This should have you concerned if you believe what they are saying. I’m sure you’ve noticed that food prices continue to rise, not fall, and this may well be the reason why.
MONDAY, FEBRUARY 9, 2009
After reading about the droughts in two major agricultural countries, China and Argentina, I decided to research the extent other food producing nations were also experiencing droughts. This project ended up taking a lot longer than I thought. 2009 looks to be a humanitarian disaster around much of the world
To understand the depth of the food Catastrophe that faces the world this year, consider the graphic below depicting countries by USD value of their agricultural output, as of 2006.
Now, consider the same graphic with the countries experiencing droughts highlighted.
The countries that make up two thirds of the world’s agricultural output are experiencing drought conditions. Whether you watch a video of the drought in China, Australia, Africa, South America, or the US, the scene will be the same: misery, ruined crop, and dying cattle.
The drought which started in November threatens over half the wheat crop in eight provinces – Hebei, Shanxi, Anhui, Jiangsu, Henan, Shandong, Shaanxi and Gansu.
Relief efforts are under way. The Chinese government has allocated 86.7 billion yuan (about $12.69 billion) to drought-hit areas. Authorities have also resorted to cloud-seeding, and some areas received a sprinkling of rain after clouds were hit with 2,392 rockets and 409 cannon shells loaded with chemicals. However, there is a limit to what can be done in the face of such widespread water shortage.
As I have previously written, China is facing hyperinflation, and this record drought will make things worse. China produces 18% of the world’s grain each year.
A) The Murray River stopped flowing at its terminal point, and its mouth has closed up.
For some reason, the debate over climate change is essentially over in Australia.
The United States
Augusta Region (Georgia, South Carolina, North Carolina)
La Niña likely to make matters worse
Brazil’s numbers for corn harvesting:
Harvested in 2008: 58.7 million tons
Horn of Africa
Other African nations suffering from drought in 2009 are: Malawi, Zambia, Swaziland, Somalia, Zimbabwe, Mozambique, Tunisia, Angola, and Ethiopia.
Middle East and Central Asia
Other Middle Eastern and Central Asian nations suffering from drought in 2009 are: The Palestinian Territories, Lebanon, Israel, Bangladesh, Myanmar, India, Tajikistan, Turkmenistan, Thailand, Nepal, Pakistan, Turkey, Kyrgyzstan, Uzbekistan, Cyprus, and Iran.
Lack of credit will worsen food shortage
Low commodity prices will worsen food shortage
The low prices at the end of 2008 discouraged the planting of new crops in 2009. In Kansas for example, farmers seeded nine million acres, the smallest planting for half a century. Wheat plantings this year are down about 4 million acres across the US and about 1.1 million acres in Canada. So even discounting drought related losses, the US, Canada, and other food producing nations are facing lower agricultural output in 2009.
Europe will not make up for the food shortfall
Stocks of foodstuff are dangerously low
2002-2005: 47.4 million tons
These inventory numbers are dangerously low, especially considering the horrifying possibility that China’s 60 million tons of grain reserves doesn’t actually exists.
Global food Catastrophe
The deflation debate should end now
In fact, agricultural commodities NEED to head higher and soon, to prevent even greater food shortages and famine. The price of wheat, corn, soybeans, etc must rise to a level which encourages the planting of every available acre with the best possible fertilizers. Otherwise, if food prices stay at their current levels, production will continue to fall, sentencing millions more to starvation.
Competitive currency appreciation
Instead of “competitive currency devaluations”, spiking food prices will likely cause competitive currency appreciation in 2009. Foreign exchange reserves exist for just this type of emergency. Central banks around the world will lower domestic food prices by either directly selling off their reserves to appreciate their currencies or by using them to purchase grain on the world market.
Appreciating a currency is the fastest way to control food inflation. A more valuable currency allows a nation to monopolize more global resources (ie: the overvalued dollar allows the US to consume 25% of the world’s oil despite having only 4% of the world’s population). If China were to selloff its US reserves, its enormous population would start sucking up the world’s food supply like the US has been doing with oil.
On the flip side, when a nation appreciates its currency and starts consuming more of the world’s resources, it leaves less for everyone else. So when china appreciates the yuan, food shortages worldwide will increase and prices everywhere else will jump upwards. As there is nothing that breeds social unrest like soaring food prices, nations around the world, from Russia, to the EU, to Saudi Arabia, to India, will sell off their foreign reserves to appreciate their currencies and reduce the cost of food imports. In response to this, China will sell even more of its reserves and so on. That is competitive currency appreciation.
When faced with competitive currency appreciation, you do NOT want to be the world’s reserve currency. The dollar is likely to do very poorly as central banks liquidate trillions in US holdings to buy food and appreciate their currencies.
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Posted in Oh Crap!, tagged africa, Asia, australia, canada, china, Drought, europe, Extreme, Food Prices, Food Production, Food Shortage, global warming, Ice Caps, La Nina, North America, Poverty, South America, US, Water Shortage on February 9, 2009 | 2 Comments »