Chart of the day: Fish-stock sustainability index

From the Economist.

NOAA (National Oceanic and Atmospheric Admin) reports that a record six fed fisheries are re-certified as healthy last year.  

After a decade of similar progress, 86% of America's roughly 250 federally monitored commercial fish stocks were not subject to overfishing; 79% were considered healthy.

The lesson:  don't let fishermen run things and - even more importantly - keep the idiot politicians out of the mix. Instead, the ones who do the best management are . . . the scientists.

More evidence of the sheer stupidity of US politics - and the GOP in particular:

And the politicians are still interfering. On May 9th the House passed legislation forbidding NOAA from developing an innovative means of apportioning fishing quotas, known as catch shares. These are long-term, aiming to give fishermen a stake in the future of their fisheries; market-based, since they can be traded; and, in practice, good for fish. Sadly, the two Republican congressmen behind the ban consider they have been designed “to destroy every aspect of American freedom under the guise of conservation”.

This borders on Know-Nothing stupid, which tells you that history can roughly repeat itself under similar circumstances.  But it's dumb stuff like this that has kept us from ratifying the UN Convention on the Law of the Sea (UNCLOS), which is really starting to hurt us as the Antarctic opens up.

Really stupid. It's like banging your head against a brick wall with these people.

Signs of the coming agricultural interdependency

FT story on Marubeni, the Japanese trading house, buying US grain trader Gavilon - a major corn trader.

Why buy it?  China's recent forays into the US corn market suggest the rise of a similar long-term relationship as did early Chinese forays on soybeans years ago.  China now regularly imports massive amounts of US soybeans. A similar long-term transactional relationship now seems in the works regarding corn.  Marubeni already has an agreement with Sinograin, a state-owned Chinese company that manages the country's strategic food reserves.

Military strategists of varying levels of economic awareness imagine the US, Japan and China fighting naval battles over the South China Sea.  Meanwhile, truly deep economic/resources dependencies - such as these in food - are cropping up all over the place. 

Guess which relationships prevail?

And no, comparing this to globalization-cum-1914 is too ludicrous a notion to process.  It isn't comparing apples to oranges; it's comparing apples to mammals.

BTW, growing up on the edge of the US corn belt (SW Wisconsin), this issue is near and dear to my heart.

Chart of the day: You can import the milk cows. The water is another story

Fascinating WSJ piece on China importing cows like crazy to build up its dairy stock.

Since 2009, China has become the world's most important buyer of dairy cows, driving up prices for calves world-wide and putting pressure on other markets such as alfalfa and bull semen. China has imported nearly 250,000 live heifers, or cows that haven't yet reproduced, since 2009, according to data tracker Global Trade Information Services. Last year it spent more than $250 million on 100,000 foreign heifers, about 25 ships worth.

China old cows were European and it has a cattle ban on North America since the mad-cow disease scare in 2003, so it's buying up stock in Australia, New Zeland - even as far as Uruguay.

Story describes the setting-up of modern American-style dairy farms (our cows outproduce the world on a per-head basis), but the trick is the amount of fresh water they require.  All the places they import these cows from are relatively water rich (more global freshwater share than population share), whereas China is 22% of the world pop with 7% of the water.

Tricky business, that.

But clearly, the attempt shows how intent China is on continuing to try and remain food self-sufficient. China won't succeed, but it'll try like all get out.

The future of American agriculture has arrived

Been briefing and writing about this one going back to about . . . I wanna say 2006.  I remember the slide I had my old slidemaster Bradd Hayes generate for what was still the Blueprint for Action brief.

Here is the reality as captured in the piece: US demand flattening, China's skyrocketing - especially for dairy (it's a growing middle class, mind you).

The head of California Dairies: "We're in an evolution. No question."

Markets "once treated as an afterthought" are now "reshaping the relationship between rural America and the rest of the world."

What are you really exporting when you export milk - even milk powder?  Water.  Whether or not you take it out for packanging, a whole lot of water goes into milk - directly and indirectly.

