(Survival Manual/1. Disaster/Problems with the natural food chain)
A. Crop Disease
The Food Crisis Of 2011, Oct. 27 2010 by Addison Wiggin, contributor
Pasted from: http://www.forbes.com/sites/greatspeculations/2010/10/27/the-food-crisis-of-2011/
“Every month, JPMorgan Chase dispatches a researcher to several supermarkets in Virginia. The task is to comparison shop for 31 items.
In July, the firm’s personal shopper came back with a stunning report: Wal-Mart had raised its prices 5.8% during the previous month. More significantly, its prices were approaching the levels of competing stores run by Kroger and Safeway. The “low-price leader” still holds its title, but by a noticeably slimmer margin.
[The world’s population is growing at about 83 million people each year. During the last ten years, while global grain supplies have remained below average, about 830 million people have been added. A rising number of people on a diminished resource base has already lead to political turmoil across the Middle East. Now switch ‘food’ for ‘fuel’ in the ‘use more- have less’ equation and in a couple years when we are seen on the downside of peak oil, imagine retail cost increases and gasoline prices in North America, Europe, and developed of Asia. Mr Larry]
Read more at: http://wiki.answers.com/Q/How_much_does_the_world_population_grow_each_year#ixzz1U44q6sq
Within this tale lie several lessons you can put to work to make money. And it’s best to get started soon, because if you think your grocery bill is already high, you ain’t seen nothing yet. In fact, we could be just one supply shock away from a full-blown food crisis that would make the price spikes of 2008 look like a happy memory.
Fact is, the food crisis of 2008 never really went away.
True, food riots didn’t break out in poor countries during 2009 and warehouse stores like Costco didn’t ration 20-pound bags of rice…but supply remained tight.
Prices for basic foodstuffs like corn and wheat remain below their 2008 highs. But they’re a lot higher than they were before “the food crisis of 2008” took hold. Here’s what’s happened to some key farm commodities so far in 2010…
• Corn: Up 63%
• Wheat: Up 84%
• Soybeans: Up 24%
• Sugar: Up 55%
What was a slow and steady increase much of the year has gone into overdrive since late summer. Blame it on two factors…
• Aug. 5: A failed wheat harvest prompted Russia to ban grain exports through the end of the year. Later in August, the ban was extended through the end of 2011. Drought has wrecked the harvest in Russia, Ukraine and Kazakhstan – home to a quarter of world production
• Oct. 8: For a second month running, the Agriculture Department cut its forecast for US corn production. The USDA predicts a 3.4% decline from last year. Damage done by Midwestern floods in June was made worse by hot, dry weather in August.
America’s been blessed with year after year of “record harvests,” depending on how you measure it. So when crisis hits elsewhere in the world, the burden of keeping the world fed falls on America’s shoulders.
According to Soren Schroder, CEO of the food conglomerate Bunge North America, US grain production has filled critical gaps in world supply three times in the last five years, including this summer…
• In 2010, when drought hit Russian wheat
• In 2009, when drought hit Argentine soybeans
• In 2007–08, when drought hit Australian wheat
So what happens when those “record harvests” no longer materialize?
In September, the US Department of Agriculture estimated that global grain “carryover stocks” – the amount in the world’s silos and stockpiles when the next harvest begins – totaled 432 million tons.
That translates to 70 days of consumption. A month earlier, it was 71 days. The month before that, 72. At this rate, come next spring, we’ll be down to just 64 days – the figure reached in 2007 that touched off the food crisis of 2008. But what happens if the U.S. scenario is worse than a “nonrecord” harvest? What if there’s a Russia-scale crop failure here at home?
“When we have the first serious crop failure, which will happen,” says farm commodity expert Don Coxe, “we will then have a full-blown food crisis” – one far worse than 2008. Coxe has studied the sector for more than 35 years as a strategist for BMO Financial Group. He says it didn’t have to come to this. “We’ve got a situation where there has been no incentive to allocate significant new capital to agriculture or to develop new technologies to dramatically expand crop output.”
“We’ve got complacency,” he sums up. “So for those reasons, I believe the next food crisis – when it comes – will be a bigger shock than $150 oil.”
A recent report from HSBC isn’t quite so alarming…unless you read between the lines. “World agricultural markets,” it says, “have become so finely balanced between supply and demand that local disruptions can have a major impact on the global prices of the affected commodities and then reverberate throughout the entire food chain.”
