Friday, January 31, 2014

Where shall the fat come from?



The four most important agriculture export streams, in value, in the world in 2011 were US$17.6 billion soybeans from United States, palm oil from Malaysia for US$ 17.5 billion,  US$ 17.3 billion palm oil from Indonesia and Brazilian soybeans for US$ 16.3 billion. Notably all four streams are for two oil crops both doubling also as excellent protein feed stock. The consumption of vegetable oils demonstrates the most rapid expansion of all major food categories and they contribute 10 percent of all food calories compared to 5 percent 45 years earlier. The global increase in per capita vegetable oil consumption has been 5.2 percent annually[i]. Most of this growth is attributable to two oils, palm oil and soy bean oils. Earlier, fat and oils were a rich man’s food in a similar way as sugar was a rich man’s food until the large-scale sugar plantations were established. Now with extremely large scale soybean and palm oil plantations price of vegetable oil has gone down considerably and calories from vegetable oil is almost as affordable as calories from grains and other traditional staples. In 100g of palm oil there are 880 calories while 100 g of whole wheat has 370 calories. Palm oil price has been between 2 and 4 times higher than wheat the last decades[ii].

In 1966, soy oil passed butter to become the world's leading edible oil or fat. In 1982 palm oil was in second place worldwide, sunflower seed oil in third, butter (fat content) in fourth, and rapeseed (canola) oil in fifth, all far behind soy oil[iii]. Of the total vegetable oil production of 161 million tons 2012/13 palm oil and palm kernel oil (both from the same oil palm) contributed almost 40 percent and soybeans 27 percent, meaning that two thirds of all vegetable oil comes form those two crops. As we can see from the table only rapeseed and sunflower oil play an important role in the global picture[iv]. Palm oil production is also without competition most area efficient, often reaching 5 tons oil per hectare. This is ten times more than the typical oil yield of rapeseed, sunflower and soybeans. 

Palm
35%
Soybean
27%
Rapeseed
15%
Sunflower seed
9%
Palm Kernel
4%
Cottonseed
3%
Peanut
3%
Coconut
2%
Olive
2%
USDA FAS, Major Vegetable Oils: World Supply and Distribution

In comparison total world production of butter was some 9 million tons[v], which is more than total coconut and olive production, but still rather marginal. Today, in average 1.3 kg butter and ghee per person is consumed in the world ranging from almost nothing in China to 2.7 kg in India[vi] and an average of 2.8 kg in developed countries. Developed countries also consume considerable quantities of cream, 2.2 kg per person[vii]. Almost 6 million tons of lard and 7 million tons of tallow are produced. Animal fats are also consumed as part of the meat itself, and much animal fat is consumed in other dairy products as well. But by and large animal fat plays a minor role for our food fat supply.

As a crop oil palm has many good properties, in particular that it is a perennial tree crop with high yields. Nevertheless, the rapid expansion has been accompanied by environmental and social damage. This include the loss of tropical rainforests due to land clearance and conversion to plantations (I have personally experienced how mainland Malaysia was covered by a haze caused by the burning), the destruction of wetland ecosystems following drainage, the pollution of waterways by eroded soil, the improper disposal of mill waste, and the contamination of rivers due to leaching of nutrients and pesticides when applied improperly. The expansion has reduced wildlife habitats and oil palm expansion is considered as a main threat to Orangutans as well as Sumatran Tiger. Not only are trees cut down to clear for oil palms, but a lot of the plantations are made on peat lands, which are mostly made up of organic matter. When drained the organic matter breaks down and emits very high quantities of CO2[viii]. This makes Indonesia the third largest green house gas emitter in the world – eighty percent of the emissions are from deforestation and land use changes[ix].