That's why the Kiwis have been in the lead.

It wasn't just the geographic proximity but the excess of water on a per capita basis (New Zealand has about 5 times the water it needs).

California ag exports to China and HK are up 85% since 2008: "All of a sudden, milk powder has become this valuable commodity." The sent this year's Miss California to China to hawk pistachios.

Amber waves of grain, my friends, in a back-to-the-future development that marks the resurgence of the economy - with ag and energy in the lead.

And yeah, both are plenty high-tech.

Wikistrat post @ CNN-GPS: New global sources of demand

Editor’s Note: The following piece, exclusive to GPS, comes from Wikistrat, the world's first massively multiplayer online consultancy.  It leverages a global network of subject-matter experts via a crowd-sourcing methodology to provide unique insights.

When Americans are warned that the “era of cheap credit is over,” we’re really being told that the inherent advantage of owning the world’s reserve currency is coming to an end. No, it won’t happen overnight, because China’s renminbi is still far from becoming a serious rival.

But the end is coming all right, and it’ll make all that Thomas Friedman hyperbole about a “flat world” a whole lot more real. America simply won’t have the advantage of being able to float debt - of all kinds - as easily as we did in the past, which means we’ll need to compete more intensely on the price and quality of our goods.

The primary driver here is China’s need to shift from a super-saving economy to a super-consuming economy. It’s gone about as far as it can go with export-driven growth, and now it needs to turn on its domestic consumption big-time, but doing that means China’s willingness to finance the debts of others will decrease - thus the end of cheap credit.

So, accepting all that, what can America anticipate when it comes to new sources of demand in the global economy?  What are some of the hot goods and services of the coming years?  We asked Wikistrat's global community of strategists for some ideas, and here’s what they chose to highlight:

Read the entire post at CNN's GPS blog.

China as Africa's De Facto World Bank - the Wikistrat video

This is a recorded briefing that I generated from the recent Wikistrat internal training simulation entitled, "China as Africa's de facto World Bank." It summarizes the points I gleaned from the wide-ranging simulation (dozens of wiki pages filled with all manner of brainstormed ideas, strategies, options by several dozen analysts) and summed up in an 8-page report.

This was the first major video production in the set-up I have constructed - after excruciating testing and accumulation of equipment - in our new rental home, which, in various parts, doubles as my work environment. Fortunately for me, virtually everyone else in my family is in school, with youngest Abebu starting within months. So during the day I have the house completely under control, meaning I can meticulously set up the gear, test at length, and pursue recordings and subsequent processing/production in peace.

Ah, the life of the bootstrapped start-up!

Naturally, comments and suggestions are welcomed on content, presentation choices (there are many ways to skin that cat, given the tremendous volume of ideas generated by any one simulation), and video capture.

One correction already accomplished: on this taping I set up a flatscreen for video feedback (I can see screen's content and myself in foreground) just to the right of the camera.  That gives me a slight off-camera eye orientation, which I thought was fine for simulating an audience interaction. But in retrospect, we decided that a straight-into-the-camera style would be better.  That is accomplished in an improved set-up that involves a smaller feedback screen being place just below the came - as in, within a couple of inches. That way I can look directly into the feedback and be, for all practical purposes, looking directly into the camera. The feedback screen is crucial because all of these briefs will be screen-content heavy and first-and-one-time briefs on my part, meaning I can't possibly memorize every click like I do on my regular brief. In that way, it is a LOT like doing the TV weather: lots of data/info to get through and you need to position yourself in front of the screen while not blocking it.  I do fairly well on this first try, but can obviously get smoother - trick being the feedback presents itself in a mirror image.

Another fix in the works: I lost my clip for my clip-on mike and therefore had to wear below the camera line because my substitute clip ain't so elegant.  That meant I picked up the clicking sound from my remote controller a bit too much - for my taste. New one is in the mail, so next time I'll wear the mike far higher and hopefully not pick up that sound.

