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Investing abroad to secure food at home
Gulf states are following in the footsteps of China and looking beyond their
shores to make heavy investments in agriculture
The latest report by the World Bank and
warnings by non-government agencies reveal that global food prices have reached
their highest in 20 years and could increase further because of rising oil
prices stemming from the unrest in Libya
and the Middle East.
Less than 40 years ago the UAE was
populated by small local communities who lived satisfactorily off the desert
land. Their meals consisted mostly of locally sourced livestock and produce.
Now, only a few generations later, the
dinner tables around the UAE are heaving with rice from India, tuna from Japan,
mushrooms from France and meat from Brazil. A steadily growing expatriate
population with diverse tastes means demand has rapidly overtaken what the
market has to offer. This, paired with worldwide shortages and spiraling
prices, has made having secure sources of food a matter of stratgic importance
for the country.
According to the International Fund for
Agricultural Development (IFAD), Arab countries account for more than five per
cent of the world's population but less than one per cent of global water
resources. Because of its arid desert climate, which is not conducive to large
scale farming, the UAE imports more than 80 per cent of its food, spending
Dh2.5 billion in 2010 alone.
In order to insulate themselves from market
fluctuations, the UAE and the other GCC states are following in the footsteps
of China
and investing heavily in agricultural land abroad. By shipping the produce home
and bypassing world markets, they can cut food costs by up to 25 per cent.
"Right now on a comparative basis we
are at the same prices as at the peak of the crisis for grain. The main reason
is that no more than 6 to 8 per cent of the total world production of grain is
actually put on the market because producing countries want to help insure that
at least at a country level they have enough," said Taysir Al Ghanem,
regional communication manager for the Near East and North Africa
communications division, IFAD.
"The important thing about land
aquisition is that countries in the Gulf will be relying less on the open
market," he said.
Sultan Bin Saeed Al Mansouri, Minister of
Economy, recently cited the main areas of investment for the UAE as Vietnam, Cambodia,
Egypt, Pakistan and Romania.
"Serious negotiations on agricultural
investments are also ongoing with other countries including Australia and Indonesia," the minister said.
While the concept of buying or leasing
farmland abroad is not new, the rising food prices have caused a recent flurry
of investment activity. Between 2006 and 2008, UAE investments in agriculture
abroad increased 45 per cent. According to the International Food Policy
Research Institute (IFPRI), the UAE ranked third in the amount of agricultural
land obtained by selected investors between 2006 and 2009. In first and second
places were China and South Korea.
Top of the agenda
The issue of rising food prices has been at
the top of the agenda at government meetings and economic forums worldwide. The
latest report by the World Bank and warnings by non-government agencies reveal
that global food prices have reached their highest in 20 years and could
increase further because of rising oil prices stemming from the unrest in Libya and the Middle East.
The UAE alone has seen prices of edible
oil, sugar and rice shoot up by 50 per cent, the price of vegetables by more
than 25 per cent and fruit by more than 20 per cent in the last year. The UAE's
Federal National Council (FNC) met at the beginning of this year to discuss
solutions to the issue.
"UAE inflation continues to be the
highest in the region, putting huge pressure on consumers, particularly
low-income people," said Khalid Ali
Bin Zayed Al Falasi, a member from Dubai
at the meeting.
In order to stem this and limit the effect
on low, post-downturn consumer confidence, the Economy Ministry has persuaded
some supermarkets and cement producers to rein in prices. Dr Hadim Al Nuwaimi,
director of the Consumer Protection Department in the Ministry of Economy,
announced recently that prices of essential foodstuffs would be slashed by up
to 40 per cent in supermarkets across the UAE during March. These products
include flour, milk, tea, rice, sugar, oil, coffee, pasta and flour.
Initiatives have also been implemented to
make do with the limited amount of water available such as growing more climate
resistant crops and using desalination plants to generate more water.
However with water used in agriculture
taking up 80 per cent of the total water supply, subsidised agricultural
schemes are unfeasible and unsustainable on a large scale.
During the Arab oil boycott of 1973, the US indicated as a retaliation measures that
there could be a boycott of food deliveries to the region which first prompted
plans to develop Sudan
as a bread basket for the region. Since rising fuel costs contributed to about
a fifth of grain price inflation, between 2004 and 2008, GCC countries have
turned their focus away from major international food exporting countries like
the EU, Russia, Canada, the US, Brazil or Australia and are focusing on nearby
areas such as Egypt, Pakistan or Cambodia.
Where to invest?
"These investments are targeted
towards developing countries where production costs are much lower and where
land and water are more abundant. Other factors that influence investments
include geographic proximity and climatic conditions for preferred staple crops,"
stated a recent report on ‘Land Grabbing' by the IFPRI.
Leading the rush are international
agribusinesses, investment banks, hedge funds, commodity traders, sovereign
wealth funds as well as individuals attracted by cheap land.
"News reports have helped shed light
on these developments, but details about the status of the deals, the size of
land purchased or leased, and the amount invested are often still murky.
Well-documented examples are scarce, and some reports are contradictory.
This lack of transparency limits the
involvement of civil society in negotiating and implementing deals and the
ability of local stakeholders to respond to new challenges and
opportunities," stated IFPRI's report.