That was the story in 2008. It’s becoming the story again now. It may go away in a few weeks or a few months. But it won’t go away for good. It’ll keep coming back…for decades.
There’s nothing you or I can do to change it. So we might as well “hedge” our rising food costs by investing in the very commodities whose prices are rising now…and will keep rising for years to come.
“While investor eyes are focused on the gold price as it touches new highs,” reads a report from Japan’s Nomura Securities, “the acceleration in global food price is unrestrained. We continue to believe that soft commodities will outperform base and precious metals in the future.”
So how do you do it? As recently as 2006, the only way Main Street investors could play the trend was to buy commodity futures. It was complicated. It involved swimming in the same pool with the trading desks of the big commercial banks. And it usually involved buying on margin – that is, borrowing money from the brokerage. If the market went against you, you’d lose even more than your initial investment.
Nowadays, an exchange-traded fund can do the heavy lifting for you, no margin required. The name of the fund is the PowerShares DB Agriculture ETF (DBA).
There are at least a half-dozen ETFs that aim to profit when grain prices rise. We like DBA the best because it’s easy to understand. It’s based on the performance of the Deutsche Bank Agriculture Index, which is composed of the following:
• Corn 12.5%
• Soybeans 12.5%
• Wheat 12.5%
• Sugar 12.5%
• Cocoa 11.1%
• Coffee 11.1%
• Cotton 2.8%
• Live Cattle 12.5%
• Feeder Cattle 4.2%
• Lean Hogs 8.3%
So you have a mix here of 50% America’s staple crops of corn, beans, wheat and sugar…25% beef and pork…and 25% cocoa, coffee and cotton. It might not be a balanced diet (especially the cotton), but it makes for a good balance of assets within your first foray into “ag” investing.
The meat weighting in here looks especially attractive compared to some of DBA’s competitors, which are more geared to the grains. It takes about six months for higher grain prices to translate to higher cattle and hog prices.
You can capture that potential upside right now…and you’ll be glad you did when you sit down to a good steak dinner a few months down the line. After all, it’s going to cost you more.”
B. Five Dangers to Global Crops That Could Dramatically Reduce the World Food Supply
29 Oct 2010, The Economic Collapse, by Michael Snyder
Pasted from: http://theeconomiccollapseblog.com/archives/5-dangers-to-global-crops-that-could-dramatically-reduce-the-world-food-supply
“The world food situation is starting to get very, very tight. Unprecedented heat and wildfires this summer in Russia and horrific flooding in Pakistan and China have been some of the primary reasons for the rapidly rising food prices we are now seeing around the globe.
In places such as Australia and the African nation of Guinea-Bissau, the big problem for crops has been locusts. In a world that already does not grow enough food for everyone (thanks to the greed of the elite), any disruption in food production can cause a major, major problem. Tonight, thousands of people around the world will starve to death. So what happens if things get even worse? Many agricultural scientists are now warning that global food production is facing dangers that are absolutely unprecedented. Crop diseases such as UG99 wheat rust and the “unintended effects” of genetic modification pose challenges that previous generations simply did not have to face. The outbreak of a real, live global famine looks increasingly possible with each passing year. So are you and your family prepared if a global famine does strike?
Already, there are huge warning signs on the horizon. Just check out what agricultural commodities have been doing. They have been absolutely soaring.
A recent article on the Forbes website noted a few of the agricultural commodities that have skyrocketed during this year….
Here’s what’s happened to some key farm commodit prices so far in 2010…
• Corn: Up 63%
• Wheat: Up 84%
• Soybeans: Up 24%
• Sugar: Up 55%
Are you ready to pay 84 percent more for a loaf of bread?
[A 1 lb. loaf of multigrain wheat bread would therefore increase in cost from about $2.78 to $5.11. Mr Larry]
You better get ready – these raw material prices will filter down to U.S. consumers eventually. So what is going to happen if the world food situation gets even tighter?
You don’t think that it can happen?
The following are 5 potential dangers to global crops that could dramatically reduce the world food supply:
1. UG99 Wheat Rust
UG99 is commonly known as “wheat rust” or “stem rust” because it produces reddish-brown flakes on wheat stalks. The International Maize and Wheat Improvement Center in Mexico believes that approximately 19 percent of the global wheat crop is in imminent danger of being infected with UG99.
