Lack of transparent disclosure has been an aggravation since my days as an international equity analyst. In my experience, there is only one solution to this aggravation: research. (Occasionally a sharp stick poked at the company directors worked.) The following was prompted by attendance at the ASrIA conference in Hong Kong in September 2011. The challenge to learn as much about the environmental sector in one week for three reasons: (1) How quickly may a Director and Officer become “reasonably” informed? (2) Do Directors and Officers need to know about it to survive? (3) If so, what should they be disclosing to shareholders and how? This is what I learnt….. The series runs sequentially over various subjects.
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Peak Food
So I am Director and Officer and I am not in the food industry; I am not in the transport industry that moves food hither and thither; I am not in the packaging industry that wraps it; I am allergic to chooks and cow pads; and I am not interested in the food poor.
Agriculture accounts for approximately 71% of global water withdrawals today and the water challenge is closely tied to food provision. Inefficient and inappropriate irrigation accounts for much of this water use. In its One Planet Business report, the WWF states that each US$1 million spent by consumers on food has an ecological footprint of approximately 1,500 hectares. Food and drink are reported to have the highest ecological footprint per dollar spent, followed by household equipment and housing.
If a Director or Officer is not in the food production or delivery then they may think this is not a critical issue for them. However, they may need to think again.
Peak food completes the golden circle of Peak Oil, Peak Carbon and Peak Water. Or maybe peak population completes the circle. A large proportion of whom, are presently hungry; malnourished.[i] Much of this is because of the rising costs of grain, the largest food group consumed in the world. By way of example the cost of wheat has doubled in ten years.[ii]
As the FT reports[iii], “From transporting food and manufacturing fertilisers, to powering tractors and machines that turn wheat into bread and pigs into bacon, the stability of the global food supply chain relies heavily on the availability of crude oil and natural gas”.
So as the price of oil rises, so does the price of soft commodities – food, with an increasing correlation. Further, as the aquifers and rivers become more and more polluted or drained, food production will increasingly be limited to renewable water resources, that is, rain. However with the clearly near and present danger from GHG induced climate changes, where that future rain falls we do not know.
And so it goes. Solutions to oil consumption are limited by food constraints. Solutions to food production / supply are limited by climate changes. And allowing climate changes will have a deleterious effect on the supply of food. And limiting water, most of which goes towards agriculture and food, we are, frankly, stuffed.
Arguments against Peak Food
There is an excellent dynamic graph of the limit of all things published by Scientific American.[iv] It does go some way towards many of the issues covered in this series. For food, the main concerns is of course the depleted seafood, or in some cases near extinction. As it mentioned few other issues of food, it does correspondent with quite a body of work that suggest that there is sufficient food, just poor management. That does not seem contentious.
Let’s look deeper.
The dominant food market in the world is the grain market, the production of which has four competing challenges it seems from the research.
The first challenge is the growing population, forecast to reach 9 billion by 2050[v]. Today, it is 7 billion (reputedly as we speak, so to speak), up one billion in just 12 years. Of that forecast of 9 billion, Worldmapper forecasts that “62% of the people will live in Africa, Southern Asia and Eastern Asia - numerically this is the same as if all the world's current population lived just in these regions. In addition another 3 billion will be spread across the rest of the world.”
However there is another story to this. It is reported by trusty old Wikipedia (with sources) that the population range is as low as 7.4 billion to 10 billion by 2050. We know that it took just 12 years to produce another billion; that is an annual growth rate of 1.4%. Plus 42% of the world’s population has a sub replacement Total Fertility Rate, or 2.33 per woman.
First up, it is difficult to believe that net new people each year is going to fall to 13 million per annum from the current 83 million (over the last 12 years). So I believe that we can shut out the 7.4 billion forecast for 2050. At the current rate, the 2050 number would be 10,154 million. However with low birth rates in half the world, aging populations, and increasing climate catastrophes affecting food and water supplies, it is possible that the number will sit at about 8.5 billion. That’s about another 1.5 billion people, however over a much longer time frame (38 years) to enable adjustment. However we already have a billion people suffering malnutrition. And the birth rate has been slowing for nigh on 50 years already. If you have a billion people hungry, wouldn’t this signal we have already passed peak food?