At the end of 2009, UAE-based agricultural
investment firm Janan formed an investment plan with Egypt to cultivate around 42,000
hectares of land with wheat, maize and other crops. The project which will
extend to 2015 is expected to produce 350,000 tonnes of wheat a year.
Last year, the UAE was also in talks with
the Cambodian government to purchase land for rice cultivation. UAE-based
Minerals Energy Commodities Holding (MEC) has been working out plans to lease
around 100,000 hectares of farmland in Indonesia.
Abraaj Capital, a private equity group
which manages $5 billion of assets across the Middle East, North Africa and the
Indian subcontinent, has purchased land in Pakistan during the past year.
Emirates Investment Group (EIG) also put money into farmland in Pakistan when
they offered up to a million acres to foreign investors.
The UAE also has investments in the Rashid
Al Dhahiri Olive Presses Company and the Al Marmouqa Food Company in Jordan. In Morocco, the
UAE's Al Qudra Holding Company is investing in various sectors such as farming
and fisheries.
In Ethiopia, which is only one of 20
or more African countries where land is being bought or leased, 815
foreign-financed agricultural projects have been approved since 2007.
When developed, land will yield roughly two
tonnes of grain per hectare. With investments across Asia Pacific and the Middle East reaching 100,000 hectares of land, the newly
cultivated land has a potential to produce one million tonnes of grain a year.
Private-public partnerships
Local food distributors such as Iffco are
forming private-public partnerships to secure agriculture supplies overseas.
The company which distributes brands such as Tiffany and Igloo has formed a
joint venture with Malaysian agriculture company Felda to grow palm oil in Malaysia. They
also co-own 81,000 square kilometres of cattle ranches in Australia.
"If you are under the mercy of raw
material prices, then you don't control your business, your business controls
you. You secure the business and control your destiny," said Mustafa
Sidki, managing director of Iffco.
However other smaller local food companies
are not financially capable of making similar investments or partnerships.
"It cannot happen. Upward integration
requires major resources. We need the financial and political back-up to do
this and preserve competition. Major companies can do this, but the market will
not absorb this supply," said Mohammad Al Ghurair, Managing Director of
Masafi, which also produces fruit juice and potato chips.
Matter of corporate responsibility
If there is one thing that the Gulf
investment programme can’t afford to overlook, it’s local needs of the area
where they are investing.
“Most of the countries in question are net
food importers themselves. Investments would need to be on such a scale that
they could improve local food security and social and political stability and
produce an exportable surplus on top of it,” stated a recent report from the
Gulf Research Centre on the Potential for GCC Agro-investments in Africa and Central Asia.
The UAE was one of the first countries to
support the Arab Organisation for Agricultural Production, an organisation set
up in Khartoum
to encourage investment in the agricultural sector. Sudan
and Somalia
are also offering land to foreign investors who have the means to develop these
impoverished
states’ agricultural sectors, especially
livestock and dairy.
“As an institution we believe that there
are proverbial win-win situations where we’ve been clamouring and crying for
more investments into land.
However, once there is a decision to do
those large-scale investments it comes with a large corporate responsibility.
The investor needs to see what impact it will have on the local agriculture and
also whether those investments contribute to overall development of the local
land,” said IFAD’s Taysir Al Ghanem.
There are many deals which are condemned by
NGOs and labelled a new form of colonialism. According to the Gulf Research
Centre’s report, well structured deals could guarantee employment, better
infrastructure and better crop yields.
But badly handled, they could also cause
great harm, especially if local people were excluded from decisions about
allocating land and if their land rights were not protected.
Opinions are divided as to whether these
land acquisitions are beneficial or detrimental to the local landowners.
“Landownership and land titling is very
fuzzy in many of the countries we work with, so it becomes quite difficult to
manage large-scale operations. IFAD’s advice would be to not go to those
operations if it’s going to affect local people,” said Al Ghanem.
According to the GRC report “Potential for
GCC Agro-Investments in Africa and Central Asia”, investment in countries such
as Pakistan, which has a high exposure to radicalism, and Afghanistan which is
suffering internal conflicts, could not only threaten their agricultural
investment but also their international standing. China
recently came under international criticism for its land investments in Sudan during the Darfur
conflict. While this new form of investment ensures security for those who can
afford it, there are many social and political issues that come into play when
developing another person’s land that the investor has a corporate
responsibility to consider.
45%
rise in UAE investments in agriculture abroad
between 2006 and 2008
50%
rise in prices of edible oil, sugar and
rice last year
Wheat prices set for increase
Russian ban on grain exports will lead to
decline in crop production
London/Moscow: Russia's ban on grain exports means
the country's farmers will plant the fewest wheat fields in four years, another
sign that global prices will keep rising.
Wheat plantings in the country, once the
second-biggest exporter, will drop 2.3 per cent to 64.2 million acres for this
year's crop, according to the median in a Bloomberg survey of as many as 19
producers, traders and analysts.
Farmers can't plant more because the ban
imposed after last summer's drought is limiting farm income. Diesel was 30 per
cent higher than a year earlier in January and OAO Acron, Russia's
third-biggest nitrogen fertilizer producer, raised some prices by more than 12
per cent for the first half.
The 84 million-metric-tonne grain harvest
anticipated in the survey is 1 million tons below what the government says it
needs to consider lifting the seven-month-old export ban. The absence of
Russian supplies comes as the US
says global grain inventories will drop 13 per cent, riots topple leaders in Tunisia and Egypt and governments hoard food.