In France, Belgium, Austria, United States of America, Luxembourg, Italy, Switzerland and  Spain per person consumption of fat is more than 150g, while in Bangladesh, Eritrea, Ethiopia, Rwanda and Burundi it is less than 30g[x]. Fat is a scarce resource globally, and the global trade represents almost forty percent of the production, a higher trade share than for any other major food commodity. China, the European Union and India are huge net importers of vegetable oils, and in Africa more than half of all oil used is imported, which is particularly disturbing considering that oil crops could do well in big parts of Africa and that the oil palm originates there. Soybean oil and palm oil provides most oils and they are both produced in large scale extractive systems. Fat is high energy and the highest yields of fat will come from tropical crops as they grow under energy abundant conditions, i.e. a lot of sun. In cold climates fat is a real problem. Butter from grass-fed cows and fat from pigs fed on a combination of waste and grain can produce as much fat per hectare as soybeans or rape seed[xi]. Which also was the reason for why in temperate climates those sources of fat has always been very important. If we consider that for the major oil crops there is a rest product which preferably is used as animal feeds, we see that the vegetable oil and animal fat production to some extent is mutually supportive.
(extracted from the book Global Eating Disorder - the cost of cheap food, forthcoming)

[i] Globalization and Food Consumption, Jacinto F. Fabiosa in The Oxford Handboook of The Economics of Food Consumtion and Policy, 2011
[ii] Svenska kaloritabeller och Index Mundi
[iii] Shurtleff, William & Akiko Aoyagi 2007 History of Soybeans and Soyfoods: 1100 B.C. to the 1980s, http://www.soyinfocenter.com/HSS/soybean_crushing1.php accessed 1 January 2014
[iv] USDA FAS 2014, Major Vegetable Oils: World Supply and Distribution, accessed 5 Jan 2014
[v] USDA FAS 2014, Butter Production and Consumption: Summary For Selected Countries, accessed 5 Jan 2014
[vi] Gerosa, Stefano and Jakob Skoet 2012, Milk availability, Trends in production and, demand and medium-term outlook, FAO, ESA Working paper No. 12-01
[vii] Gerosa, Stefano and Jakob Skoet 2012, Milk availability, Trends in production and, demand and medium-term outlook, FAO, ESA Working paper No. 12-01
[viii] Obidzinski, K., R. Andriani, H. Komarudin, and A. Andrianto. 2012. Environmental and social impacts of oil palm plantations and their implications for biofuel production in Indonesia. /Ecology and Society/ *17*(1): 25. http://dx.doi.org/10.5751/ES-04775-170125
[ix] Norway-Indonesia REDD+ fact sheet
[x] FAO Statistical Division 2014, D-Protein-Cons.country-Groups Country groups 1990-92 1995-97 2000-02 2005-07
[xi] Fairlie, Simon, Can Britain Feed Itslef?, the Land 4 Winter 2008-8

Saturday, January 18, 2014

Champagne is a creation of London City


A few years ago, I spent a few weeks in Samoa, a paradise Pacific island country. Some things strike you in Samoa. The village and the extended family (still) have strong positions in Samoa, land is mostly still communal (some 90 percent) and leaders of the extended families, the mathai, assign land to the members of the family. Soils are mostly rich. In these soils Samoans have been growing coconuts, breadfruit, taro and bananas as well as a number of fruits. Traditionally, pigs played a big role. Later cattle, cocoa and coffee were introduced. Many products are not sold in the market but are distributed within then families and villages; the meat in particular is mostly consumed at big parties. Farming is still not integrated in the market economy. Like was the case in many places in Europe only hundred years ago.

Commercialization of farming means bringing more farmers into a mainly cash-based and market based economy, both on the input and output side. It means that farmers shall sell products in a market situation, but it also means that farmers use more inputs, both hard and soft inputs, ranging from credits, fertilizers, irrigation to advisory service and business planning. In this way they can increase productivity and their incomes –and outcompete other farmers. But the price is increased risk. But not only that. When traditional farming systems are brought into the market economy, the change is not only technical or economic and the effects are not only for the household. In effect the whole social context is disrupted. When farms are embedded in the local context there is trust and mutual dependence between them and the others. This was certainly the case for when farming was brought into the market economy in Europe and the same pattern is seen everywhere. Of course this disruption was not only a negative thing, it was also a pre-condition from breaking down crippling traditions, prejudice and discrimination.