Ultimately, it is estimated that about 80 percent of the wheat on the globe is capable of catching the disease.
There is no known cure.
This current strain of wheat rust was discovered in Uganda in 1999 and has spread into areas of Kenya, Sudan, Ethiopia, Yemen and Iran. It is feared that this crippling disease will spread even farther into south Asia, devastating the fertile growing regions of Afghanistan, Pakistan, India and Bangladesh.
If that happens, you might as well kiss world food stability goodbye.
A recent article in the Financial Times contained an absolutely stunning quote from one prominent agricultural scientist….“You can talk about crying wolf,” says Ronnie Coffman, director of the Durable Rust Resistance in Wheat project at the University of Cornell in the US, “but it is a wolf”, he asserts, “driving across the corn fields of Kansas.”
Later on in the same article, Coffman warns that this disease could cause a devastating famine in which literally millions of people would die….“It can be absolutely devastating if environmental conditions are right,“ he says. “You can count the number of people who could die from this in the millions.”
2. Mad Soy Disease
Mad Soy disease is spreading at an alarming rate among soy farms down in Brazil. Previously, the disease had been confined to the north part of the country, but now it has been increasingly spreading south. This disease retards the maturation of infected plants, and it has been causing yield losses of up to 40 percent. The USDA says that “there are no known effective treatments.”
3. Verticillium Wilt
Verticillium Wilt is a fungus that prevents lettuce from absorbing water, causing it to quickly grow yellow and eventually wilt. This dangerous fungus is very hard to get rid of totally because it can stay in the soil for up to seven years.
Today, Verticillium Wilt is spreading all over Monterey County, California. Considering the fact that Monterey County produces more than 60 percent of the lettuce in the United States, that is very bad news.
4. Late Blight
In 2009, a disease known as “late blight” attacked potato and tomato plants in the United States with a ferocity never seen before. According to a press release from Cornell University, late blight had “never occurred this early and this widespread in the U.S.” when it started showing up all over the place early last year.
Late blight begins as ugly brown spots on the stems of potato and tomato plants, and as the spots increase in size, white fungal growth develops until finally a soft rot completely collapses the stem.
This was the disease that was responsible for the Irish potato famine in the 1850s. A major new outbreak could occur without warning.
5. Genetic Modification
While it may or may not technically be a disease (depending on how you look at it), genetic modification is having a very serious affect on crops around the globe. For example, about 10 years ago Chinese farmers began to widely adopt Monsanto’s (MON) genetically modified Bt cotton. Researchers have found that since that time, mirid bugs that are resistant to the Bt pesticide have experienced a complete and total population boom.
Today, six provinces in Northern China are experiencing what can only be described as a “mirid bug plague”. Mirid bugs eat more than 200 different kinds of fruit, vegetables and grains. Chinese farmers in the region are completely frustrated.
In the United States, a different problem is developing. The complete and total reliance of so many U.S. farmers on Monsanto’s Roundup herbicide has resulted in several varieties of glyphosate-resistant “superweeds” developing in many areas of the United States.
The most feared of these “superweeds”, Pigweed, can grow to be seven feet tall and it can literally wreck a combine. Pigweed has been known to produce up to 10,000 seeds at a time, it is resistant to drought, and it has very diverse genetics.
Superweeds were first spotted in Georgia in 2004, and since then they have spread to South Carolina, North Carolina, Arkansas, Tennessee, Kentucky and Missouri. In some areas, superweeds have become so bad that literally tens of thousands of acres of U.S. farmland have actually been abandoned.
One of the most frightening things about genetic modification is that it actually reduces that amount of crop diversity in the world. For example, if nearly all farmers start using the same “brand” of genetically modified plants that are all virtually identical, it sets up a situation where crop diseases and crop failures can cascade across the planet very easily.
Genetic variety is a very desirable thing, but today our scientists are just doing pretty much whatever they want without really considering the consequences.
It has been said many times that genetic engineering is similar to “performing heart surgery with a shovel”. The truth is that we just do not know enough about how our ecosystems work to be messing around with them so dramatically.
Can we afford to make any serious mistakes at this point? The truth is that we already live in a world that is not able to feed itself. Tonight, approximately 1 billion people across the globe will go to bed hungry. Every 3.6 seconds someone in the world starves to death, and three-fourths of those who starve to death are children under the age of five.”
One response to “Problems with the natural food chain”
Good article Mr Larry.