"The situation in Russia is
absolutely crucial," said Sudakshina Unnikrishnan, a London-based
commodities analyst at Barclays Capital, the most accurate wheat-price
forecaster in the first two quarters of 2010, according to data compiled by
Bloomberg. With global stockpiles reduced, "we'd be starting a year off on
a much weaker footing", she said.
Widespread drought
While Russian wheat prices are 22 per cent
cheaper than futures on the Chicago Board of Trade, the global benchmark, First
Deputy Prime Minister Viktor Zubkov said March 2 the export ban could be
extended from July through the end of 2011. Russian policies may mean no reversal
in the 94 per cent rally that began in June after drought and flooding from Canada to Russia ruined crops. The surge
contributed to what the United Nations says were record-high global food prices
last month.
The S&P GSCI Index of 24 commodities rose
47 per cent since June, the MSCI World Index of equities climbed 28 per cent
and Treasuries returned 0.8 per cent, a Bank of America Merrill Lynch index
shows.
Wheat will average $8.98 (Dh33.02) a bushel
in the next quarter, 7.9 per cent more than the $8.3225 traded March 4,
Barclays estimates. Societe Generale SA, the second most-accurate forecaster
tracked by Bloomberg in 2010, is predicting $9.10, the highest quarterly
average in more than three years.
Natural disasters are cutting harvests
around the world and forcing governments to forego revenue from international
sales to ensure food security for their own people.
New tenders
Ukraine imposed grain export quotas last year and India banned
shipments of lentils, onions and edible oils. China
and Japan
are selling from state food stockpiles. Egypt,
Iraq, Bangladesh and Saudi Arabia tendered for grains.
Cyclones and flooding damaged crops in Australia
this year and drought is threatening wheat in northern China. Costs
may keep rising in coming months, with only rice keeping the world from a
repeat of the previous crisis, the UN said March 3. More than 60 food riots
occurred worldwide from 2007 to 2009, the US State Department estimates.
Russian farmers are already behind after
planting 12 per cent less winter wheat, a crop that normally accounts for 66
per cent of the annual total, according to estimates of the International
Grains Council, whose membership exceeds 50 countries. The country's grain
stockpiles will probably drop to 5.4 million tonnes by June 30, 75 per cent
less than a year earlier, the IGC estimates. Global inventory of wheat will
decline 10 per cent to 177.8 million tonnes, according to the USDA.
Government subsidy
Spring plantings could be bigger if the
government provides loans to farmers, according to Pavel Skurikhin, president
of the Moscow-based Grain Producers' Union,
which represents about 3,000 companies.
Prime Minister Vladimir Putin said on March
2 the government gave farmers another 1 billion roubles (Dh130 million) to buy
seeds and the same amount for fertilizers. Spring grain plantings in Russia usually
start by April and the harvests are usually completed in October.
Harvests may also exceed expectations
should growing conditions improve.
"The early indications are that the
crop is going to be more or less normal," said Abdul Reza Abbassian, a
senior economist at the UN's Food and Agriculture Organisation in Rome. "At this time
last year we expected the record for Russia, and look what happened. So
it still has to be seen in the context of assuming normal weather during the
growing season."
Stockpiles
The surge in wheat prices may slow as
demand weakens. North African and Middle Eastern nations accelerated grain
purchases to boost stockpiles and curb domestic prices as unrest spread.
Grain shipments from the French port of Rouen,
Europe's biggest cereal hub, to Algeria
were the highest in more than six months in the week to March 2, to fill
contracts concluded in past months, port data show. Egypt, the largest wheat importer,
is "running on fear" and will likely buy less in coming months, said
Mehdi Chaouky, a London-based analyst at Diapason Commodities Management SA,
which has about $8.5 billion invested in commodities.
Relief may also come from outside Russia. Combined
global production of wheat, soyabeans and corn will be 1.81 billion tonnes in
2011-2012, 16 million tons more than demand, Societe Generale estimates. That
compares with a 40 million-tonne shortfall in the current season. The bank is
predicting higher prices in every quarter this year.
UN warns record food prices put millions at risk
Jan 7, 2011
ROME — The United Nations warned Friday millions of people are at risk after global food prices hit their highest level ever, as clashes over rising prices erupted in Algeria this week.
Surging prices for cooking oil, cereal and sugar in particular, "will affect millions of people," Abdolreza Abbassian, an economist at the UN's Food and Agriculture Organisation (FAO) in Rome, told AFP.
The FAO's food price index, an average of monthly price changes for meat, dairy, cereals, oil and sugar, hit 214.7 points in December -- the highest level since the index began in 1990.
The December level tops the peak of 213.5 in June 2008.
Price highs at the time provoked a food crisis and riots in a number of African countries, as well as in Haiti and the Philippines, and aid agencies fear the latest price rises could spark further violence.
In Algeria this week, demonstrators and security forces clashed in the capital and other towns in protests against a spike in the costs of basic food items by 20 to 30 percent this month.
The global price index for sugar in December rose to a record high of 398.4, up from 373.4 in November. The price of cereals also rose over the same period to 237.6 points, the highest level since August 2008.
