Famine the other F word !

Jack H Barnes's picture

world is closer to a major famine today than it has been in decades. 
In the current era, there have been smaller cases of famine in the world
such as Niger in ‘05 and again in 2010.  The western African region is
exposed to drought-based famines on a fairly regular basis.

The changing weather patterns from El Nino to La Nina in the Pacific,
however, have been the primary driver for this round as rain patterns
change due to a cooling or heating of the mid Pacific.

The rains occurring in normally dry Australia and droughts in
locations like China were, in the past, linked to a La Nina phase.  We
have moved from a El Nino 2010 into a La Nina 2011.  The current La Nina
is a deep one with no sign of it ready to end yet.

China has documented history of over 1,800 famines (nearly 1 per
year) over the past 2000 years.  The four famines of 1810, 1811, 1846
& 1849 are reported to have killed no fewer than 45 million people
in China over a 39-year period.

The largest famine in modern times was the Chinese famine of 1958 – 1961, during the “Great Leap Forward
period in China.  The death total is estimated to have been between 36
to 45 million people with an estimated additional 30 million canceled or
delayed births.

The use of modern technology and fertilizers, along with growing
scales of economy has helped to lower the risk of a global famine. The
world has not faced a real significant famine event in decades.

This brings us to today. The fires of last summer in Russian wheat
fields significantly lowered the total harvest for the Russian market. 
Russia, a net exporter of wheat has found itself needing to import grain
for next year’s planting season.  Today, Russia has an export ban in
place for most grains.

rains of November and December have flooded large parts of Australia,
and those who were able to harvest their wheat, watched it rot in silos
during the floods.

The drought in China’s Northern Province is currently the worst it
has been in the last century. Beijing is at 88 days and counting since
rain.  The change in weather pattern, to a wet one is not expected soon.

Experts say that if the drought continues over coming
weeks with no effective measures to combat it, the winter wheat crop,
which accounts for more than 90 percent of the country’s wheat harvest,
could be hurt significantly.

GuoTiancai, deputy chief of the agriculture ministry’s wheat experts
group, said the dry weather had not hurt the winter crop for now, as
earlier irrigation was providing enough moisture.

“But as the temperature warms up in spring and wheat grows faster,
any measures which are not in place during the period could cause big
losses to the final yield … immeasurable losses.”

In Shandong, there are locations that have not experienced a drop of
rain in the last four months.  The district is 86% below average since
October.  This drought has caused the local governments to use fire
trucks to deliver water to 240,000 people and over 100,000 livestock.

The shift in weather patterns has sent freezing rain and snow to the south, normally the warmer areas of the nation.

“It is of great significance for the people’s basic lives
and the social and economic development to combat the current drought
and ensure agricultural production,” Wen said.

Beijing Water Authority states that Beijing has been in a drought for
the last 12 years.  The estimated loss of rainfall would add up to
about 20 billion cubic meters (or 200 billion cubic feet) of water.

Sea ice off China’s east coast is starting to hamper shipping, as
smaller boats and ships are kept in port, and larger ships wait off
shore for a break in the ice.  The drought on shore having impacted 17%
of the winter wheat crop already.  90% of the nations wheat supply is
grown in the winter, making this springs rains extremely important.

planet has been increasing its population exponentially, while the area
under cultivation has been stable to dropping over the longer term as
productive increases allowed a greater concentration of food production
by a smaller and smaller number of workers.  This process has seen
productive land turned into housing tracks in the California food

The British Government’s Chief Scientific Adviser John Beddington
believes the system is failing now.  He is also Professor of Applied
Population Biology at Imperial College, London.

‘Firstly, it is unsustainable, with resources being used faster than they can be naturally replenished,’ he said.

‘Secondly a billion people are going hungry with another billion
people suffering from “hidden hunger”, whilst a billion people are

The USDA releases a World Agricultural Supply and Demand Estimate.  The latest edition was released January 12th
It is a great resource for following the world food storage estimates. 
After the fire in Russia last summer, the rains in Australia, and now
the drought in China, wheat buyers have ran out of sources of wheat in

WHEAT: U.S. wheat ending stocks for 2010/11 are projected
40 million bushels lower this month as a reduction in expected feed and
residual use is more than offset by higher projected exports. Feed and
residual use is projected 10 million bushels lower as December 1 stocks,
reported in the January Grain Stocks, indicate lower-than-expected
disappearance during September-November. Exports are projected 50
million bushels higher reflecting the pace of sales and shipments to
date and reduced competition with lower foreign supplies of milling
quality wheat. At the projected 1.3 billion bushels, exports would be
the highest since 1992/93…

The worldwide supply of wheat is estimated to climb in 2011, as
nations around the world focus on rebuilding their reserves.  The full
impact of the floods in Australia are not known yet, as most of their
crop was out of the field, but was in silo’s at this stage.

The last estimate lowered Australian production due to the flooding.

…More than offsetting these increases are reductions for
Kazakhstan and Australia. Kazakhstan production is lowered 1.3 million
tons based on the latest government reports. Australia production is
lowered 0.5 million tons as heavy late-December rains and flooding
further increased crop losses in Queensland.

