It is quite clear that we are seeing the end of recession and have taken the high growth path. However, the acute problem we’re facing is still unknown to us: FOOD SECURITY. Yesterday, Food inflation had aggravated to 11%.
Just take a look at the world around you :-
‘In 2008, a Dubai-based investment firm acquired 800,000 acres in Pakistan. In 2009, Saudi Arabia signed a deal for 1.2m acres of farmland in Tanzania’.
‘Morgan Stanley has bought 40,000 h.a of farmland in Brazil. Goldman Sachs invested US$300m to acquire 10 poultry farms in China.’
Why are investors going land frenzy? Or is it leading to the Oil way? Let us look at what is common between them.
- Current oil and land reserves insufficient to support the needs of the world 20 years , Both resources are being depleted at a faster rate than their generation.
- Origination is concentrated while demand is globally spread
- Both Oil and Food prices hit all time high in 2008, rising prices are pre cursor to shortages
In the above table, on one hand there is oversupply of Oil in Middle East while and undersupply in Asia pacific areas.
Image source: IDFC research
Coming to agriculture, production and consumption points are globally distributed. This is also similar to oil where there is surplus in one region and a deficit in another.
What alternatives do we have?
We have alternatives for Oil like other sources of energy such as biomass, wind power, solar power, ethanol based fuels, etc. Also recent uses of clean technology have potential to contain the demand of oil by making units operationally efficient.
Unlike oil, Food doesn’t have any alternative. One third of arable land is lost due to soil erosion, demand for biofuel reduces land availability for food production, and Industrialization is also major issue which is reducing the proportion of cultivable land. In short: Arable land is depleting but food consumption is increasing.
How can we contain the situation of Food crises?
On productivity side, I think the best way to contain this issue is improving the technology for food cultivation. Better seeds, better irrigation facilities, better fertilizers and pesticides
On economics side, efficient price discovery is also important. Like US and Europe, new age commodity exchanges offer good potential. Regulations regarding land acquisition may also help since 80% of farmers cultivate on small parcels of land. If regulations prohibit large corporations to buy huge parcels, economies of scale could help revamp agricultural production
The future is not known to anyone but right steps today will help us to deal with this crisis which is not so far. It will not be far that one of our basic need from “Roti Kapda Makaan” is set to go through a dynamic shift!
Your thought ?