"Rising prices are re-emerging as a threat to global growth and social stability," Robert Zoellick, president of the World Bank, wrote in a commentary for the Financial Times on Wednesday.
Zoellick also stressed the importance of improving "long-range weather forecasting and monitoring, especially in Africa."
The FAO's November Food Outlook report blamed rising food prices on unexpected shortfalls due to bad weather, aggravated by policy responses from some exporting countries, which had seen a knock-on effect on the market.
Corn Advances as Dry, Warm Weather in Argentina May Limit Grain Production
By Luzi Ann Javier - Jan 10, 2011
Corn futures rose for the first time in three days in Chicago on concern that dry weather in Argentina will hold back production in the second-largest shipper of the grain, depleting global stockpiles.
Corn for March delivery gained 0.8 percent to $6 a bushel on the Chicago Board of Trade. The grain has slipped 4.6 percent so far this year, after surging 52 percent in 2010.
A storm system forecast to drift across Argentina through Jan. 11 isn’t expected to bring significant rainfall to the driest areas, T-Storm Weather LLC said in a report e-mailed today. Several days of heat will follow in the driest areas of the Argentine corn and soybean belt, it said.
A “drying trend is likely to return this week, so crop concerns are likely to re-emerge,” Commonwealth Bank of Australia said in a report e-mailed today.
The corn harvest in Argentina will decline to 20.4 million metric tons this year from 22.5 million tons, after drought hurt the crop, the Buenos Aires Cereals Exchange said Jan. 6. The exchange’s estimate compares with the U.S. Department of Agriculture forecast last month for 25 million tons.
The USDA is scheduled to release a crop report on Jan. 12. Global corn stocks may be 127.3 million tons at the end of this season, compared with last month’s USDA outlook for 130 million tons, according to the average estimate of 14 analysts surveyed by Bloomberg. Inventories are forecast to fall from an estimated 147.2 million tons a year ago.
Global soybean inventories will drop to 58.78 million tons at the end of this season, from 60.4 million tons a year earlier, according to the survey. That compares with the USDA’s estimate last month of 60.1 million tons.
China Demand
March-delivery soybeans rose 0.4 percent to $13.70 a bushel in Chicago. The oilseed, which advanced 34 percent last year, has slipped 2.4 percent this month.
China, the top soybean buyer, lifted imports of the oilseed by 29 percent to a record in 2010 as the domestic crushing industry expanded to supply higher consumption of livestock feed and cooking oil.
The world’s most populous country bought 54.8 million tons of soybeans last year, including 5.43 million tons last month, the customs office said on its website.
Wheat for March delivery gained 0.5 percent to $7.78 a bushel in Chicago. Milling wheat for March delivery traded on NYSE Liffe in Paris advanced 0.2 percent to 251.50 euros ($324.86) a ton.
Global wheat reserves will drop to 175.2 million tons from 196.7 million tons a year ago, according to the Bloomberg survey. The USDA estimated stockpiles would decline to 176.7 million tons last month.
Sarkozy and Obama to discuss soaring food prices
President Nicolas Sarkozy arrived in Washington Monday for talks with US President Barack Obama. The visit comes as France takes the helm of both the G8 and G20, with food price regulation and currency stability high on Sarkozy’s agenda.
When French President Nicolas Sarkozy arrives in Washington Monday, he’ll have plenty of ammunition to argue his case for greater global food price and currency stability.
In the past four weeks, several people have been killed in Algeria and Tunisia in violent riots over soaring food prices and unemployment.
During his meeting with US counterpart Barack Obama, Sarkozy will argue that an agreement on currencies and global imbalances will help prevent further swings in commodity prices to avoid a veritable world food crisis, like the one that hit in 2008, when riots broke out in dozens of countries across the world.
Coordination on global concerns
French Prime Minister Francois Fillon underlined the point last week when he told a conference that one of France's top G20 priorities was to find a collective response to "excessive volatility" in commodity prices, notably for food and energy.
Washington is Sarkozy’s first stop in seeking support for the planned reforms. France is the current rotating president of both the G8 and the G20, and is hoping to push through the changes by the end of the year.
The two leaders will also discuss a range of security issues such as the NATO-led war against the Taliban in Afghanistan, Iran’s nuclear developments, the increasing terror threat from Pakistan, and the ongoing post-election crisis in Ivory Coast.
In the French and Lebanese press, relatively more attention has been paid to the discussion the two leaders will have about the upcoming indictment by the UN-backed Special Tribunal for Lebanon (STL).
Both France and the US support the tribunal, which is charged with investigating the killing of former Lebanese Prime Minister Rafik al-Hariri. But global leaders fear that that the findings could unleash widespread violence in the Middle East.
Shaky relations?
Sarkozy will meet Obama for the first time since documents leaked by whistle-blower website Wikileaks revealed that US diplomats found the French president "viscerally" pro-American but also touchy, thin-skinned, and with a complicated private life.
Sarkozy will travel with his wife, Carla Bruni-Sarkozy, who is supposed to have a separate lunch with Michelle Obama.
World Risks Food Riots as Grains Climb, Economist Chalmin Says
Jan. 6 -- The world may face social unrest including food riots in April as grain prices increase, said Philippe Chalmin, an economic adviser to the French government.