The global rain patterns are expected to stay in a La Nina phase for a
few more months exacerbating the water drought in China.  If the rains
do not return in the spring, China will have to find new sources of
wheat to purchase for its population by this fall.

The world has enough food for its population currently, but after the
fires in Russia last summer, the flooding in Australia this winter, and
now the on going drought in China is starting to drain the worlds
reserves.  If the crops of 2011 are sub par or worse damaged due to
weather related conditions, the planet could be looking at a real famine
issue in 2012.

Links of interest to the story

Confessions of a Macro Contrarian www.JackHBarnes.com

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shortus cynicus's picture

The article point in correct direction.

But there is some hope: most of food is used to feed animals and to "produce energy".

I hope consumers will avoid eating expensive meat and burning food. That may lower drastically demand on grains and hold prices stable, but unfortunately still high. Last year farmers have burned corn instead of coal, because energy accumulated in corn was cheaper than in coal. And now we have food shortage? I can't believe that. What we have is speculation in commodities and priorities of distribution problem, but never a supply shortage on big scale.

Banning speculative capital must be done. I personally will never buy any food-fonds. Killing people by creating price bubbles should be prosecuted.


AnAnonymous's picture

Only one thing is known to be efficient against speculation: that is abundance or mass production.

Mind you, abundance has never got speculation to disappear but the capacity to bring always more on the table dilutes speculative attempts.

Now that production is levelling, moving in unisson to the oil plateau reached lately, speculation is back  on the front.

But this time, speculators are mega sized compared to the past, as they've fatten on abundant times.

Enjoy the ride.

John_Coltrane's picture

And here's another problem-modern monoculture (lack of genetic diversity and crop variety) leaves us at the mercy of any future major pest emergence.  All crops will be wiped out, not just some without specific resistence. 

ebworthen's picture

Greater numbers of humans fed on less acreage with higher yields that are dependent upon petroleum for tillage, planting, fertilization, pesticides, harvesting, processing, transportation to consumers.

More people + less land + drought + demand for petroleum + rising prices = civil unrest and wars over oil.


bunkermeatheadprogeny's picture

Programmers are already writing code for a simulated Michael Jackson to sing the new "We are the World" song.

DrLamer's picture

So what? Israel has been warned about it's upcoming drought as early as A YEAR BEFORE it (the warning was provided by The Onwer of Holy Land in His regular manner - via His slaves prophets, with a detailed list of sins). And ... nothing changed. Jews simply ... rised so-called "tax on water", have established limits on water  and  .... classified all info about the drought in Israel. You see, there is no even word "Israel" in the above article. This is a top-secret matter of national security in Israel.


Weisbrot's picture

ask yourself, so why arent any countries building any large desalinization plants and water pipelines yet? these folks running the various countries arent all the names that so many call them. whats the plan?

DoChenRollingBearing's picture

I have hedged my bets on food price increases by buying paper food ETF DBA, which is based on futures contracts of various of the food commodities (not just grains).  DBA has had a big short term run but is below its highs in 2008.  I am in at about 25, it is now around 32/33.  Where will it go short term?

I will take some profits in DBA when I see our grocery bills going higher.  I will NOT sell my PMs however.  Only in extremis.

Other paper food ETFs to consider:

CORN (3 guesses)

JJG (various grains only)

Sad Sufi's picture

I have a little DBA also, but purchased more recently at a higher price.

I like the idea that if food goes up, I am covered and if it goes down, and DBA drops for some reason, then that will be reflected in what I pay at the store also.  This to me is a "good trade." 

Hedging against known expenditures in the future to me is sensible.  For burning gasoline there is UGA etf.

Coldfire's picture

Calculated chaos.

Drag Racer's picture

Anyone with estimates on the effect in yield GMOs have had. I know the yield is lower, just not sure how much.


DR's fact of the day: 1900-1901 Monsanto had 1 product and 1 customer. The customer was Coca-cola and the 'secret formula' ingredient hidden from the curious world and purchased from Monsanto was no other than saccharin. Now you know. They started by selling poison and never stopped.

pitz's picture

Mofos just need to find a better grocery store if the grocery store they shop at doesn't have the food they need.

Eternal Student's picture

Agreed; excellent post.

It is missing a few very key items, though. The first is the dependence of food production upon oil. For every 10 calories that we consume, 9 of them come from oil (from fertilizer, packaging and shipping). We are, literally, eating oil. Which has lead to the population boom of the past 100 years.

Second, a very key item is our just-in-time supply chain. That's very fragile; and if you disrupt it beyond a few days, the stores run empty.

And another extremely important point is the fact that we are destroying the soil upon which we grow our food. There are ruins of old cities in China where you can see where this has happened. Started out with good soil, the local population grew, the top soil was depleted and the city could no longer be supported. Now, we're doing this on a global scale.

All in all, it's not a rosy picture. And modern agribusiness is only making things worse.

bunkermeatheadprogeny's picture

I guess oranges will make a comeback as a xmas present.

DoChenRollingBearing's picture

Indeed, an excellent post.  Food looks like it is about to become a BIG problem.

See my comments below about food ETF DBA as a way for Americans to hedge against higher food prices.