The Global Food Crisis: From Panic to Organic

If you have been watching the commodity-related ETFs like the GreenHaven Continous Commodity Index (AMEX:GCC), the PowerShares DB Commodity Idx Trking Fund (AMEX:DBC) or the iShares S&P GSCI Commodity-Indexed Trust (NYSE:GSG), you know that food and commodity prices have been soaring.

 

Here's a look at the Dow Jones-AIG Commodity Index for the past year. It says it all!

 

There are shortages right now in a number of key grains and the outlook is bleak for any significant surpluses. The weather worldwide is not cooperating in the key growing regions. There are a few exceptions.

  

The food crisis has benefited some investors. Companies like Corn Products (NYSE:CPO) have been taken over by the likes of Bunge Ltd. (NYSE:BG), a company that operates in three segments: Agribusiness, Fertilizer, and Food Products (BG is looking more attractive recently as the price of the stock has corrected greatly).

 

Food kingpin General Mills (NYSE:GIS) is trading at new highs in spite of the stock market's malaise. Carefully chosen "food" investments have done well in recent months, but millions of people in poorer nations have been devastated by the current food crisis. The suffering has been staggering and not widely reported.

 

According to a report from the Organic Consumers Association (www.organicconsumers.org) entitled "Small Farms Best for the Environment", there is hope for the suffering masses of humanity that reverts back to the "greenest" form of growing food that has ever existed.

 

During a conference that was held earlier this summer in Modena, Italy, it was proclaimed that small-scale, not industrial farming, is one of the answers to food shortages and climate change. This was a conference of organic farmers that argued this sensible, age-old axiom.

 

Can you imagine what it would do for worldwide food production, not to mention our health, if we all had small family gardens and raised many of our own fruits and vegetables?

Meeting at the Organic World Congress, the International Federation of Organic Agriculture Movements IFOAM -- www.ifoam.org -- criticized a recent U.N. food summit for touting chemical fertilizers and genetically modified [GM] crops rather than organic solutions to tackle world hunger.

The World Bank says an extra 100 million people worldwide could go hungry as a result of the sharp rise in the price of food staples in the last year.

At the U.N. food summit in Rome this month, the World Bank pledged $1.2 billion in grants to help with the food crisis. Once again it is a drop in the bucket but it at least officially signals the desperate crisis that is at hand. Yet who is being helped the most by the grants?

"The $1.2 billion the World Bank says will solve the food crisis in Africa is a $1.2 billion subsidy to the chemical industry," said Vandana Shiva, an Indian physics professor and environmental activist speaking at the forum in Modena.

"Countries are made dependent on chemical fertilizers when their prices have tripled in the last year due to rising oil prices," she said. "I say to governments: spend a quarter of that on organic farming and you've solved your problems."

She said industrial farming was based on planting a single crop on vast surfaces and heavy use of chemical fertilizers, a process that used 10 times more energy than it produced. "The rest turns into waste as greenhouse gases, chemical runoffs and pesticide residues in our food," she said.

In contrast, organic farms could increase output by 10 times by growing many different species of plants at the same time, which helped retain soil and water, she said. "In a one-acre farm in India they can grow 250 species of plants," she said.

 

Feeding Nine Billion People

The U.N.'s Food and Agriculture Organization Director General Jacques Diouf said last December there was no reason to believe that organic agriculture can substitute conventional farming systems in ensuring the world's food security.

"You cannot feed six billion people today and nine billion in 2050 without judicious use of chemical fertilizers." This shows how deeply ingrained that mantra is, one that is fostered mainly by the big Agribusiness and Chemical companies.

Shiva has begun a civil disobedience campaign in India against the patenting of natural seeds, particularly of crops that resist flooding and drought and can better withstand climate change. She sounds like a brave and determined woman.

"We need this worldwide. Seeds are for everyone," she said. She would also agree this is no simple problem and that the solution will take time, but it has to start somewhere.

According to IFOAM, a quarter of greenhouse gases are emitted by industrially farmed crops and livestock. The proportion rises to 40 percent when including the emissions caused by transporting commodities around the world.

 

That is a startling and powerful statistic that is a giant "green" clue to how the global climate crisis can be turned around. All it takes is a concerted effort by those "in the food industry" and the mega-companies that support it.

IFOAM members also criticized the production of fuel from grains, citing a U.S. university study that it took 1.3 gallons of fossil fuel to make 1 gallon of ethanol from corn.