To back test that back of the envelope assumption, the recent report by the World Business Council for Sustainable Development suggests 9 billion by 2050[vi]. They also go on to suggest that a sustainable world for a sustainable lifestyle of middle income is 6 billion; and for elite lifestyle is only 1.8 billion people. Both population levels way below current population let alone future population.
The second competing challenge for food is of course the new biofuel industry. It is said to have doubled from 9% a decade ago to 18% today.
The third competing challenge is land conservation; Land being bought up by private philanthropists and returned to its natural state. For example, in Australia Bush Heritage Australia has raised more than $100 million to buy almost one million hectares of high-conservation-value private land in Australia.[vii]
The fourth competing challenge is fodder for animals. And it is this component that is the most critical and with little reported analysis. The global middle class is set to quadruple by 2050, mainly in China and India, but also the other BRIC countries. And this new middle class increase their meat consumption, by many multiples. Whereas they may eat meat, dense caloric nourishment, once a week, it becomes 7 times a week as their prosperity improves. That is an increase from 52 times a year, to 365 times a year.
And it is a reasonably well known fact that it takes seven meals of grain to produce one meal of dressed meat. So in essence that is like adding another 3.5 billion people to the planet by 2050 in addition to the 9 billion mentioned above in terms of input to food production. All up, 12.5 billion.
Yikes, somehow this is not working out as an against argument for Peak Food.
Strategies Peak Food
This research shows that all businesses have oil, carbon, water and food interests. It is difficult to have arrived at this point in the paper and wonder which is the likely worst scenario and which to manage first from a risk mitigation perspective.
Of course there is always the strategy of do nothing. Apparently this could well be the outcome if you do…...ZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZ
Whether in the food business at any level, you are still intrinsically linked through your using / producing at Peak Water, Carbon or Oil. Measuring, managing and reporting it must have some value to the food chain.
How much? Don’t know. As a Director or Officer, you will have to do the numbers. As I write this, in today’s Independent newspaper they publish :
Across the world, the indignant rise up against corporate greed and cuts
Protests against corporate greed, executive excess and public austerity began to gel into the beginnings of a worldwide movement yesterday as tens of thousands marched in scores of cities. The "Occupy Wall Street" protest, which started in Canada and spread to the US, and the long-running Spanish "Indignant" and Greek anti-cuts demonstrations coalesced on a day that saw marches or occupations in 82 countries.
They live in a world of plenty, but one in seven will go hungry today
Enough crops can be grown to feed the planet. But spiralling grain prices, stock market speculation, climate change and corrupt and failing governments have left almost a billion people facing starvation.
Today is World Food Day. It might, if one heeds the words of Ban Ki-moon, be more suitably designated Global Lack of Nutrition Day. For, according to a statement by the Secretary-General of the United Nations this weekend, in a world that can produce enough food to feed everyone, nearly a billion people will go hungry today. And that is one in seven of us.
[i] FAO
[ii] http://www.investmenttools.com/futures/soy/chicago_wheat_futures_market.htm. This is a simple and easy to use graphingr service. However the United Nations FAO has exception data bases, and are available for free. Whether you want to know about global trade / production of tangerines from Tunisia or rice from Burma, it is all there.
[iii] Financial Times, FridayOctober 14 2011, World Food, Link Between Fuel and Crop Prices grows stronger. Javier Blas.
[iv] Scientific American, How Much is Left, by Michael Moyer 2010 http://www.scientificamerican.com/article.cfm?id=interactive-how-much-is-left
[v] http://www.worldmapper.org/display.php?selected=11
[vi] Sustainable Consumption Facts and Trends from A Business Perspective. World Business Council for Sustainable Development. http://docs.google.com/viewer?a=v&q=cache:r3K9L9yz6hsJ:www.wbcsd.org/DocRoot/I9Xwhv7X5V8cDIHbHC3G/WBCSD_Sustainable_Consumption_web.pdf+spending+on+sustainability+trends&hl=en&gl=au&pid=bl&srcid=ADGEESjXzjo12xpjFX6ibawweP0NrvrBr35ySmRcI_pA39HXN_nUo0qlIUk_I4PWCdO0UQr3Sv_iR5SB3M7FLi947SElMDO1IR_Zut0__c-3vDselZlimZp2LRw5079WARa-uLUhIu1g&sig=AHIEtbSVpgwj0YNRNF9qyIK4yn7FP8XI-Q
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