Crop damage caused by flooding in Australia and drought in Argentina is likely to boost grain prices in coming months, Chalmin, an economics professor at the University of Paris- Dauphine, said in an interview in the French capital today.
“I’m very concerned,” Chalmin said. “Around Easter we could start to see food riots.”
World food prices advanced to a record in December, partly driven by higher sugar prices, the United Nation’s Food and Agricultural Organization reported yesterday. The FAO’s cereal index rose to the highest level since August 2008, remaining about 37 points below the record level in April that year.
Corn prices rose 52 percent in Chicago last year, while wheat climbed 47 percent. Grain prices may rise further because of uncertainty about production in South America, FAO senior economist Abdolreza Abbassian said yesterday.
“For the cereals, I expect very strong tension around March, April,” Chalmin said. “There are no more stocks available with the large exporters. It’s not because of sugar that you’re going to have food riots.”
Skyrocketing food prices in 2008 sparked protests and riots in almost three dozen poor nations including Haiti, Somalia, Burkina Faso and Cameroon.
'One poor harvest away from chaos'
Millions of the world’s poorest people and the state of the global economy are threatened by the food price rises, writes Geoffrey Lean.
'Within a decade," promised the top representative of the world's mightiest country, "no man, woman or child will go to bed hungry."
Dr Henry Kissinger, at the height of his powers as US Secretary of State, was speaking to the landmark 1974 World Food Conference. Since then, the number of hungry people worldwide has almost exactly doubled: from 460 million to 925 million.
And this week the airwaves have been full of warnings that the formidable figure could be about to increase further, as a new food crisis takes hold. Some experts warned that the world could be on the verge of a "nightmare scenario" of cut‑throat competition for the control of shrinking supplies.
The cause of such alarm? On Wednesday, the Food and Agriculture Organisation (FAO) reported that global food prices had hit a record high and were likely to go on rising, entering what Abdolreza Abbassian, its senior grains economist, called "danger territory".
That is bad enough for Britain, adding to the inflationary pressures from the soaring cost of oil and other commodities, not to mention the VAT increase. But for the world's poor, who have to spend 80 per cent of their income on food, it could be catastrophic.
Robert Zoellick, president of the World Bank, warns that the rising prices are "a threat to global growth and social stability", and Nicolas Sarkozy has identified them as a priority for the G20, which he chairs this year.
Already they are higher than in 2008, when they drove the tally of the malnourished briefly above a billion for the first time in history, and caused riots in countries as far apart as Indonesia, Cameroon and Mexico. That ended nearly two decades during which the number of hungry people had stayed the same, while the world population grew by 1.2 billion, so that the proportion of an increasing humanity without enough to eat steadily fell.
But the crisis of two years ago, and the one that may be unfolding now, are polar opposites of the one behind the World Food Conference. Then, bad harvests had produced a real shortage. Now, we have bumper crops: the past three years have produced the biggest harvests ever. The issue is not one of supply, but of demand.
The mushrooming middle classes of India and China helped cause
the 2008 price hike by eating more meat, which, in turn, mops up grain: it can take, for example, 8lb of cereals to produce one of beef. And cars contributed as well as cows. Biofuels transferred over 100 million tons of cereals from plates to petrol tanks: to fill a 4 x 4 tank requires enough grain to feed a poor person for a year. Speculation, too, helped drive prices up.
The same factors are at work again, though fortunately the hungry are not yet as badly hit. This is partly because the price of rice, which feeds almost half of humanity, has remained relatively stable; and partly because it is mainly the higher-quality wheat and maize – eaten by the better off – that has got much more expensive.
But things remain volatile, since the world has heavily run down its grain stocks over the past decade, and much of what remains is in China, which does not readily release them even when prices are high. So the present abrupt rises have been brought about by a harvest that is only 1.4 per cent down on last year, and prices remain unusually hostage to the weather.
So if it is all so precarious at times of bumper harvests, what will happen if – or rather, when – we get a really bad one? That is what is worrying Lester Brown, president of the Washingtion-based Earth Policy Institute, whom I first met at the 1974 conference. A former champion tomato-grower – then an enthusiast for the Green Revolution, now a leading prophet of danger and one of the first to forecast the present situation – he is publishing a book on the issue on Wednesday.
"The reality," he says, "is that the world is only one poor harvest away from chaos. We are so close to the edge that politically destabilising food prices could come at any time."
Imagine, he says, if last year's Moscow heatwave – which sent average temperatures 14F above normal, and contributed to this year's smaller harvest – next hit Chicago and the Midwestern bread basket. The US harvest could slump by 40 per cent, sending prices "off the chart" and cause "the global economy to start to unravel". As the climate changes, such extremes are likely to be more common.
Back in 1974, Kissinger spoke of the "thin edge between hope and hunger". A generation on, it is time to take it seriously.
India’s leopards go out on the town
It was about as long as a small leopard, the biggest of its species ever recorded in Britain. The 4ft predator, which gobbled down a family cat in middle-class Maidstone for its Boxing Day dinner, ended quite a year for the urban fox. In October, one killed 11 penguins in London Zoo; in August, two invaded bedrooms in Folkestone and Fulham to kill a kitten and bite a lawyer; in June, yet another attacked twin nine-month-old girls as they slept in Hackney,
Worried? It could be worse. In India, the role of Britain’s streetfighter foxes is increasingly being filled by, well, leopards. Driven from their natural habitat by its destruction, drawn by the easy pickings of urban life, the big cats are now constantly spotted in the subcontinent’s towns and cities. Stray dogs are a staple diet, but the leopards also regularly kill people. Indeed, in June one even took on the Indian Army itself, injuring 12 adults and children near the gate of the military academy at Dehra Dun.
