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The Next Crisis Will Be Over Food

The United States is now a net importer of food, we read recently. If we understand that correctly, there is no longer enough food Made in the USA to feed Americans’ appetites. Colleague Dan Denning began a nervous discussion on the topic when he sent this article from the Financial Times, with its headline reading: “The next crisis will be over food”

From the article: “… what is really catching the attention of Goldman Sachs now is the outlook for agricultural prices. Or as Jeff Currie, head of commodities research at the US bank, says with disarming cheer: ‘We think we could go into crisis mode in many commodities sectors in the next 12 to 18 months… and I would argue that agriculture is key here.”

“Mr. Currie argues… if the world today was a rational economic place, then regions such as the Gulf which are food-constrained ought to be investing heavily in agriculture. And since the US is the world’s biggest agricultural supplier, this implies that the Saudi Arabians, say, should be snapping up farms in Wisconsin – as America secures oil in the most efficient manner by sending teams of Texans to Riyadh.

“But in practice numerous investment controls prevent Saudi Arabians from buying Wisconsin farms and Americans owning Saudi oil wells. And these controls are not being dismantled now. On the contrary, mutual mistrust is now rising. Hence the fact that Gulf leaders are currently considering desalinating sea water to plant wheat in the desert – while the US and Europe are trying to turn corn into fuel.

“Such exercises might make sense in domestic political terms; but they are apt to be fiendishly expensive. Thus the upshot of this misallocation, Mr. Currie would argue, is even more inflation – even if the world does experience some form of growth slowdown.

“Now, for any investor who is long on commodities right now (and I would guess that club includes Goldman Sachs), such trends might seem to smack of good news. For anybody who is dirt poor in the developing world, however, the picture is disastrous.

“But leaving aside this very real human tragedy, what should also be crystal clear for investors is that this is not a picture that points to 21st-century capital markets progress; nor is it likely to breed stability in the medium term. Anyone who thinks this decade’s problems start and end with credit, in other words, may yet receive a rude shock; sadly, we live in a world where soybeans may yet pack as painful a punch as subprime.”

“The globalization of the food supply has been great,” Dan continues. “3,000 mile chicken Caesar salads, as Jim Kunstler puts it. But just in time, calorie delivery is running straight into more conventional realities… like droughts… floods… and plain old high prices.

“I always thought the French position on retaining the ability to produce your own food was never fully discussed as a strategic choice. It is one thing to outsource your textile industry… or your industrial base… or your supply of oversize sweat pants.

“But outsourcing your supply of food and water… depending on unfriendly or unreliable trading partners to keep sending fresh fruit and poultry… or thinking the global system of trade will forever expand and never again contract… these are all dangerous assumptions that could leave you with an empty national stomach at night.”

Our Daily Reckoning suggestion: plant a garden.

Bill Bonner
The Daily Reckoning Australia

Bill Bonner
Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.

6 Comments

  1. John says:

    “Our Daily Reckoning suggestion: plant a garden.”

    Ricardo must be rolling in his grave right now.

  2. rufus13 says:

    Plant a big garden now. Plant fruit & nut trees and bearing bushes wherever practical. Citrus trees can grow indoors in a bright window over the winter and be moved outside in summer. Encourage bees. Stop using herbicides and pesticides on your property because poisons will end up in your produce.

    My yard had never been a garden, but does have 24 inch deep topsoil. The bad news is that 30% of the soil is rock larger than a golfball.
    Power tools have been very useful, and the rocks will be added to foundation projects. Even if the garden goes back to yard, it will be less trouble to plant a garden without power tools when the time comes.

    Getting ones’ body used to stoop labor is something that takes a little time. Serfdom doesn’t come easy, but fresh fruit is some consolation. Blueberries, raspberries, figs, and grapes don’t take much effort once planted.

    Prepare to dry, vacuum-pack, or pressure-can your produce. Freezing depends on municipal power service to preserve your food supply (unless you have installed solar/wind/hydro generation and storage in your home). Bad-quality/irregular power may become the new “standard” for electricity.

    Water catchment from the roof into barrels provides enough moisture for the 8 week dry season. Our city is inept enough that water may not always flow through pipes & meters.

    Birds and opossums are the biggest trouble to an urban farmer. Air rifle, traps, and a .22 pistol have all been handy. Continuous .30 cal. and 12 ga fire are a bit much on a 50′x 100′ lot.

    Cheers from the intersection of the Willamette and Mighty Columbia rivers.

  3. Tony B says:

    If globalization is the problem, decentralization is the solution.
    Just as in WW2, when Britons and Americans had Victory Gardens, we need individual involvement on a massive scale. Urban vacant lots and apartment roofs, suburban backyards, even washtubs on a patio would work.

    When trucks can’t deliver that Mexican lettuce to New York because they can’t buy fuel on non-existent credit, it will be too late. Start now and assure your food independence!

  4. I was just looking for this info for some time. After six hours of continuous Googleing, finally I got it in your web site. I wonder what’s the lack of Google strategy that do not rank this kind of informative sites in top of the list. Usually the top websites are full of garbage.

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