Global Food Crisis Worsening

The countries that comprise 75% of the world's agricultural output are experiencing drought conditions. The scarcity of rain in the north and central provinces of China is the worst in recorded history. Australia has experienced drought since 2004, with 41% of its agricultural base suffering the worst drought in 117 years.

In the United States, continuing drought conditions are affecting California, Texas, Florida, Georgia and the Carolinas. The hardest hit in South America are Brazil, Argentina, Paraguay, Uruguay, Bolivia and Chile.

Africa faces food rationing and famine from lack of rainfall in Kenya, Tanzania, Burundi, Uganda and South Africa. Other African nations suffering from drought are Malawi, Zambia, Swaziland, Somalia, Zimbabwe, Mozambique,Tunisia, Angola and Ethiopia.

The Middle East and Central Asia are suffering from the worst droughts in recent history affecting Iraq, Syria, Afghanistan, Jordan, Lebanon, Israel, Bangladesh, Myanmar, India, Tajikistan, Turkmenistan, Thailand, Nepal, Pakistan, Turkey, Kyrgyzstan, Uzbekistan, Cyprus and Iran.

With a 20 to 40 percent decline in world food production, already rising food prices are headed significantly higher. Coming at this time when global food stocks are at an all time dangerously low level, political turmoil between nations could be a result.

Disclosure: No position.

Comments

[BxCapricorn:]

I was hoping you would site the lack of credit available to farmers, for the decrease in this year's crop planting. The CEO of Potash, WIlliam Doyle, during the conference call, put it right out there. It has amazed me how everyone simply ignores the obvious and will state, "we didn't see this coming...." when the moment of crisis arrives.

seekingalpha.com/artic...

Example:

"This was brought to the forefront again earlier this week as G8 officials called for increasing public and private investment in agriculture citing growing concerns over the global food supply. A dangerous game is now unfolding around the world. Fertilizer applications are being reduced at unprecedented levels, with our estimates for North American potash applications falling as much as 30% to 35%, phosphate by 20% to 25% and nitrogen by 5% to 10%.

To put this in context, U.S. applications this fertilizer year are expected to be similar in total volume to the 1983 pick year while farmers now need to generate 90% more production than in 1983 and will plant 25 million additional acres of corn, the most fertilizer intensive crop in the U.S. Clearly, nutrient replenishment will suffer.

This level of reduction has never been seen before. No one can state precisely what the impact will be on the world's food supply immediately or over the longer term, but we know with scientific certainty that nutrient under application damages both crop yields and quality."

We can hope that the corn crop in America comes in heavy and covers, as I've projections that it will. Maybe everyone's new Victory Gardens are being underestimated. Maybe not.

May 31 06:21 AM

[pielcanela:]

If you don't get rain, you're just wasting fertilizer.

May 31 07:18 AM

[Mad Hedge F...:]

I agree totally. I don’t normally rely on National Geographic magazine for investment advice, but in the June issue the screaming long term bull case for the soft commodities is there in all its glory. During the sixties, new dwarf varieties, irrigation, fertilizer, and heavy duty pesticides tripled crop yields, unleashing a green revolution. But guess what? The world population has doubled from 3.5 to 7 billion since then, eating up surpluses, and is expected to rise to 9 billion by 2050. Now we are running out of water in key areas like the American West and Northern India, droughts are hitting Africa and China, soil is exhausted, and global warming is shriveling yields. Water supplies are so polluted with toxic pesticide residues that rural cancer rates are soaring. Food reserves are now at 20 year lows. Rising emerging market standards of living are consuming more and better food, with Chinese pork production rising 45% from 1993 to 2005. The problem is that meat is an incredibly inefficient calorie transmission mechanism, creating demand for five times more grain than just eating the grain alone. I won’t even mention the strain the politically inspired ethanol and biofuel programs have placed on the system. It is possible that genetic engineering, sustainable farming, and smart irrigation could lead to a second green revolution, but the burden is on scientists to deliver. The net net of all of this is that food prices are going up, a lot. Entertain core long positions in corn, wheat, and soybeans on the next dip, as well as the second derivative plays like Agrium (TO), Potash (POT) and Monsanto (MON). You might also look at DB Commodities Tracking Index Fund (DBC). These will all surpass last year’s stratospheric highs at some point.

