// you're reading...

Economics

The Food Bubble

7 August 2011

The Food Bubble

By Gwynne Dyer

There are all kinds of bubbles. We had the financial bubble that burst in 2008, causing economic devastation that we are still paying for. There is the Chinese real estate bubble, the biggest in history, which may take the whole world economy down with it when it bursts. But nothing compares with the food bubble.

Back in 2008, the OECD published a report on world food supply predicting that the price surge of that year would quickly revert to normal: “Barring any underlying climate change or water constraints that could lead to permanent reductions in yield, normal higher output can be expected in the very short term.” And barring age, disease and accidents, we will all live forever.

Between April, 2010 and April, 2011 the average world price of grain soared by 71 percent: not a very big deal for people in rich countries who spend less than 10 percent of their incomes on food, but a catastrophe for poor people who already spend more than half their money just to keep their families fed. And that is before “climate change and water constraints” get really serious. But they will.

Let’s ignore the effects of climate change, because it’s too early in the game to be certain that any given drought, flood or heat-wave has been caused by rising temperatures. Besides, there are a few countries (notably the United States) where climate change is still seen as controversial by a significant number of people. So let’s just talk about what happens to the world food supply when the irrigation water runs out.

The first great food price crisis was in the early 1970s, when consumption was outrunning production due to rapid population growth: the world’s population almost doubled between 1945 and 1975. Grain prices were even higher in real terms than they are now, and there was near-starvation in some areas. But the problem was quickly solved by the famous “Green Revolution”, which hugely increased yields of rice, wheat and maize (corn).

The only drawback was that the Green Revolution wasn’t really all that green. Higher-yielding strains of familiar crops played a part in the solution, certainly, but so did a vastly increased use of fertilizer: global fertilizer use tripled between 1960 and 1975. And above all, there was an enormous expansion of the world’s irrigated area. It has more than tripled since 1950.

Only 10 percent of the world’s cropland is irrigated even now, but that irrigated land provides about 40 percent of the world’s food, so it is absolutely vital. Yet they didn’t discover any new rivers after 1950. Almost all of the new irrigated land – two-thirds of the total – uses water that is pumped up from deep underground aquifers.

A lot of those aquifers are “fossil”, meaning that they filled with water long ago and are now cut off from the surface. They will eventually be pumped dry. Others still recharge from surface water that filters down, but they are almost all being pumped at many times their recharge rate, so they will effectively go dry, too. Then the world will have to make do with the one-third of irrigated land that gets its water from the weather. It won’t be enough.

Obviously, the aquifers won’t all go dry at once. Some are bigger than others, and some have been pumped much longer or more heavily than others. But most of them are going to go dry at some point or other in the next thirty years.

The irrigated area in the United States has probably passed its peak already. In key agricultural states, it is already long past: 1978 in Texas, 1997 in California. In China and India irrigation may be at its peak right now. A World Bank study reported in 2005 that the grain supply for 175 million Indians is produced by over-pumping water, and some 130 million Chinese similarly depend in a dwindling supply of underground water for their grain.

It gets worse. In the Middle East, Israel banned all irrigation of wheat in 2000 in order to conserve the remaining underground water for people. It now imports 98 percent of its grain. More recently Saudi Arabia, which was self-sufficient in wheat production only five years ago, decided to shut grain-growing down completely before the major aquifer under the country runs dry. Next year, it will import 100 percent of its grain.

Saudi Arabia will be able to go on importing grain even when the price is twice what it is now, and so will Israel. But there are a great many countries that will lose their ability to feed their own people once the irrigation bubble bursts – and will not be able to afford to import food at the vastly inflated prices that ensue.

Never mind what climate change will eventually do to the world food supply (although we will mind very much when it finally hits). The crisis is coming sooner than that, and it is quite unavoidable. We are living way beyond our means.

_______________________________

To shorten to 725 words, omit paragraph 8. (“A lot…enough”)