Overall, pretty happy with the effort. At first, I repeat the text too much, but I warm up over time and get more extemporaneous and relaxed as I got more comfortable with moving myself around. This is far different from me being tracked by a cameraman on a big stage, because I go completely unconscious on my style and let the camera-guy deal with all that.  Here, with a fixed camera, I have to adjust my style somewhat. So a bit stiff at first, improving throughout, and clearly something I will grow more easy with it as I repeat the process.

WPR's The New Rules: India's Pastoral Ideal an Obstacle to Globalized Future

When most people think of revolutions, they imagine the overthrow of political orders. By contrast, most of what we see today in globalization’s continued expansion is not violent political revolution, but rather unsettling socio-economic revolution. Yes, when existing political orders cannot process that change -- and the angry populism that typically accompanies it -- they can most definitely fall. This is what we have seen in the Arab Spring to date. But more often this populism leads to political paralysis in countries both democratic and authoritarian. A case in point is the recent controversy in India over Prime Minister Manmohan Singh’s plan, since scrapped, to allow multinational retail chains like Wal-Mart, Carrefour and Tesco to mount joint ventures with local firms in direct retail sales operations. The public uproar showed that at times, globalization is simply too much change, too fast..

Read the entire column at World Politics Review.

WPR's The New Rules: Time to Worry About Over-Eating, not Over-Population

The real clash of civilizations in the 21st century will be not over religion, but over food. As the emerging East and surging South achieve appreciable amounts of disposable income, they're increasingly taking on a Western-style diet. This bodes poorly for the world on multiple levels, with the most-alarmist Cassandras warning about imminent resource wars. But the more immediate and realistic concern is the resulting health costs, which will inevitably trigger a rule-set clash between nanny-state types hell-bent on "reining in" a number of globalized industries -- agriculture, food and beverages, restaurants, health care and pharmaceuticals -- and those preferring a more free-market/libertarian stance.

Read the entire column at World Politics Review.

The simplest equation on making sufficient food happen

From WSJ interview with Peter Brabeck-Letmathe, CEO of Nestle. 

The global middle class means a good billion more have recently had the opportunity to access meat - high protein of choice, especially for growing bodies. When you want meat, it's a 10-times multiplier on grains or vegetables.

Do-able, says the CEO, if you follow one simple rule: "no food for fuel."

Other two rules: don't fear genetic advances and DO charge for water.

Besides some geographic adjustment on climate change, that's really it. We can handle the new demand without problems, no matter what the fear-mongers tell you. But we can't simultaneously chase "energy independence," which is doofus amidst all the other skyrocketing commodity interdependencies, because we cannot will ourselves into not caring about the Gap.

Simple solutions requiring decent political leadership, which appears - on a global scale right now - to be our one great unrenewable resource.

Chart of the Day: The Dragon Eats Corn

WSJ story.

This is, of course, big news to those of us who own farmland in the Midwest (I do by extension through my wife), because China is already buying up all the soybeans (or so it would seem), and now they're moving in corn in such a big - and I believe, a permanent - way, that a state like Indiana, where damn near everything is corn or soybeans, is feeling pretty good.

Our acreage, BTW, is in NW Ohio - basically the farm my wife grew up on (her share).

With China sucking up this corn and the rest of the world's demand rising as well, it almost strikes me as criminally stupid, in a strategic sense, to continue with the economic farce that is corn ethanol.  I've seen estimates where one-third of our crop (!) is destroyed in this manner - and I do consider it "destruction" is a world where 1B are too fat and 1B are malnutritioned (Soylent Green anyone?).

Mini rant for the day. Up to Lambeau tonight to see Pack v Cards in preseason.  Taking the Mei Mei.

Chart of the day: World's biggest ag producers

From FT story about effort of world policymakers to set up transparent info system on ag to avoid speculation, etc.  Good luck with that.  Farmers the world over tend to be tight-lipped, whether family or corporate.

