Malthus Revisited

So many of my friends are focusing on our worsening economic conditions, losing sleep about our imminent bankruptcy, and debating the spendthrift habits of our political leaders. I am almost relieved to find other problems to occupy my mind.

A friend recently sent me an article that raises lots of old questions, Malthusian in nature, questioning the adequacy of the worldŐs food supply. Such subjects are far a field from the economic issues that hold the attention of most of us today, but itŐs a subject that has long been uppermost in the minds of most of our neighbors.
I shortened and revised the script of the original manuscript for reasons of brevity.

"China continues to make headlines as a global export powerhouse. But little attention is focused on the probability it will soon become the worldŐs largest importer of grain. The reduction in arable land, hastened by rapid economic growth in China has led to a steady decline grain harvests.

"On February 8, 2004, the Chinese government announced an emergency appropriation, increasing its agricultural budget by 25% or roughly $3 billion. The additional funds will be used primarily to raise support prices for wheat and rice, the principal food staples, and to improve irrigation infrastructure. For the State Council to approve such an increase outside of the normal budget-making process in such haste indicates the government's mounting concern about food supplies. ItŐs a subject that is never far from the minds of its leaders.

"After a remarkable expansion of grain output from 90 million tons in 1950 to 392 million tons in 1998, China's grain harvest has fallen in four of the last five years dropping to 322 million tons in 2003. This drop of 70 million tons exceeds the entire annual grain harvest of Canada. Wheat stocks have followed a similar course. China's harvest shortfalls of recent years have been covered by drawing down its once massive stocks of grain. While grain production is dropping, demand is climbing, driven by the addition of 11 million Chinese people per year and by fast-rising incomes. As people earn more, they are moving up the food chain, eating more grain-fed livestock products such as pork, poultry, eggs and to a lesser degree beef and milk.
"The fall in China's grain harvest is due largely to shrinkage of the grain-harvested area from 90 million hectares in 1998 to 76 million hectares in 2003.

"Several trends are converging to reduce the grain area, including the loss of irrigation water, desert expansion, the conversion of cropland to non-farm uses, the shift to higher-value crops and a decline in double-cropping. The last development is due to the loss of farm labor in the more prosperous coastal provinces, as farmers seek higher paying jobs elsewhere in the booming economy.

"In the competition for scarce water, China's cities and industry invariably get first claim, leaving farmers with a shrinking share of a shrinking supply. Losing irrigation water may mean either abandoning land or less double cropping. Paying farmers in the north and west to plant their grainland to trees to halt these advancing deserts is further reducing the grain area.

"In a country where farms average 1.6 acres (0.6 hectares), many grain farmers are shifting to higher-value fruits and vegetables to boost income. In each of the last 11 years, the area in fruits and vegetables has increased, expanding by an average of 1.3 million hectares a year.

"China soon will be forced to turn to the world market for massive imports of 30, 40 or 50 million tons per year. This comes at a time when world grain stocks are at their lowest level in 30 years. Among other things, this means that the world surplus of grain and cheap food of the last half-century may soon be history. Higher food prices could become a permanent part of the economic landscape.
"Adjusting to these higher food prices could become a dominant preoccupation of governments in the years ahead.
When China turns to the world market, it will necessarily turn to the United States which controls nearly half of world grain exports.
"There are other trends that appear ominous to students of world food supply.

"Global warming may now be a subject whose importance will occupy center stage. How many remember the fires that erupted from drought conditions in Australia and California recently? Climactic disasters seem to be commonplace and more severe.

"Livestock disease has suddenly appeared after a long term dormancy. Mad cow disease and the spread of Sars contagion in world chicken populations are obvious examples. We are reminded of the risks of over-crowding and poor animal husbandry habits of the poor farm communities in Asia.

"Perhaps most important of all is the sudden rise in the price of grains. Soybeans are now 100% above last yearŐs price and twice its historic high. Wheat has followed a similar less dramatic course. Moreover, we have a shortage of ocean going grain carriers to deal with increased demand.
"In short we are waking up to new risks that could easily interrupt the long history of adequate, global food supplies.

"When next you think about the perilous condition of your nationŐs economy , imagine what a real food shortage could do to your serenity. ItŐs hard to imagine our nation of overweight citizens facing at last a self-enforced diet.

In the mean time, donŐt be surprised if food prices remain at high levels until the cows come home.
Richard E. McConnell April 1, 2004