Sunday, May 4, 2008

Famine II

Famine, malnutrition, hunger. I posted in February on problems with world food supplies, prices and possible famine coming as early as this year due to inflationary pressures from oil prices feeding through to costs in food production (97% of the process is petrochemical dependent), not the least of which is the cost of fertilizers, grain and acreage being diverted to biofuels production, and weather-related (Global Warming) reductions in crops produced. All that is still the case. The difference is that the effects were seemingly minor and limited to the very poorest of the poor. That is no longer the case. China, Korea and Japan are all buying up land in other countries to feed their burgeoning populations. Japan has experienced shortages of a few commodities already:

Japan's Hunger

"In the past, Japan was a rich country with a powerful yen that could easily buy cheap imports such as wheat, corn and soybeans," said Mr Shibata, who directs the Marubeni Research Institute in Tokyo. "But with enormous competition from the booming Chinese and Indian economies, that's changed forever. You also need to take into account recent developments, including the damage to crops caused by drought and other disasters in exporting countries like Australia," where the value of wheat exports has tumbled from $3.49 billion to $2.77 billion in the past three years. The situation has been compounded by a surge in demand for bio-fuels such as ethanol, made from maize, encouraging farmers around the world to divert their efforts away from wheat and barley and into maize, further driving up prices.

Arguably Japan's biggest concern, however, is its weakening ability to sustain its population with domestic produce. In 2006 the country's self-sufficiency rate fell to 39%, according to the Agriculture Ministry.

Japan is among the richest nations on Earth. A nation that assumed until recently that it could buy all the food it needed. The rise of China and India has changed that. Food prices are soaring, a wealthier Asia is demanding better food and farmers cannot keep up. In Korea, where they are nearly self-sufficient in rice production, but import 95% of everything else, prices are skyrocketing. Prices went up 3% in Nov. and Dec., 2007, over the previous year. By January, prices were already jumping:

Skyrocketing international prices of oil, gas and grain are making food and household goods more expensive.

"I think I felt better during the 1997 financial crisis," said Yang Young-geun, 53, who has run a Chinese restaurant in southeastern Seoul for 12 years. "It has never felt tougher than today."

As the prices of flour and oil, the main ingredients of jajangmyeon (noodles with black bean paste sauce), have climbed, he said, he no longer makes any profit on the dish.

"The cost of the ingredients to make the noodles has risen from 30 percent to 45 percent of the total cost," Lee said. "After paying salaries to my employees and maintenance costs, I have almost nothing left."

... The 51-year-old owner of a Chinese restaurant in Seocho, southern Seoul, has started selling the noodles at 4,000 won, up 500 won from last year.

"I tried to avoid raising the price by cutting personnel costs, but I could not stand the skyrocketing prices of ingredients anymore," said the female owner, who refused to be named.

"I am afraid to shop these days because the price of everything goes up day by day,"
said Kim Gyeong-soo, a 54-year-old housewife in Jung District, Seoul. "Our family now takes vitamin C instead of eating fruit."

Since then, the things have gone from bad to worse:

The Korean economy is facing a bout of stagflation with lower economic growth at a time of sharply rising prices, a government report said yesterday.

Producer prices rose the fastest in almost 10 years due to increasing costs of crude oil and agricultural products. The announcement came a day after the Bank of Korea said that economic growth will likely be far less than earlier projected.

“Korea’s economy already peaked and is entering a downward phase,” the Ministry of Strategy and Finance said in a report on the overall economy.

Wholesale Prices Make Biggest Jump In Years

Economy goes down, further contraction expected: ministry

Around the globe, people are protesting and governments are responding with often counterproductive controls on prices and exports - a new politics of scarcity in which ensuring food supplies is becoming a major challenge for the 21st century.

Damaged by severe weather in producing countries and plundered by a boom in demand from fast-developing nations, global wheat stocks are at 30-year lows. Grain prices have been on the rise for five years, ending decades of inexpensive food.

Drought, a declining dollar, a shift of investment money into commodities and use of farm land to grow biofuel crops have all contributed to food woes. But population growth and the growing wealth of China and other emerging countries are likely to be more enduring factors.

World population is set to hit 9 billion by 2050, and most of the extra 2.5 billion people will live in the developing world. It is in these countries that the population is demanding dairy and meat, which require more land to produce.

"This is an additional setback for the world economy, at a time when we are already going through major turbulence, but the biggest drama is the impact of higher food prices on the poor," Angel Gurría, head of the Organization for Economic Cooperation and Development, said.

A Perfect Storm Cometh... bifurcations... tipping points... complex systems...

In Gurría's native Mexico, tens of thousands took to the streets last year over the cost of tortillas...

Global food prices... rose 35 percent in the year to the end of January, markedly accelerating an upturn that began, gently at first, in 2002. Since then, prices have risen 65 percent.

In 2007 alone... dairy prices rose nearly 80 percent and grain 42 percent.

"The recent rise in global food commodity prices is more than just a short-term blip," the British research group Chatham House said in January.

"Society will have to decide the value to be placed on food," it added...

...A number of governments, including Egypt, Argentina, Kazakhstan and China, have imposed restrictions to limit grain exports and keep more of their food at home.

..."If one country after the other adopts a 'starve-your-neighbor' policy, then eventually you trade smaller shares of total world production of agricultural products, and that in turn makes the prices more volatile," said Joachim von Braun, director general of the International Food Policy Research Institute in Washington.

In Argentina, a government tax on grain led to a strike by farmers that disrupted grain exports.

Vietnam and India, both major rice exporters, announced further curbs on overseas sales Friday, sending rice higher on U.S. futures markets.

...Waves of discontent are already starting to be felt. Violent protests hit Cameroon and Burkina Faso in February. Protesters rallied in Indonesia recently and media reported deaths by starvation. In the Philippines, fast-food chains were urged to cut rice portions to counter a surge in prices.

Trade Minister Kamal Nath of India said Monday that the government was looking to cut duties on food items to rein in rising prices.

In short, the world faces a food crisis and in some places it is already boiling over. Geopolitics will increasingly be affected by shortages and competition for a smaller pool of resources. Let us not forget Japan annexed Korea in 1910 in part to use Korea as a rice bowl. A large portion of Korean rice production was shipped to Japan during the period of occupation. What is to prevent old animosities from rising up a people become hungry, malnourished or even face starvation? A nation like Korea which is pinched between two more powerful neighbors must keep such possibilities in mind. (Not to mention what might happen if the DPRK (North Korea) destabilizes or China decides to have a presence there.)

Climate problems persist and will likely worsen over time. While Australia had a bit of a reprieve from their on-going drought, scientists worry the drought conditions are a long-term, essentially permanent feature of Australia's climate. This is obviously problematic if this loss of production isn't made up elsewhere.
Coupled with the problems of Climate Change damaging food production and Peak Oil transferring food production to fuel production, is this problem of population and wealth, i.e. consumption. That is, the dogma of perpetual growth.

Albert Bartlett (link to the left) warns us of the dangers of never-ending growth.

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