Both foxes and leopards are aggressive, adaptable animals, and both are thriving. There are now thought to be 34,000 urban foxes in Britain, visiting more than a third of the country’s urban gardens at least once a month. And the leopard – which is also increasingly invading South African cities – has avoided the fate of, say, the endangered tiger: by one estimate more than half a million of them are at large. Could their motto be: “If you can’t beat them, eat them”?
Drought in India Forces Talk of User Fees, Rainwater Harvesting
Thursday, 10 June 2010 21:14
A record heat wave and growing water crisis in India are forcing politicians to consider implementing user fees and other measures to conserve water.
During the last several weeks, record high temperatures in several areas have been blamed for dozens of deaths across the country. In the western city of Ahmedabad, at least 20 people have died and hundreds have been hospitalized from the heat, Channel NewsAsia reported. And in the eastern state of Orissa, 14 people died in five days from the searing temperatures of up to 46 degrees Celsius (115 degrees Fahrenheit), according to the Press Trust of India.
Meanwhile drying rivers are causing regional water shortages. And in Nagpur, an urban area of 2.4 million in central India, the heat wave has triggered a fuel crisis as rail wagons that normally transport petroleum have been pressed into service to carry water instead.
To cope, the Indian government is drafting a new water policy that could create user fees for water-intensive sectors, such as agriculture, to deal with the crisis.
“The situation is getting worse as the country’s per capita availability is reaching the water-stress situation,” Montek Singh Ahluwalia told the Times of India. Ahluwalia, the deputy chairman of the government panel drafting the new policy, said that nearly 80 percent of the country’s water goes to agriculture, but estimated that the figure could be reduced to 50 percent.
In Pune, the country’s eighth largest city, the Green Energy foundation, a locally-based environmental non-profit, is urging the government to encourage greater harvesting of rainwater, which the foundation estimates could provide 21 percent of the eastern city’s water needs. A foundation-prepared report for their proposal criticizes the municipality for poor water management and notes that the city faces a 30 percent cut in its water use.
While last year’s monsoon season was the country’s driest in nearly four decades, this year’s monsoons are expected to bring normal levels of rainfall.
‘Brace for a crisis’
President Mahinda Rajapaksa yesterday instructed ministers and officials to prepare a strategic plan to face an impending food crisis as there were signs that the world is to confront a food shortage by next April, the Presidential Secretariat sources said.
Sri Lanka is facing the danger of losing between 15% - 20% of her food harvest due to incessant rains, it had been revealed at a meeting of the government Food Protection and Cost of Living Committee at the Temple Trees.
Addressing the meeting President Rajapaksa had warned that the global community is destined to experience a food crisis due to natural disasters once again. President Rajapaksa has pointed out that some 600,000 lives and a huge portion of food reserves have been perished as a result of the natural calamities.
Meanwhile, Agriculture Minister Mahinda Yapa Abeywardana confirming what President Rajapaksa at the EPCOLG stressed that Sri Lanka will not be able to get any assistance from other countries in the event of a food shortage as the food crisis is a global phenomenon due to extreme climate change.
“All other countries are in the same predicament,” he said.
“Almost all countries that Sri Lanka imports food commodities like India, Thailand, Pakistan, Australia and EU countries are already confronted with food shortages or about to face in near future due to extreme climate change conditions. It could be floods, forest fire, droughts or sub zero temperature that have devastated not only food crops but hundreds of human lives, cattle and paltry. There will be serious negative implications out of this globally spread natural disasters where no country will be able to help other countries. That is why President Rajapaksa wants a comprehensive strategy to face this impending food shortage,” Minister Abeywardana told Daily Mirror.
He stressed that some one quarter of Sri Lanka is under water and 40% of food cultivated areas in the country had been submerged. It would take a minimum two to three days to flood water to recede if there were no more rains.
He added that it would take another fortnight to assess the full damage to paddy, vegetables, fruits and other crops from the rain and floods.
“There is no doubt that we need an advanced strategy to face the food crisis that is inevitable. We can have a better picture only after the flood waters have fully receded. Therefore, we cannot say what kind of response we have to the crisis right now. What I can assure is that the government is going to face this with resolve and people must be prepared to it,” Minister Abeywardana emphasized. Meanwhile, Health Minister Maithripala Sirisena who is in the flood affected areas has drawn the attention of officials about the necessity to repair the submerged roads as early as possible as it has hampered the relief supply to flooded areas in the country.
Three interlocking crises are striking Russia simultaneously: the highest recorded temperatures Russia has seen in 130 years of recordkeeping; the most widespread drought in more than three decades; and massive wildfires that have stretched across seven regions, including Moscow.
The crises threaten the wheat harvest in Russia, which is one of the world’s largest wheat exporters. Russia is no stranger to having drought affect its wheat crop, a commodity of critical importance to Moscow’s domestic tranquility and foreign policy. Despite the severity of the heat, drought, and wildfires, Moscow’s wheat output will cover Russia’s domestic needs. Russia will also use the situation to merge its neighbors into a grain cartel.
