With world grain prices soaring to unprecedented levels, a familiar name is starting to make the rounds again after some 200 years on the shelf – Thomas Malthus.
At the beginning of the 19th century, the English demographer predicted that the exponential growth of the human population would outstrip our ability to increase food production. The result: widespread famine will cause the Earth's population to plunge.
The trillion-dollar question is whether global food output can be raised to satisfy the soaring demand and, if so, where will it come from? Some see the Earth reaching the limits of productivity, while others see hope in the use of technology to increase yields and farmable area.
"What we have on our hands today is a global food crisis...what we are talking about is classic Malthusian economics in the form of population gains beginning to outstrip the available food supply," Merrill Lynch said in a February report.
However, others see the growing chorus of alarm as overblown.
"There's certainly no reason to go into a panic mode here and to talk about Malthusian economics right now," said Gerald Bange, chairman of the U.S. Department of Agriculture's World Agricultural Outlook Board.
"We've seen some very large leaps (in production) in the past and I suspect we'll see some very large leaps in the future. Our technological abilities have not been tapped for sure," Bange said.
The price of agricultural commodities such as wheat, corn and soybeans have surged over the past two years, fed by a perfect storm of soaring demand from growing consumption in emerging markets like India and China, surging use of grains for biofuel production and climatic problems that cut production. In a little over a year, benchmark wheat prices have risen 100%, soybeans are up 75% and corn prices are up 49%. This comes as global supplies for grains have reached multi-decade lows.
While the gains are partially explained by the declining value of the U.S. dollar, in which reference prices for grains are fixed, economist point to a real increase in demand well beyond the currency effect. The sharply higher prices have already translated to real hunger in the world's poor.
Countries are scrambling to ensure supplies and shield their populations from the rising prices. Traditional agricultural exporters such as Argentina and Russia have imposed export limits and heavy export taxes to stem domestic inflation in food prices. Riots broke out in Mexico last year over the cost of tortillas, prompting the government to cap prices. A stampede over cheap cooking oil in China left three people dead and prompted the government to put limits on grocery prices.
Worldwide, 36 countries are currently facing food crises, according to the U.N.'s Food and Agriculture Organization.
"The world is entering a new era of hunger at a time when the absolute number of hungry people was already was growing," said Josette Sheeran, executive director of the U.N. World Food Program.
The hunger comes despite increasing production across the globe. World grain production is expected at 2.47 billion metric tons for the 2007-08 crop year, up 40 million tons from the previous year, according to the USDA.
"We'll continue to see expanding production, but there are limits to that growth," said Mark Rosegrant, director of the environment and production technology division of the International Food Policy Research Institute.
In the developed world, the pace of yield increases has slowed, dropping from about 2%-3% a year during the 'green revolution' to about 1% a year, Rosegrant said. The 'green revolution' refers to a period of soaring agricultural output achieved midway through the last century. "Prices will continue to rise over the next years," he added.
"We can get a little more output, but not much...there is no easy way to expand," said Lester Brown, President of the Earth Policy Institute.
There is at most 10% more currently feasible farmland available to expand production, with most of that area available in Brazil and Sub-Saharan Africa, said Robert Thompson, professor at the University of Illinois at Urbana-Champaign.
However the myriad problems plaguing African countries with the potential to increase farmland is stifling the investment and development necessary, Thompson said.
Brazil is expected to greatly increase the amount of soybeans it grows next season, but the resulting deforestation is raising alarm.
Brazil's Environment Ministry warned in January that up to 7,000 square kilometers of rain forest went under the ax during the second half of 2007. If that pace keeps up, the country is expected to lose 15,000 square kilometers during the year ending in August, up 34% from the previous 12-month period.
"Pressures to increase deforestation to up crop output will increase, with the Amazon Rainforest under particular threat," said the Earth Policy Institute's Brown. But such deforestation brings other, long-term threats. "If the (Amazon) rainforest is gone, the result will be more droughts in the south of Brazil and north of Argentina," Brown said.
Water shortages are also generating concern, with increasing dryness expected due to climate change posing another threat to our ability to feed ourselves. "About 2020 many farming areas are likely to be hit by drought" due to climate change, the International Food Policy Research Institute's Rosegrant said.
"Water shortages are increasingly going to limit increasing agricultural output, with aquifers in the U.S., China and across the world being depleted," Brown said.
Faced with limited area and water limitations, many see the increased use of biotechnology as the only way to meet the intense demand for food.
Seed companies are rushing to use genetically modified plant strains to increase resistance to pests, drought and poor soil conditions and are optimistic that their technology holds the key.
"If you look at the last 40 years, yields have doubled (in the U.S.), now we're yielding about 150 bushels per acre in corn. There are many who believe that the opportunity to (again) double this average yield will take less than 40 years," Monsanto (MON) Chief Executive Hugh Grant said at a recent symposium.
"We have just begun to tap the tools of genetic engineering and biotechnology," said the University of Chicago's Thompson.
However, private biotechnology companies cannot be relied upon to fully address the world's food needs, and public-sector spending is desperately needed to develop the new crops that can meet the food needs of the developing world, Thompson said.
"In the low-income countries it doesn't pay the big multinational biotech companies to invest to solve the local problems and the high income countries' foreign aid programs are not investing much in agricultural research," he said.
"If we don't allow the tools of genetic engineering to help solve this problem, then I think we may be in trouble in the 21st century -- Malthus would have a far higher likelihood of being right," Thompson said.
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