When I grow food for myself and my family, I use good seeds, I avoid contamination of the produce, I take well care of the nature resources that are needed for the production, I take care of the soil. I process it in ways that produce good and nutritious food. There are incentives for me to do things right and in an efficient way. I might still overuse nature resources, such as ground water or wild bio-diversity, either as a result of ignorance or because I think the negative effects are so far away in the future and that is meaningless to try to mitigate those now. If I learn what harm I cause, the chance is high I will correct my behavior.

How does the (capitalist) market model compare with this? Does the market model produce good food? Does it produce quality? Does it promote land stewardship? Well, the market model certainly has produced cheap food, but not necessarily good food. True, the market can also supply you with exquisite organic foods which are fairly traded with small scale producers. The proponents of the free market as the best way to organize food production will argue that this is exactly the beauty of the free market. If people are interested enough they will put their money on such high quality items.

But this reasoning misses a whole lot of information. First, the externalization of costs in the market system still favors those actors in the food chain that can let the bill be paid by someone else, whether it is nature, coming generations or workers in distant countries. Second, the high quality life style of the rich is built on the backs of the poor. It is lousy work conditions in farms and restaurants that provide the rich with their excellent food. The waiter and dishwashers in the Guide Michelin and other fine dining restaurants can’t eat same as their patrons, far from it. In the same way as the attendant at the delicatessen desk in the supermarket can’t afford to eat any of the stuff the well heeled clients buy. Inequality is a precondition for the lifestyle of those that can enjoy exquisite food via the market. Champagne is created by Wall Street and London city. 

(Raw material to my coming book Global Eating Disorder - the Cost of Cheap Food)

Friday, January 10, 2014

Food, Water and Energy - competing and converging.

The Energy, Water and Food nexus can be conceptualised as the ‘perfect storm’. Increased energy demand by 50% by 2030; increased food demand by 50% by 2030; and increased water demand by 30% by 2030. There is competition between them but also convergence. How we deal with the three are among the most pressing challenges.

For farmers, it can be much more profitable to sell water rights than to farm. Two farmers in San Joaquin Valley, California planned in 2010 to sell the right to draw up to 57,343 acre-feet of water per year from the California State Water Project. Under this sale, the farmers would be paid a total of $11.7 million dollars, as they sell the water at a price of $5,850 per acre-foot[i]. The use of water can be for energy production, municipal or industrial water.

Eagle Ford in Texas is one of the fastest-growing shale oil and gas plays in the United States. It is also in one of the driest parts of the country. Following a severe drought in 2011, concerns are mounting that oil and gas extraction is competing with irrigation for scarce water supplies. Drilling and fracturing rock formations to release oil and gas uses enormous quantities of water: 4 to 5 million gallons of water for every well in the Eagle Ford, according to most estimates. The economic return for using groundwater for fracking is enormous. If oil prices remain around $80-90 per barrel, the gross revenue from a single well could be $24 million-32 million or more. The returns on using groundwater for oil extraction easily outstrip those for agriculture. If the groundwater owner can claim royalties on output from oil and gas wells, using groundwater to frack wells could yield more than 2,000 times compared to using the same amount of water to grow corn[ii].

This competition for water is not only for oil and gas extraction in the energy sector. Large scale concentrated solar power fields are often located in dry areas and needs huge quantities of water for cooling. In 2011, China had to make the tough choice between using water in the Three Gorges Dam for irrigation of food crops or for energy. The Three Gorges Dam discharged enough water to fill 2 million Olympic-sized swimming pools by June 10, according to a government statement. Lower water levels on the 6,264-kilometer (3,915-mile) river may increased China’s oil demand by 300,000 barrels a day to make up for lost hydropower generation[iii].