A History of Drought and Wildfire
Flooding peat bogs appears to be bringing the fires under control. Smoke from the fires has kept Moscow nearly shut down for a week. The larger concern is the effect of the fires — and the continued heat and drought, which has created a state of emergency across 27 regions — on Russia’s ordinarily massive grain harvest and exports.
Russia is one of the largest grain producers and exporters in the world, normally producing around 100 million tons of wheat a year, or 10 percent of total global output. It exports 20 percent of this total to markets in Europe, the Middle East and North Africa.
Cyclical droughts (and wildfires) mean Russian grain production levels fluctuate between 75 and 100 million tons from year to year. The extent of the drought and wildfires this year has prompted Russian officials to revise the country’s 2010 estimated grain production to 65 million tons, though Russia holds 24 million tons of wheat in storage — meaning it has enough to comfortably cover domestic demand (which is 75 million tons) even if the drought gets worse.
The larger challenge Moscow has faced in years of drought and wildfire has been transporting grain across Russia’s immense territory. Russia’s grain belt lies in the southern European part of the country from the Black Sea across the Northern Caucasus to Western Kazakhstan, capped on the north by the Moscow region. This is Russia’s most fertile region, which is supported by the Volga River.
Though drought and wildfires have struck Russia over the past three years, they have not affected its main grain-producing region. Instead, they struck regions in the Ural area that provide grain for Siberia. Those fires tested Russia’s transit infrastructure, one of its fundamental challenges. Russia has no real transportation network uniting its European heartland and its Far East save one railroad, the Trans-Siberian. While its grain belt does have some of the best transportation infrastructure in the country, it is designed for sending grain to the Black Sea or Europe — not to Siberia. The Kremlin began planning for disruptions of grain shipments to Siberia during the droughts and fires of 2007-2009. During that period, Moscow established massive grain storage units in the Urals and in producing regions of Kazakhstan along the Russian border.
This year’s drought and fires do not primarily affect Russia’s transportation network, but rather the grain-producing regions in the European part of Russia that make up the bulk of Russia’s grain exports. These regions lie on the westward distribution network, with the port of Novorossiysk on the Black Sea handling more than 50 percent of Russian exports.
Russia has focused largely on being a major grain exporter, raking in more than $4 billion a year for the past three years off the trade. This year, the Kremlin announced Aug. 5 that it would temporarily ban grain exports from Aug. 15 to Dec 31. Two reasons prompted the move. The first is the desire to prevent domestic grain prices from skyrocketing due to feared shortages. Russia’s grain market is remarkably volatile. Grain prices inside Russia already have risen nearly 10 percent. (Globally, wheat futures on the Chicago Board of Trade have risen nearly 20 percent in the past month, the largest jump since the early 1970s.)
The second reason is that the Kremlin wants to ensure that its supplies and production will hold up should the winter wheat harvest decline as well. Winter wheat, planted beginning at the end of August, typically fully replenishes Russian grain supplies. Further unseasonable heat, drought or fires could damage the winter wheat harvest, meaning the Kremlin will want to curtail exports to ensure its storage silos remain full.
Russia’s conservatism when it comes to ensuring supplies and price stability arises from the reality that adequate grain supplies long have been equated with social stability in Russia. Unlike other commodities, food shortages trigger social and political instability with shocking rapidity in all countries. As do some other countries, Russia relies on grain more than any other foodstuff; other food categories like meat, dairy and vegetables are too perishable for most of Russia to rely on.
Russia’s concentration on food volatility has a long history. Lenin called grain Russia’s “currency of currencies,” and seizing grain stockpiles was one of the Red Army’s first moves during the Russian Revolution. In this tradition, the Kremlin will husband its grain before exporting it for monetary gain. And this falls in line with Russia’s overall economic strategy of using its resources as a tool in domestic and foreign policy.
Exports and Foreign Policy
Russia is a massive producer and exporter of myriad commodities besides grain. It is the largest natural gas producer in the world and one of the largest oil and timber producers. The Russian government and domestic economy are based on the production and export of all these commodities, making Kremlin control — either direct or indirect — of all of these sectors essential to national security.
Domestically, Russians enjoy access to the necessities of life. Kremlin ownership over the majority of the country’s economy and resources gives the government leverage in controlling the country on every level — socially, politically, economically and financially. Thus, a grain crisis is more than just about feeding the people; it strikes at part of Russia’s overall domestic economic security.
Russia’s use of its resources as a tool is also a major part of Kremlin foreign policy. Its massive natural resource wealth and subsequent relative self-sufficiency allows it to project power effectively into the countries around it. Energy has been the main tool in this tactic. Moscow very publicly has used energy supplies as a political weapon, either by raising prices or by cutting supplies. It is also willing to use non-energy trade policy to effect foreign policy ends, and grain exports fall very easily into Moscow’s box of economic tools.
Russia is using the current grain crisis as a foreign policy tool even beyond its own exports, prices and supplies. It has asked both Kazakhstan and Belarus to also temporarily suspend their grain exports. Belarus is a minor grain exporter, with nearly all of its exports going to Russia. ButKazakhstan is one of the top five wheat exporters in the world, traditionally producing 21 million tons of wheat and exporting more than 50 percent of that. The same drought that has struck Russia also has hit Kazakhstan; production there is expected to be slashed by a third, or 7 million tons.
