About 10 people died in food riots in April last year. They were fighting because ‘khabus’ disappeared off the shelves in Cairo and surrounding cities due to wheat shortage.
Rioters, many hungry and all angry, burned buildings and cars demanding an answer.
There were also riots from Equatorial Guinea to Haiti to Bangladesh as bread and rice went scarce.
Much of these events did not get as much attention from the media as they deserved.
“This is the world’s big story,” noted economist Jeffrey Sachs, director of Columbia University’s Earth Institute, had told CNN then.
Imagine the life of a person earning Rs 8,000 per month today in India. Feeding himself and his family the basic needs is becoming a nightmare.
Everywhere you see, it’s a problem of shortage or the so-called “supply-side constraints”. What that means is high inflation is here to stay and we had better learn to live with it.
Need reasons? Here are a few: for the last 5 years, arable land acreage has shrunk by 8% globally due to soil erosion, rising sea levels and advancing deserts, aided by sandstorms.
The situation in some parts of China is so dire that sandstorms manage to submerge telephone poles under their advancing dunes.
China is emerging as the “dust bowl” of the world as overgrazing, falling water tables, depleting rivers is leaving the topsoil drier year on year.
With dry soil vulnerable to blowing in the wind, especially in northern and western parts of China, the resident population is frequently forced to move rapidly. Africa is another source of sand storms emanating from the Sahara and Sahelian regions.
In case you think the menace of sandstorms is exaggerated, consider this: sandstorms originating from northwest China dumped millions of tonnes of sand in Arizona, US and Canada in 2001.
Korea now frequently experiences sandstorms that destroy crops. The role of temperature in crop yields cannot be emphasised enough. For every rise of 2 degrees celsius in global temperature, rice and wheat crop output declines 8-10 %.
With the Copenhagen summit pointing towards a very warm 2010 calendar year, it wouldn’t be a bad idea to save money to buy food.
Here’s more: The Chinese are losing 360,000 hectares a year to advancing deserts, Brazil 58 million hectares and Nigeria 351,000 hectares.
All these are heavily populated nations and running out of buffer stocks of grains and pulses.
Figures for the former Soviet Union are not authentic, but sandstorms are on the rise there too.
The Bodele depression in Chad loses 1.3 billion tonnes of topsoils to sandstorms a year.
Africa loses 3 billion tonnes of topsoil a year to sandstorms and the Taklamakan and Kumtag deserts are approaching each other, sometimes at a rate of 150 metres per day!
Once these two deserts converge, the frequency and ferocity of the sandstorms can only be imagined. So will the magnitude of crop destruction and food shortage world wide.
Nature, surely is angry with the world.
Enough has been written about the impeding shortage of water, our most necessary but finite resource.
Unfortunately, little of what has been written has been taken seriously.
Shortage of water means an automatic shortage of food.
Aquifer depletion in non rejuvenating aquifers has been to the extent of 40% in some parts of India and China in the last 25 years.
Pilferage, adulteration and mismanagement of this resource adds to the reckless wasteful consumption that threatens to hasten a food shortage worldwide.
Let’s look at how soft commodities have reacted and will react to all this:
Sugar: Worldwide output of sugar was down 4.7% in 2008-09. India needs to import 2 million tonnes in 2009-10 just to meet this fiscal year’s target.
This is in addition to the 1.80 million tonnes already imported.
While demand for this fiscal is at 23 million tonnes, production is only 16 million tonnes.
There is a buffer stock of 3 million tonnes with the government.
Remember, the sugar crop is measured in 6-7 year cycles. With 3-4 years of ascending crop yields and 2-3 years of descending crop yields. We are in the second year of the downward cycle and unless the yield improves, cane prices are not about to decline. A truant monsoon and late excess rains have impacted the soil productivity. This commodity is at a three-decade high and barring routine price corrections, do not expect it to get any sweeter.
Wheat: The largest exporters of the grain —- US, Canada, Australia and Argentina —- are witnessing stagnating / falling production levels. With domestic consumption rising due to rising population, there is less to export. Average US exports have fallen from 100 million tonnes a year to 80 million tonnes and continue to fall. Rapid industrialisation and rising population is exerting a downward pressure on availability of cultivable land and an upward pressure on grain prices. China, the self sufficient nation till a few years ago is facing a crunch in availability due to rapid industrialisation and automobile incursion. The shopping list of China for wheat is expected to hit 80 million tonnes a year in a shortage-infested world market. Unless the population growth reverses dramatically, cheaper grains in the coming years will be a fairly tale or a cruel joke.
Rice: Japan is the epicenter of rice consumption and the yield has seen a sharp decline. Rising consumption, limited cultivable land, industrialisation and soil erosion has turned Japan into a net importer.
Without getting into macabre and depressing details, here’s pointing to a simple fact: Thailand and Vietnam (largest exporters globally) have refused to step up exports in order to add to domestic buffer stocks and curb inflation. China has been pressing both for long-term supply contracts, to no avail. Experts believe it may escalate into a conflict / political crisis as mankind fights for food. Don’t even dare to dream of cheaper pulao / biryani in the coming years.
Cotton: Worldwide cotton production is down 9.20% to 109.51 million bales. The reason is not hard to find: the crop needs a long growing season with plenty of sunshine and water. In the harvesting season, dry weather and repelling pest attacks are a major factor for improving yields. With higher carbon emissions and global warming, the climate is increasing hostile for producing high grade cotton. As much as 70% of the output is actually medium staple and experts predict a deterioration in the quality of output in addition to the shortage in terms of quantity. Your wardrobe bill is going to rise, whether you chose to like it or otherwise.
Tea: problems in Africa of top soil erosion, Sri Lanka of local strife and India of erratic monsoons have seen the output failing to keep up with the consumption. With rising temperatures expected in the coming year, the output maybe lower. Rising population will add to the demand / supply imbalance and buoy prices. The morning cuppa promises to scald its loyal fans.
What is the best solution with life turning so dear? If you are a pessimist, the saying goes, there’s nothing to lose.
Given that, don’t expect any magic wand from the authorities to ease the situation.
Simply, they can’t.
All the talk of raising interest rates and cash reserve ratio by the Reserve Bank of India will be like Band Aid for an amputated limb. Also remember, while prices of commodities will dip also occasionally, the larger trend is up for a long, long term.
Can you afford to forget that?
Bhambwani is the author of the recent book A Trader’s Guide to Indian Commodity Markets.
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