In United States, 143 billion gallons of freshwater is used daily for cooling power plants – more than any other freshwater use, even more than for irrigation[iv]. At the same time irrigation itself consumes a lot of electricity as in India. Moving and treating the water of California takes almost 20 percent of the electricity of the stat’s electricity[v].

“We just want to get enough money to get the bank off our back,” Mark Shannon a farmer in California’s Joaquin valley told the New York Times in 2010. “We would love to stay here because this is some of the best dirt in the world. But I can’t farm myself out of this water problem.” he says as he has to let his land be converted into a solar power field[vi]. This is a very vivid illustration of that shortage of resources will be a permanent feature in the future, and how land, water and energy interplay. And it also shows that when a resource is used for one purpose it is withdrawn from some other place, something that is self-evident for everybody except a special breed of humans that have total faith in the market and technology to solve all problems and that there are no limits in resources.

In a "free" market economy a choice like this is simple. Has the potential energy in the water a higher market price than the food that is produced; we'll use it for energy production and let people starve.

Read more
Turning water into wine - ooops, sorry, I meant dollars...
How wet is your cucumber?
http://www.water-energy-food.org/en/home.html

[i] http://blogs.ei.columbia.edu/2010/11/30/california%E2%80%99s-water-rights-controversy-should-farmers-be-allowed-to-transfer-water-to-developers/
[ii]http://www.reuters.com/article/2013/05/01/us-column-kemp-texas-fracking-idUSBRE9400HB20130501
[iii] http://www.bloomberg.com/news/2011-05-24/china-orders-release-of-three-gorges-dam-water-to-ease-drought.html
[iv] Food, water and Energy, Know the Nexus, Grace Communications 2013
[v] Food, water and Energy, Know the Nexus, Grace Communications 2013
[vi]http://www.nytimes.com/2010/08/11/business/energy-environment/11solar.html?ref=business&pagewanted=all&_r=0



Monday, January 6, 2014

World Milk Markets: How 2 percent rule the rest.



The global giant in milk trade is not India or no 2 United States or not even any of the other biggest producer, it is New Zealand which alone produce some 18,000 tonnes of milk[i]. Every third minute a container of dairy products is shipped from New Zealand[ii]. Globally, most milk is sold in the country of production, but of the milk production in New Zealand most (95%) is exported. With annual exports in excess of NZ$13.7 billion, the dairy industry is New Zealand’s biggest export earner, accounting for more than 29% by value of the country’s merchandise exports[iii]
From the Globaldairy

In New Zealand itself one actor is totally dominating, the farmers’ cooperative, Fonterra, which collects around 90 per cent of New Zealand's milk production. “Because Fonterra purchases such a large proportion of New Zealand's total milk, there isn't a 'market price' for milk that is independent of the price paid by Fonterra”, I read on their web site[iv]

New Zealand accounts for about one-third of global cross-border trade in dairy products, but only account for a little over 2% of total world milk production[v]. This means that the so called world market price is determined at the fortnightly auctions of Fonterra, one single actor. 

Considering that only seven percent of the dairy products produced are actually sold outside of the country of production and that the volume traded by Fonterra is in the range of two percent of the global production it is a remarkable achievement – or a scary expression of globalization – that dairy farmers all over the world will sleeplessly await the results of Fonterras auctions.

(Extract from my coming book, Global eating disorder - the true cost of cheap food)





[i] FAOstat 2009-2011, accessed 23 December 2013
[ii] Fonterra 2013, www.fonterra.com
[iii] DCANZ 2013, http://www.dcanz.com/about-nz-dairy-industry/dairying-today, accessed 28 December 2013
[iv] Fonterra 2014, http://www.fonterra.com/global/en/Financial/Farmgate+Milk+Price accessed 5 January 2014
[v] Ministry of Primary Industries New Zealand, http://www.mpi.govt.nz/agriculture/pastoral/dairy.aspx, accessed 28 December 2013.