the US have inadequate soil moisture levels. Here in Australia our summer crop plantings are well down from previous years. This developing crisis should concern everyone who eats food.

Regards,
Aaron Edmonds
2002 Nuffield Scholar
President Australian Sandalwood Network
www.australianuts.com

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54 Responses to “The Great Grain Drain: A Note from Aaron Edmonds”

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  1. Comment from: Pinxi


    I always knew that Aaron, detribe & Pinxi had a lot in common. It’s a valid point too about vocalists v’s doers. I just wanted to say to Aaron that he should practice how he chooses his words (& human-sheep govt-farmer analogies) to avoid pub brawls.

    detribe with the question of dumping prices locals out of their own production v’s they can’t afford 1st world crops, you touch on an area I nearly raised earlier but decided it was too complicated for my already long-winded posts. In quick response to you I can say that I was referring to correctly priced 1st world output. Dumping subsidised products (as with trade barriers) creates additional peverse & distortionary effects and can vary by area & crop. In this space we can’t go much beyond generalisations. In addition, still trying to keep it in a nutshell I can point to locally specific conditions & degree of inequality. Where an industrialising country has growing divisions between urban growth areas & urban slums & rural poor you can have the latter going without while you can have food being shipped from rural to urban areas where the highest bidders are; you can also have a structural change in the crops demanded (the new wealth doesn’t want traditonal staples eg potatos) so more volative markets. This has led some govts to try to control prices or markets, or subsidise food for the poor, or restrict movements between rural & urban areas. Some other local govts (eg in Brasil) have taken up the idea of basic rights and provided subsidised food staples for everyone -rich or poor. A similar kind of measure is the work for food policy (eg India) where if an area is facing a potential famine then people can work on public projects in exchange for food transfers. It would have complicated matters too much above but I nearly pointed out that subsidies and bilateral trade agreements can sometimes benefit poor people in 3rd world countries but the main point is these are add-on measures in an already distorted system and dependency on compensatory measures or aid (whether its genuine or dumping in disguise) is not a solution.

    Having said all that, I 1st read your post assuming you were addressing the 3rd world farmer, but perhaps you meant 3rd world ag exports underpricing 1st world farmers (particularly where they’re industrialised & organised to store & ship large quantities with reliable quality eg soy beans)? If so, it fits, it doesn’t go against the grain (heh) of my comments in earlier posts above. It’s already been stated that 3rd world exports (esp standard cash crops) can be sold on international markets, doesn’t necessarily benefit to the strugglers or the subsistence workers, especially where there are industrial operations, FDI & a high degree of inequality as there is in latin america.

  2. Comment from: Pinxi


    re global economic security Aaron, there are already plenty of volatilities in the economic system itself

  3. Comment from: Aaron Edmonds


    Agree Pinxi but lets not see how food insecurity affects it concurrently. Sadly I don’t think we’ll be able to avoid it and there is somewhat of a perfect storm approaching. Loose monetary policy on an unprecendented scale, equity bubble, housing bubble, deflation of the currency all commodities are traded in, weather variability and general jostling for resources in a regionally unsettling manner.

  4. Comment from: Aaron Edmonds


    Urea price has recently concluded a 30% rise over a succession of 2 months. Well on the way to a inflationary move we might prefix with hyper don’t you think Ian? Of course in anticipation of these fertilizer price rises and still being in the business of growing grain, I have 2 years worth of fertilizer on hand to avoid these price jumps. Commodity markets are great supporting arguements when it comes to futurising … But the future for sandalwood just became a little clearer ;)

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