17th April 2016 – Brian’s Musings #5 – More Food for Thought
As you probably know, I read a lot of books about where the world might be headed. Generally I find they have three flaws. Firstly they are all too often written by someone in North America or the United Kingdom based on what he sees in his immediate vicinity; his observations are then extrapolated to the rest of the world. Then too, it’s as though they are written in a silo with next to no mention of topics covered in parallel silos. Finally, books written by journalists tend to be padded out with folksy anecdotes rather than homing in on the key facts, a habit no doubt honed in writing newspaper articles.
Feed Frenzy by Paul McMahon has none of these flaws. It is a beautifully written synopsis of the food industry which reads like a thriller. He starts with a brief history of food production. Economists have battled to produce a simple summary of world trade in food; by reducing the trade to flows of calories he is able to identify the major producers and consumers of food. As one would expect, the USA, Canada, Australia, New Zealand and some EU countries are the traditional exports who have been joined by major players in South America and Asia. As middle class lifestyles take off, so China and South East Asian countries have become major importers.
Overall demand for food has risen as a result of a combination of growing population, richer diets, biofuels and wild weather. Taken together with ecological limits, food prices have more than doubled since 2004. Some interesting facts he throws in are that 50% of seafood today is farmed while 30% of food is lost before it even reaches the consumer, who bins another significant percentage. He spends a chapter examining the impact of land availability, yield gaps, energy (particularly biofuels), fertiliser production and water.
He then moves away from food production to examine the impact of national bans on exports, import and export tariffs and large scale hoarding, all of which can cause unnecessary distortions in the market. A further chapter is devoted to commodity speculation as financial giants increased their trades in agricultural futures way beyond the physical stocks in the market. In particular he examines the role of the five big commodity trading houses Cargill, Archer Daniels Midland, Louis Dreyfuss, Bunge and Glencore (which this week sold a major stake in its agricultural division), as well as the rising Asian challengers Noble, Olam and Wilmar.
Up till this point inefficient and impoverished Africa has not featured much in the discussion. Sub-Saharan Africa was identified as a potential future breadbasket for the world. However, the continent features strongly in his chapter on land grabs, mostly Arab and Asian countries buying into countries such as Sudan, Ethiopia, Madagascar and Mozambique, pushing the peasants off the land to make way for developments he believes are unsustainable. He emphasises that China is not part of these land grabs though reports from Australia this week highlight concern at the acreage owned there by Chinese interests.
While most observers are pessimistic that food production can keep pace with population growth, McMahon is much more optimistic. In his final chapter he outlines how we need to help small farmers in developing countries, behave ecologically correctly, reform financial markets and adapt to higher prices which will keep producers in business.
As I mentioned, he does not just stay in the food information silo but ventures into related areas such as health, energy, international trade and financial services. Feeding Frenzy was published just before the dramatic drop in oil prices which would have had the effect of reducing a major input cost and putting pressure on the viability of biofuels. Looking at his recommendations for the future I wondered that he hadn’t advocated phasing out the use of valuable agricultural land to grow tobacco and sugar given their adverse impact on health.
I hope this summary has given you more food for thought!
Useful References:
The International Institute for Applied Systems Analysis (IIASA) is an international scientific institute that conducts research into the critical issues of global environmental, economic, technological, and social change that we face in the twenty-first century.
OECD-FAO Agricultural Outlook 2007-2016
Samsung Economic Research Institute (SERI) report New Food Security Strategies in the Age of Global Food Crises
Munich Re analysis of natural catastrophes in 2015
China in Australia
As you probably know, I read a lot of books about where the world might be headed. Generally I find they have three flaws. Firstly they are all too often written by someone in North America or the United Kingdom based on what he sees in his immediate vicinity; his observations are then extrapolated to the rest of the world. Then too, it’s as though they are written in a silo with next to no mention of topics covered in parallel silos. Finally, books written by journalists tend to be padded out with folksy anecdotes rather than homing in on the key facts, a habit no doubt honed in writing newspaper articles.
Feed Frenzy by Paul McMahon has none of these flaws. It is a beautifully written synopsis of the food industry which reads like a thriller. He starts with a brief history of food production. Economists have battled to produce a simple summary of world trade in food; by reducing the trade to flows of calories he is able to identify the major producers and consumers of food. As one would expect, the USA, Canada, Australia, New Zealand and some EU countries are the traditional exports who have been joined by major players in South America and Asia. As middle class lifestyles take off, so China and South East Asian countries have become major importers.
Overall demand for food has risen as a result of a combination of growing population, richer diets, biofuels and wild weather. Taken together with ecological limits, food prices have more than doubled since 2004. Some interesting facts he throws in are that 50% of seafood today is farmed while 30% of food is lost before it even reaches the consumer, who bins another significant percentage. He spends a chapter examining the impact of land availability, yield gaps, energy (particularly biofuels), fertiliser production and water.
He then moves away from food production to examine the impact of national bans on exports, import and export tariffs and large scale hoarding, all of which can cause unnecessary distortions in the market. A further chapter is devoted to commodity speculation as financial giants increased their trades in agricultural futures way beyond the physical stocks in the market. In particular he examines the role of the five big commodity trading houses Cargill, Archer Daniels Midland, Louis Dreyfuss, Bunge and Glencore (which this week sold a major stake in its agricultural division), as well as the rising Asian challengers Noble, Olam and Wilmar.
Up till this point inefficient and impoverished Africa has not featured much in the discussion. Sub-Saharan Africa was identified as a potential future breadbasket for the world. However, the continent features strongly in his chapter on land grabs, mostly Arab and Asian countries buying into countries such as Sudan, Ethiopia, Madagascar and Mozambique, pushing the peasants off the land to make way for developments he believes are unsustainable. He emphasises that China is not part of these land grabs though reports from Australia this week highlight concern at the acreage owned there by Chinese interests.
While most observers are pessimistic that food production can keep pace with population growth, McMahon is much more optimistic. In his final chapter he outlines how we need to help small farmers in developing countries, behave ecologically correctly, reform financial markets and adapt to higher prices which will keep producers in business.
As I mentioned, he does not just stay in the food information silo but ventures into related areas such as health, energy, international trade and financial services. Feeding Frenzy was published just before the dramatic drop in oil prices which would have had the effect of reducing a major input cost and putting pressure on the viability of biofuels. Looking at his recommendations for the future I wondered that he hadn’t advocated phasing out the use of valuable agricultural land to grow tobacco and sugar given their adverse impact on health.
I hope this summary has given you more food for thought!
Useful References:
The International Institute for Applied Systems Analysis (IIASA) is an international scientific institute that conducts research into the critical issues of global environmental, economic, technological, and social change that we face in the twenty-first century.
OECD-FAO Agricultural Outlook 2007-2016
Samsung Economic Research Institute (SERI) report New Food Security Strategies in the Age of Global Food Crises
Munich Re analysis of natural catastrophes in 2015
China in Australia
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