I have been writing about the world hunger crisis this past week since our dinner with Joe and Pat Richter of Farms International. What caught my attention was the food riots in fourteen countries. And nary a word in our newspapers.Once you start to look, the picture looks less than promising. Can too much knowledge be a bad thing? I would like to believe that the only way we can begin to fix things is by knowing how broken they are.
My brother forwarded the following article to me about a killer strain of black stem rust that destroy wheat crops called Ug99. One of the articles I read last week made reference to this wheat disease as one of the variables in a "perfect storm" of trouble brewing, which also included the decision to fight global warming by making food crops into ethanol.
Don't take my word alone. Do a Google search on the topic and you'll see it's serious.
Ug99!
Ug99!
“Ug99” is the name given to a strain of wheat fungus (Puccinia Graminis). This virulent new form of the disease first appeared in Uganda in 1999. It is spread by wind and now is responsible for driving up food prices.
It appears that the present genetic composition of wheat has little or no resistance to this new fungus strain. In some areas of the globe, crop losses are expected to reach 100%. In Africa there are known experiences of loss of over 70%. The economic losses expected from this fungus are now estimated in the many billions and growing. Worse there is an intensifying fear of exacerbated food shortage in the poor and emerging countries of the world. The ramifications are serious.
Food rioting continues to expand around the world. We saw the most recent in Johannesburg last week. So far this unrest has been directed at rising prices. Actual shortages are still to come. Remember: food shortages can cause changes in governments and can lead to severe repression of populations. Also, remember that the food chain starts with grains. All grains are under severe price pressure and the ability of substitution is shrinking because there is no surplus grain inventory to replace one in short supply.
Governments are responding with protectionism and tax policy modification of export-import taxes and tariffs. Typically they reduce the import taxes so as to lower the domestic price of incoming grains and foodstuffs. At the same time they raise the export taxes in order to keep homegrown foodstuffs within the country. In some cases they actually embargo exports. These tariffs and embargoes end up only adding to trade barriers, reducing global efficiencies and ultimately only raising the prices for everyone. Such actions have already occurred in Argentina, Brazil, China, Ethiopia, India, Morocco, Peru, Russia, Turkey, Venezuela, Zambia, and others.
The world’s mature and wealthier countries are food exporters as a result of developed and efficient agriculture. Australia, Canada, European Union, New Zealand and the United Sates are in that category. But these countries have taken little advance action in the face of the increasing global food imbalances. The US Agriculture Department reports global grain stocks at half century lows.
America’s bio-fuel policy is worsening the situation. We have a huge subsidy in place for corn-based ethanol. That is raising and has driven up the price of corn. There is no end in sight for that subsidy and, thus, the upward corn price pressure is imbedded for all practical reasons. Ethanol is American politics at its very worst.
In addition it seems that the new form of wheat fungus has risk to America’s wheat crop. Present American wheat has very little resistance to Ug99. It will take between five and eight years to genetically engineer a resistance. In the interim period, US agriculture now faces this higher risk of fungus.
As with bird flu (H5N1), North and South America have been spared from Ug99 to date. And as with bird flu, the professional epidemiologists are worried just as the rest of us go about our daily lives taking things for granted. Complacency is always the enemy.
Meanwhile, Ug99 is windborne and on its ways to the breadbaskets of Asia. And meanwhile, H5N1 is avian borne and spreads globally. The most recent human case was confirmed in Egypt on April 17th. So far, H5N1 virus is still a bird disease and not efficiently transmitted among humans. The World Health Organization (WHO) reports 30 confirmed cases and 23 deaths, year-to-date in 2008.
USED WITH PERMISSION
It appears that the present genetic composition of wheat has little or no resistance to this new fungus strain. In some areas of the globe, crop losses are expected to reach 100%. In Africa there are known experiences of loss of over 70%. The economic losses expected from this fungus are now estimated in the many billions and growing. Worse there is an intensifying fear of exacerbated food shortage in the poor and emerging countries of the world. The ramifications are serious.
Food rioting continues to expand around the world. We saw the most recent in Johannesburg last week. So far this unrest has been directed at rising prices. Actual shortages are still to come. Remember: food shortages can cause changes in governments and can lead to severe repression of populations. Also, remember that the food chain starts with grains. All grains are under severe price pressure and the ability of substitution is shrinking because there is no surplus grain inventory to replace one in short supply.
Governments are responding with protectionism and tax policy modification of export-import taxes and tariffs. Typically they reduce the import taxes so as to lower the domestic price of incoming grains and foodstuffs. At the same time they raise the export taxes in order to keep homegrown foodstuffs within the country. In some cases they actually embargo exports. These tariffs and embargoes end up only adding to trade barriers, reducing global efficiencies and ultimately only raising the prices for everyone. Such actions have already occurred in Argentina, Brazil, China, Ethiopia, India, Morocco, Peru, Russia, Turkey, Venezuela, Zambia, and others.
The world’s mature and wealthier countries are food exporters as a result of developed and efficient agriculture. Australia, Canada, European Union, New Zealand and the United Sates are in that category. But these countries have taken little advance action in the face of the increasing global food imbalances. The US Agriculture Department reports global grain stocks at half century lows.
America’s bio-fuel policy is worsening the situation. We have a huge subsidy in place for corn-based ethanol. That is raising and has driven up the price of corn. There is no end in sight for that subsidy and, thus, the upward corn price pressure is imbedded for all practical reasons. Ethanol is American politics at its very worst.
In addition it seems that the new form of wheat fungus has risk to America’s wheat crop. Present American wheat has very little resistance to Ug99. It will take between five and eight years to genetically engineer a resistance. In the interim period, US agriculture now faces this higher risk of fungus.
As with bird flu (H5N1), North and South America have been spared from Ug99 to date. And as with bird flu, the professional epidemiologists are worried just as the rest of us go about our daily lives taking things for granted. Complacency is always the enemy.
Meanwhile, Ug99 is windborne and on its ways to the breadbaskets of Asia. And meanwhile, H5N1 is avian borne and spreads globally. The most recent human case was confirmed in Egypt on April 17th. So far, H5N1 virus is still a bird disease and not efficiently transmitted among humans. The World Health Organization (WHO) reports 30 confirmed cases and 23 deaths, year-to-date in 2008.
USED WITH PERMISSION
Copyright 2008, Cumberland Advisors. All rights reserved.
The preceding was provided by Cumberland Advisors, 614 Landis Ave, Vineland, NJ 08360 856-692-6690. This report has been derived from information considered reliable but it cannot be guaranteed as to its accuracy or completeness. David R. Kotok, Chairman and Chief Investment Officer, email: david.kotok@cumber.com
The preceding was provided by Cumberland Advisors, 614 Landis Ave, Vineland, NJ 08360 856-692-6690. This report has been derived from information considered reliable but it cannot be guaranteed as to its accuracy or completeness. David R. Kotok, Chairman and Chief Investment Officer, email: david.kotok@cumber.com
For information on Farms International, visit http://www.farmsinternational.com/
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1 comment:
Dear Ed;
Thanks for the article writeup. I trust more and more folks will become aware of what is happening so that real change can occur.
Joe
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