Thought for food - Straight from the Hip by J Mulraj
Investing in India - Straight from the Hip by J Mulraj
Thought for food A  A  A

25 JANUARY 2013

Two columns ago we wrote about tight oil as a possible solution, thanks to technology, of the crisis of falling petroleum reserves, and the havoc that a shortage of fossil fuels would cause to the global economy, and to our way of living.

But shortage of fossil fuels will more seriously impact food supply. This is because the whole global agricultural system is based on a very high usage of fossil fuels.

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A must see documentary 'Farm of The Future' on BBC explains it beautifully.

Society in the developed world, especially in USA, was built upon the premise of cheap and plentiful petroleum resources. We are now going to pay the price for that.

The cheap and plentiful petroleum resources made it possible to have suburban homes, and mega cities, connected with roads and 'a car in every garage', as in the American dream, to go everywhere. This meant that food had to be grown elsewhere, not in the neighbourhood, and transported to supermarkets.

Both the growing of food through mechanised farming (only about 2% of Americans are farmers, feeding the rest, using tractors, harvesters etc., all driven by petroleum products) and the despatch of it to the cities (using trucks, planes, ships) require a lot of petroleum products.

Now, because farming is mechanised in these countries, the soil has got degraded, and increasingly reliant on fertilisers to provide the nutrients it needs (production of fertilisers also is based on petroleum products). As the documentary reveals, plowing, a very normal farming practise, actually ends up killing the living organisms in the soil (birds eat up the worms and insects when the soil is plowed) and it is the organisms which provide the nutrients, viz. nitrogen, phosphate and potash, which then have to be factory produced.

The design of the food supply chain also results in a huge amount of wastage of food, which, as per this excellent, must see, Ted talk by Tristan Stuart. A good part of that is because of cosmetic standards laid down by supermarkets on how the food should 'look'. So, even though the food is perfectly edible, about a third of food is wasted because it they don't meet cosmetic standards laid down by supermarkets. A simple example he gives is that no supermarket ever sells any sandwich with a crust (the piece of bread at the two ends). The crusts are wasted.

One hopes that this aspect of standards is looked into by the Ministry of Commerce & Industry when clearing retail supermarkets, whether domestic or foreign. Perhaps supermarkets can be asked to have a separate section where cosmetically unacceptable but edible foods can be sold, at a discount.

Indian agriculture has also become heavily dependent on reviving the nutrients in soil using fertilisers, alongwith pesticides to keep the pests away. We, too, can face the problem of food shortages, consequent to petroleum product shortages. At an Oxford farming conference this January, Mark Lynus, an environmentalist who was a vocal opponent of genetically modified (GM) food, became a persuasive advocate of it. In his modified view, it would be the way forward to feed 9 billion people. If the European Union and countries like India were to agree (they are now cautious about GM foods) then companies like Monsanto and Syngenta would benefit from their technology.

There are, however, several opponents of GM foods, such as Vandana Shiva, who oppose the privatisation of seed ownership, and warn that if a farmer is overindebted in order to buy expensive seeds, and if the crop fails, he is likely to commit suicide, which is a sad recurrence in Indian agriculture.

One likely solution is permaculture, as mentioned in the first documentary on 'Farm of the Future'. Permaculture is a planned system modelled on natural ecosystems. A localised system of farming, with local communities, even backyard gardens, provides food, thus reducing dependence on petroleum products, is needed. New York, for example, supplied a lot of its own food in earlier days.

A new study by the University of Minnesota and Mc Gill says "yield growth has been lower in wheat and rice than it has been in maize and soyabeans. This is problematic because wheat and rice are more important as foods: between them, they account for around half of all calories consumed. Maize and soyabeans are more important as feedgrains (ie, they are fed to livestock or used to produce fuel). The authors note tartly - and accurately - that "we have preferentially focused our crop improvement efforts on feeding animals and cars [rather than on] crops that feed people and are the basis of food security in much of the world."

A lot of starvation deaths were caused in African countries because of a shortage of corn, because most of it went to produce ethanol, aided by subsidies

All the points are well summarised in the video, 'Feeding Nine Billion- by Dr. Evan Fraser'. Feeding 9 b. will require four strategies, viz. using all available technologies, better distribution, localised farming and stronger regulation with proactive Government policies.

How does this affect investors?

If high petro product prices start creating more food inflation, and lead to a shortage of food, then, as in 2011, in the Middle East, there would be public protests, leading to changes/overthrows of Governments. Democratic Governments would have to react; in fact, they ought to proactively strategise now.

