Wednesday, March 12, 2008

Weather Withers Wheat

In the vast agricultural lands of New South Wales, Australia, where wheat stalks once stood bountiful and strong; a dust bowl now exists. Drought has all but wilted the wheat crops that have rendered its productive farmlands into a wasteland. For two years in a row, the country that produces the worlds second biggest supply of wheat is facing drastic reductions in harvests. Last year, it was 66% below normal levels, the year before was worse at one sixth of normal harvest. Farmers have not recouped the cost of planting and nourishing, and will have to borrow from the banks for this year's season. And if this year's harvest still fails, they will have to sell their farms. Or, they may not plant at all this year.

The huge wheat silos of Australia that used to store 25 million tonnes of wheat are empty, and its impact has been felt halfway around the globe. Rising food prices have made the poor eat even less. The price of wheat increased by 130% from last year due to Australia's low harvest. Josette Sheeran, head of the UN World Food Program (WFP) predicts that rising costs of food will continue through 2010; and fears that poorer nations and the poor in general will eat less nutritious food, in less volumes, and will rely on aid. The donations to WFP must be increased to meet the same level of volume for food aid, or be doubled for the expected rise in hunger and starvation in poorer parts of the world. Global food reserves are at their lowest in 30 years.

In parts of Asia, Africa and the Middle east, the inadequate supply and price increases have resulted in food riots, even as bands of hungry people walk the parched earth demanding more for prices they can afford. The supply drop even for grains other than wheat, such as rice and corn, is beginning to wreak havoc as prices become unreachable. Apart from weather conditions, the population increase, the conversion of grains and vast lands for biofuel production, and the economic miracles in China and India that produces vast numbers of emerging middle class populations that consume more, have triggered a supply shortage that caused a rapid increase in food costs. In the end, it is only those countries who can afford to pay more that will have sufficient supply of food.

In another part of the world, at the Chicago Board of Trade, a frenzy is visible everyday with buyers and sellers screaming and using hand signals, exchanging pieces of paper, volumes of grains being traded by the minute, billions change hands in four full hours of market activity. There are no actual grains on the trading floor. These are moneyed people looking at the current and future depletion of grain crops as an investment opportunity because of the rising price. These are the people who do not have to worry about their meals for the next 2 years while starvation stalks several regions of the globe. They see it from the perspective of making a profit, unmindful of the the hunger, death and desolation that their expected profits will bring.



Blogtommy said...

No wonder all the farmers around here are pretty happy. I guess it's give and take....It costs them a ton more to produce given the costs of fuels etc...but they'll make some of that back given the rising cost of wheat...I guess the Chicago traders you mention are somewhat similar to OPEC sheiks and others in oil rich countries that are doing what they can to cripple the west...Interesting thought.


Tapline said...

This was bound to happen. I just read a post,which I can't find again,,,,,about the amount of oil available through, shale and mud and it cost about $15.00 per barrel to process, jet we can't process it because of the restrictions placed on alternative fuels by congress. Canada also has billions of gallons ready to be processed, but we cant buy it because of restrictions, but China can and from what I gather is going to do just that....make sense,,, while the rest of the world will starve. Watch what the full ramifications of this shortage will bring....God,,,The love of money.......Hate it.....I ramble stay well.....

durano lawayan a.k.a. brad spit said...

Hi Tommy,

This whole thing can become a vicious cycle with very negative effects.

The farmers can recoup and make a profit based on the current selling price, but if this is turned into biofuel, they may not find anything to eat, and would probably spend more for food. The expense budget for food will increase in relation to other regular expenses.

I guess the world needs to rethink biofuels, and start mending the global warming situation. Also, the Catholic Church and all other religions must seriously implement reducing births as the earth's area is not increasing, and too many people on the planet will put tremendous pressure on its resources. --Durano, done!

durano lawayan a.k.a. brad spit said...

Hi Tapline,

In addition to China buying Canada's oil, the Chinese have also secured a leasehold agreement with Kazakhstan, I think, to plant wheat and raise farm animals inside this former Russian satellite state. The Chinese have already sent tens of thousands of farmers across the border about a year ago, if I'm not mistaken.

This was done to assure that the mainland would have enough food reserves for their emerging affluent middle class.

This was a smart move on the part of the Chinese. --Durano, done!

Debbie said...

Tapline is correct about the huge amounts of shale oil available. We are killing ourselves with all these restrictions.

Debbie Hamilton
Right Truth

ablur said...

The pro ethanol crowd is just now finding it don't pencil and will do far more damage then gas to our environment.
You don't hear anyone complaining about the amount of fuel being spent moving oil from one side of the planet to the other, when it is right there only restricted.
I really don't have a problem with people making money, it is how we buy stuff, like food. It is how we employ people so they too can buy food.
Has anyone actually penciled out the population density of the planet? The facts would surprise you. The problem comes down to location and restrictions.
The lower 48 of the USA only, is 1.9 billion acres. If you divided the population of world up into family units of 4 and gave them each an acre, you wouldn't even cover the USA. That leaves 90% of the worlds land mass for everything else. 4 per acre is a pretty low density. Look at NYC or Tokyo for comparable density.

We need real solutions people, not political sound bites that appeal to emotion.

durano lawayan a.k.a. brad spit said...

Hi Debbie,

I think perhaps governments jumped too quickly on biofuel development when their studies and models were not fully proven and tested.

The impact of weather conditions such as the drought in Australia is hard to accurately predict. The year started out good then suddenly the climate changed.

It tells us that there is a problem that disturbs the stability of weather conditions - whether it is the sun getting hotter or greenhouse gases - must be determined and studied with finality, then a definite solution can be carried out. What we see today are declarations based on inconclusive data which both sides (Greenhouse vs. Sun burning hotter) have arguments and counter-arguments for.Perhaps, both contribute to weather disturbances, but this must be resolved. --Durano, done!

durano lawayan a.k.a. brad spit said...

Hi Ablur,

I wonder if the social and economic dislocation of people from dense cities being transferred to this one acre of yours has been factored into your equation. In addition, the type of training and skills thay would have versus planting and farming. Then there's the schools and social institutions and workstations that will be left unattended.

Also, the amount needed for farm implements, tools and seeds, and fertilizers.

Would the US also be willing to break its immigration policies and have all of their citizens accept Chinese, Indians, Hispanics, Latinos, Africans, and all other nationalities where all of the world's poor are; and embrace them openly in America? Or are they going to do battle with these foreigners?

And what if the land is not even that arable and is frequented by tornadoes, pests, and drought?

This is no real solution, but a brainless knee jerk reaction from a practitioner of amateur armchair economics.:-) --Durano done!

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