The United States and Brazil defended their use of corn and sugar cane to make ethanol to fuel cars at the UN food summit saying it was a minor factor in food price inflation. This would favor companies like Archer Daniels Midland (NYSE:ADM) and Verenium (Nasdaq:VRNM).

 

Once again as investors we can "vote with our wallets" and invest in companies that are doing all they can to reduce greenhouse gases and promote the use of organic, non-polluting forms of agriculture. These companies are few and far between, but they do exist and we hope to report on them here. Any comments on such companies that you know of would be greatly appreciated.

Disclosure: None

 

Comments

[Alex T]

Is IPI one of these companies?

[buyitcheap]

It worked for the Pilgrims at Plymouth, they went from a community farming...why not?

[buyitcheap]

Sorry incomplete post - they went from a community farming collective (and near starvation) to an individual/family farm approach and they thrived, producing surpluses.

[riverpirate]

Sure, small scale farming can work if your only goal is to stay alive and feed yourself.

Bottom line however is that the wealth we enjoy in the world -- the whole world -- is largely the product of one very powerful phenomenon: specialization (aka utilizing comparative advantage).

If we were all to grow our own food locally, 3/4 of the world would be farmers as a primary occupation. Good luck finding someone to roof your house, fix your car, pave your roads, do your taxes, build you a TV, or make you a coffee. No, they'll all be to busy tending to their gardens.

A fine bit of eco-ignorance this is.

[Spokanite]

Riverpirate, your ignorance is global. You think that because YOU, on of 400 m folks in a 6+ billion world, everyone is like YOU. Facts dude is that the vast majority of people live day to day and close to the land. So stop projecting your eco-ignorant world view onto the other billions.

Think for a minute, might be hard but try this, if all those 4-5.5 billion people suddenly didn't have ag work to keep them full and provide income, what would they do? Make shoes for you? It'd be massive amts of folks scurring off to vast slums in mega cities trying to make a living somehow.

[longhold]

Why does "organic farming" need any investment give everyone some seed and a planting stick and let them go to it. The newly elected green party in Germany was very disapointed to learn that they could not produce enough organic and natural food to feed their own people and thus had to revert to traditional modern agriculture to survive. Natural, Organic, and local only food production will only work when we reduce the worlds population by half. I sugest that the liberals who propose such a solution volinteer their lives first so that their goal may become a reality.

[CLH]

People can only be fed by bioengineering not by returning to the stone age.

[fearofgreed]

Why would anyone be scared of letting people choose? Is it a problem that Europeans do not want American food?

[Think-About-It]

riverpirate, you nailed it.

Too may dreamers out there with half-baked ideas.

[supereco]

I wouldn't say these ideas are half baked. Big agribusiness is not sustainable and is very short-sighted. The agricultural chemical runoff is already taking its toll in the US, with a dead zone the size of New Jersey in the Gulf of Mexico. That means less fish and shrimp to feed the growing demand for these edibles. news.nationalgeographi...

This is not a liberal or conservative debate. It affects us all.

And if it weren't for dreamers, we would be in the stone age (think Edison, Einstein, Bucky Fuller, etc.)

[akapital]

Specialization (be it agriculutural or otherwise) has historically brought great benefits but always at a cost. It is time to consider whether that cost is worth it.

Consider, would we need so many roads and so much infrastructure if people ate and worked close to home? Would we need a specialist to fix "everything we have" if we learned more about what we use. It use to be very common for people to sustain their own house, car, and garden as well as work a full time job. More recently that full time job has taken up more and more of our time.

The 40+ hour work week is a fairly recent phenomenon. Contrary to popular belief humans have historically enjoyed a good amount of leisure time. It is about finding a balance...

[MarcCourtenay]

How about some more investment ideas, as per "Once again as investors we can "vote with our wallets" and invest in companies that are doing all they can to reduce greenhouse gases and promote the use of organic, non-polluting forms of agriculture. These companies are few and far between, but they do exist and we hope to report on them here. Any comments on such companies that you know of would be greatly appreciated"

[Rosedog]

Verenium (VRNM) is heavily into biofuels-Its the leading public company in the field of cellulosic biofuels (from switchgrass etc. instead of corn as the article states). They also just got a US Dept of Agriculture government grant to build a new facility. Their stock is on the rise again- only time will tell.

[buyitcheap]

longhold - LOL that is the best "Modest Proposal" I have read in some time! Spot on! Please run for office so that I can vote for you.

And why is it that people who support zero population growth are already alive and apparently unwilling to really commit to the "cause?"