If, for example, there is more localised farming based on permaculture, as is to be encouraged, it would reduce dependence on chemical fertiliser. This would delight the Finance Minister, for it reduces the subsidy burden. India has, very wrongly, continued to subsidise only one fertiliser, viz. urea, whilst freeing potassic and phosphatic fertilisers from subsidy. Consequently, farmers use more of urea than they should, which degrades their soil further. One wonders if the Government would study, and act on if found necessary, the thought that plowing a field harms the soil. But, instead of studying this, there is a fight between our Fertiliser Minister and his Minister of State, about whether the urea subsidy benefits the corporation or the farmer. Which makes one wonder if, in our political milieu, enough forward thinking would go into the coming food crisis, to avert it and if there would be strong regulation to protect the country, or the usual political compromises to protect the special interests.

Having said that, it is heartening to know that tainted politicians also get their comeuppance, as did the Chauthalas, in a corruption scandal.

In global news, there has emerged a demand for bonds issued by the weak, peripheral Governments of Europe. Yields on 10 year Spanish bonds have fallen below 5% and those of 10 year Italian bonds below 4% . This suggests that institutional investors and pension funds are returning to these markets, and have a risk appetite for such bonds.

Last week the BSE-Sensex climbed 64 points to end at 20,103 and the NSE-Nifty gained 10 to close at 6,074.

In the coming week we will have the RBI Governor announce his credit policy. The market is expecting a 25 basis point (quarter percent) cut in interest rates. If he does not cut rates, being worried about inflation, the market would fall sharply. If he does cut them by 25 basis points, the market would be steady, since the cut is expected (unless he goes aggressive and cuts by 50 basis, which is unlikely).

Any time over the next month the Sensex is likely to breach the resistance of 21,000. Perhaps the Union Budget may provide the trigger. Once it does, it would be time to fasten seat belts, as one does prior to take off.

J Mulraj is a stock market columnist and observer of long standing. His weekly column on stock markets has run for over 27 years. An MBA from IIM Calcutta, he has been a member of the BSE. He is Conference Head - India, for Euromoney. A keen observer of events and trends, he writes in a lucid yet readable style and takes up issues on behalf of the individual investor. Nothing pleases him more than a reader who confesses having no interest in stock markets yet being a reader of his columns. His other interests include reading, both fiction and non-fiction, bridge, snooker and chess.

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6 Responses to "Thought for food"
Om Prakash Sharma
Jan 27, 2013
In India we hardly have a visionary poltician. They are all looters and crib when they don't get the chance to hoodwink the system Like (1)
Jan 27, 2013
Great article! The future is already happening and farmers are quitting agriculture in droves and migrating to cities in search of work. Farmlands are being converted to real estate development and farmers children are pursuing careers outside o agriculture. All the signs are there for us to see but we choose to ignore it or are too busy with our daily lives sit up and take notice.

If we do not take preventive measures now the consequences of a food crisis will be disastrous for India.
Like (1)
Jan 26, 2013
USA is the waste capital of the world. It is not sensitive to its waste, be it in food or land. Energy costs and foreign competition has made it aware of energy waste and it is making progress toward controlling waste of energy.
Abundant resources and food production has so far rendered USA blind to erosion of land. It maybe a long time coming.
For India it has come long ago. ALL of India's troubles and ills lie with the corrupt rulers and no one else.
It hard working people are being short changed and its time for the apathetic electorate to rise up and claim what's rightfully due to them.
Like (2)
Jan 26, 2013
This "Food for Thought" was a well laid out buffet.Lots of choices to consider in addressing this crucial issue. One can only hope that governments the world over are starting to consider the serious consequences of petrol dependent food production, and the unconscionable "contribution" of GM seeds to agriculture. Anyone taking a long term view can see that the practices of the past 60 -70 years are not sustainable. We are an amazingly creative species. Surely there will be other excellent solutions, in addition to wormi-compost, that can be devised to address out food and ecological concerns now and into the future. Like (2)
sharat sinha
Jan 26, 2013
We as NGO have for long Been experimenting with wormi-compost as an alternative to chemical fertilizer. Womri-compost not only replenishes nutrition taken away from soil but also increases fertility of soil in ling term. Like (1)
surajit som
Jan 26, 2013
apprx 55% of our population-which is rural and engaged in agriculture- roughly gets only 15% of our national income. this is diabolical. this kind of inequality is simply destructive and has lead to degradation and sub-human existence for the majority of people. sexual attacks on women is one by-product. the only solution is dramatic improvement in agriculture and related sectors. but that is not the only problem. take another factor. ruling classes everywhere are addicted to 9-5 work culture. this is equally unsustainable like mechanized farming. in fact it is this whole scale 9-5 work culture which has contributed to West's socio-economic-moral decline and rampant unemployment. in America only around 3% of the population is engaged in agriculture and average age is above 58 !!! this will be suicidal in a country like ours. Like (1)
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