May 31 12:35 PM

[denny Johnson:]

America needs to end the policy of paying farmers "not to plant" ! This is a world crisis and the US should not ignore its responsibility to provide as much grain as possible. It also will help our economic recovery, by reducing our Federal costs of "land banking" and increase our exports, bringing in cash. Or at least...... stop giving the UN cash and have the US buy American farmer grain to give to the UN instead. Keeping the money at home.


On May 31 12:35 PM Mad Hedge Fund Trader wrote:

> I agree totally. I don’t normally rely on National Geographic magazine
> for investment advice, but in the June issue the screaming long term
> bull case for the soft commodities is there in all its glory. During
> the sixties, new dwarf varieties, irrigation, fertilizer, and heavy
> duty pesticides tripled crop yields, unleashing a green revolution.
> But guess what? The world population has doubled from 3.5 to 7 billion
> since then, eating up surpluses, and is expected to rise to 9 billion
> by 2050. Now we are running out of water in key areas like the American
> West and Northern India, droughts are hitting Africa and China, soil
> is exhausted, and global warming is shriveling yields. Water supplies
> are so polluted with toxic pesticide residues that rural cancer rates
> are soaring. Food reserves are now at 20 year lows. Rising emerging
> market standards of living are consuming more and better food, with
> Chinese pork production rising 45% from 1993 to 2005. The problem
> is that meat is an incredibly inefficient calorie transmission mechanism,
> creating demand for five times more grain than just eating the grain
> alone. I won’t even mention the strain the politically inspired ethanol
> and biofuel programs have placed on the system. It is possible that
> genetic engineering, sustainable farming, and smart irrigation could
> lead to a second green revolution, but the burden is on scientists
> to deliver. The net net of all of this is that food prices are going
> up, a lot. Entertain core long positions in corn, wheat, and soybeans
> on the next dip, as well as the second derivative plays like Agrium
> (seekingalpha.com/symbo...), Potash (seekingalpha.com/symbo...)
> and Monsanto (seekingalpha.com/symbo...). You might also
> look at DB Commodities Tracking Index Fund (seekingalpha.com/symbo...).
> These will all surpass last year’s stratospheric highs at some point.

May 31 06:20 PM

[LilBob:]

On May 31 12:35 PM Mad Hedge Fund Trader wrote:

> I agree totally. I don’t normally rely on National Geographic magazine
> for investment advice, but in the June issue the screaming long term
> bull case for the soft commodities is there in all its glory.

I agree with you here Mad. And not just in soft commodities. It's pretty much a no-brainer that given increasing food prices and existing "local food," movements across the US, a resurgence in small farm production-especially in rural and semi-rural counties adjacent to major interstates and cities is going to happen. Right now wouldn't be a bad time to grab some battered shares by makers of small tractors, implements and generators, as well as companies that specialize in "boutique," food production equipment.

May 31 08:10 PM

[Mauiwalt:]

As oil prices increase the transportation and processing costs of food, we should experience shortages of certain high demand foods in our local stores as a tell. This first sign of trouble is when to make your buy move. Watch soybeans.

Jun 01 12:04 AM

[Karen Consumer:]

With the current administrations drive to reduce carbon dioxide regardless of human cost, I can see food shortages rising.

From paying farmers not to plant so as not to oversupply and cause food prices to drop to paying farmers not to plant so as not to release carbon dioxide into the atmosphere, neither make sense to me. If you're a farmer, plant, what ever the prices are, they are.

Add to that the carbon tax on cows for releasing carbon dioxide and methane by the mere process of living and breathing.

Then you factor in the feed, fertilizer, shipping to and from, the incredible Ethanol debacle...

My sign will read "will work for refined sugar products".

Jun 01 12:16 AM

[learnmoney:]

As a British resident but investing in US ETFS I have been a bull of most of the agricultural funds for the last 3 months. The reasons are simple:
Poor weather in most of Europe and food stocks down to very low levels and that includes Russia.
Land values have come down but with credit still difficult bankers only take the short term route in lending to farmers so expect a squeeze in 20010 as well.

Jun 01 06:21 AM