Kazakhstan traditionally exports to southern Siberia, Turkey, Iran and its fellow Central Asian states, Kyrgyzstan, Tajikistan, Uzbekistan and Turkmenistan. For the first time, Kazakhstan had planned to send grain exports to Asia. It had contracted to send approximately 3 million tons of grain east, with 2 million of those supplies heading to South Korea and the remainder to be split between China and Japan. The drought has forced Kazakhstan to reassess whether it can fulfill those contracts along with contracts for its immediate region.
Russia’s request that Belarus and Kazakhstan cease grain shipments does not seem primarily connected to Russia’s concern over supplies, but instead looks to be more political. The three countries formed a customs union in January, something that has caused much political and economic turmoil. Kazakhstan sought to lock in its president’s desire to remain beholden to Russia even after he steps down, while Belarus reluctantly joined as Russia already controlled more than half of the Belarusian economy.
For Moscow, however, the union was a key piece of its geopolitical resurgence. The Russian-Kazakh-Belarusian Customs Union was not set up like a Western free trade zone, where the goal is to encourage two-way trade by reducing trade barriers, but as a Russian plan to expand Moscow’s economic hold over Belarus and Kazakhstan. Thus far, the Customs Union has undermined Belarus and Kazakhstan’s industrial capacity, welding the two states further into the Russian economy.
Since the customs union has been in effect, Russia has quickly turned the club into a political tool, demanding that its fellow members sign onto politically motivated economic targeting of other states. In late July, Russia asked both Kazakhstan and Belarus to join a ban on wine and mineral water from Moldova and Georgia after continued spats with each of the pro-Western countries. Russia has added another level of demands in light of the grain shortages. As of this writing, neither Astana nor Minsk has accepted or declined the demands from Moscow, with grain exporting season just a month away.
Given current Russian production and storage supplies, Russia doesn’t actually need Belarus or Kazakhstan to curb their exports. Instead, it is seeking to use the drought and fires to create a regional grain cartel with its new customs union partners.
And this leads to the question of the other former Soviet grain heavyweight, Ukraine. Ukraine, which does not belong to the customs union, is the world’s third-largest wheat exporter. In 2009, Ukraine exported 21 million tons of its 46 million-ton production. Also hit by the drought, Ukraine revised its projected production and exports for 2010 down 20 percent, with exports down to 16 million tons. Some fear Ukraine will have to slash its export forecasts even further. Moscow will most likely want to control what its large grain-exporting neighbor does, should it be concerned with supplies or prices. Despite Russia’s recent actions with regard to Belarus and Kazakhstan, however, Ukraine has not publicly announced any bans on grain exports.
If Russia is going to exert its political power over the region via grain, it must have Ukraine on board. If Russia can control all of these states’ wheat exports, then Moscow will control 15 percent of global production and 16 percent of global exports. Kiev has recently turned its political orientation to lock step with Moscow, as seen in matters of politics, military and regional spats. But this most recent crisis hits at a major national economic piece for Ukraine. Whether Kiev bends its own national will to continue its further entwinement with Moscow remains to be seen.
Australian floods raise fears of wheat shortage
Severe flooding in Australia could lead to an increase in the price of bread on supermarket shelves due to global shortages of wheat.
US wheat futures rose heavily yesterday as concerns grew that Australian wheat growers will be unable to deliver their harvests as a result of the devastation. Australia is the world's fourth largest exporter of wheat after the USA, Canada and Russia.
At the Chicago Board of Trade, the price of wheat for March delivery rose over 3pc, at one point hitting $8.25 (£5.30) a bushel, the highest since last August. Warnings over impending cold weather in the US were also cited as reasons for the rise.
Gordon Polson, a director at the Federation of Bakers, which represents the UK baking industry, said that although the 'spot' price of wheat is not what large bread producers pay for their supply, the increase could eventually lead to higher prices on the shelf.
"There is no doubt that if there is a longer trend of higher wheat prices, this will be reflected in [bakers'] costs. If there are a couple of poor harvests in the world that will obviously impact prices," he said.
The Queensland area of Australia has been hit by calamitous flooding. Andrew Fraser, Queensland's State Treasurer, described the floods as a "disaster of biblical proportions". Water is covering land the size of France and Germany. It is expected to reach over 30 feet deep in some areas in coming days.
Early last month it was estimated that there were eight to 10 million tonnes of wheat and barley crops still waiting to be harvested in paddocks in Queensland and New South Wales. Local reports last month said that the rain may have cost grain growers in Victoria, New South Wales and Queensland between $1bn (£660m) and $2bn in lost revenue.
Julia Gillard, Australia's prime minister, said that the floods will have an economic impact and announced grants of up to $25,000 (£16,000) for businesses hit by the crisis.
She said: "We know there are far too many families who have had to leave not only their homes, but also their businesses. This targeted financial assistance will help them minimise their economic losses as they embark on the very difficult recovery period that lies ahead, and help businesses start trading as soon as possible."
The impact on global wheat prices of the Australian floods will be less pronounced than it would have been a decade ago due to Russia's increased dominance in the wheat market.
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Djama Omar Said