What I found interesting about chart.  China, of course, is a huge ag producer, second only to US and not that far behind.  Problem is, of course, that China has 4 times as many people, so it's not really an exporter of note and, like India, consumes most of what it produces and then must import additionally (India less so, but as its middle class grows and climate change makes growing harder, it will follow China into a significant dependency).  EU is decent exporter, and then you get into the familiar South American and Black Sea countries, plus Canada and Pakistan (the former being more like US - a big exporter, and the latter less so because of its large population).  

So you see, just a handful of countries do the bulk of the producing and when you take out the self-consuming, the pool gets even smaller.

Again, water is crucial for the 21st century, and the West Hem has roughly 3 times as much as it needs - by population, so the West largely feeds the East, meaning protecting the food supply in the West becomes important in an age likely to feature biological terror.

Time's Battleland: "The future of Fifth Generation Warfare: Follow the food!"

Everybody thinks that the future is going to see fights over energy, when it's far more likely to be primarily over food. Think about it: The 19th century is the century of chemistry and that gets us chemical weapons in World War I. The 20th century is the century of physics and that gets us nuclear weapons in World War II. But the 21st century? That's the century of biology, and that gets us biological weaponry and biological terror. My point: obsessing over nuclear terrorism is steering by our rearview mirror.

Read the entire post at Time's Battleland blog.

WSJ: "The Chinese want our nuts." Roast 'em if you got 'em!

Sometimes China feels like a nut (2009), sometimes it doesn't (2005).  But when it does and that nut is the pecan, then an entire US industry changes - overnight.

Pecans are very American, the WSJ piece begins, as the pecan is the state nut of Arkansas, Alabama and Texas. Since forever, the price of pecans has followed the usual ag pattern of boom-and-bust. That all changed a few years back when the Chinese and their burgeoning middle class entered the picture.

Why do the Chinese get so turned on to pecans?  Advertising. Retired Chinese woman:  "We used to eat only walnuts, and then we saw on TV that pecans are more nutritious than walnuts." 

And an industry is reshaped.

The underlying dynamic that will increasingly knit the two nations together:

Nearly $1 of every $5 China spent on U.S. items last year went to buy food of some sort, $16.6 billion worth, according to the U.S. Department of Commerce. U.S. exports of goods of all sorts to China more than doubled between 2005 and 2010. Exports of crops and processed foods—soybeans, dairy, rice, fruit juice—more than tripled. Exports of pecans rose more than 20-fold.

Naturally, fears arose in the industry - or at least among its middlemen.  Check this out:

American shellers complained that selling so many premium pecans to China—the Chinese want the biggest, best nuts—would undermine both the domestic market and export markets in Europe. So they held back orders. China responded by going directly to growers. As Texas A&M pecan expert Jose Pena puts it: "It's kind of hard to tell a grower not to sell to the highest bidder."

There is a larger lesson in there:  US could use a new partner but prefers the seemingly safe "known known" of Europe.  Then China comes along and upsets the dynamics, but still the industry's insiders say, we must stick with what we know.  China goes directly to suppliers, and this is a bit threatening, but who can argue with sales?

Same is true for a lot of what America seeks to do in the Gap/developing world.  We assume our only allies are our old allies.  China shows up and creates all this positive change, but we find it upsetting and have a hard time interacting with them on the subject, preferring our known knowns from Europe. But the path ahead is clear enough:  the market has shifted and we've got some new friends - if we choose to get past the fear and recognize them as such.

This has been my underlying logic going back to "Blueprint for Action" (2005, but started briefing in late 2003). "Implausible!" and even "impossible" in the pol-mil realm, because we prefer the enemy image (AirSea Battle Concept), but the solution for our having too few resources to throw against too many fake states undergoing remapping in the Gap is clear enough: you ally yourself with the great demand producer in the system right now.

How Russia will matter beyond energy and minerals

From WSJ blurb "How to Bet the Farm on Mother Russia" (23 March 2011).

Besides being impressed with EU wheat production (they grow wheat like we grow corn), the point is how low Russia's yields remain.  You combine that with all the fallow fields (one-third) and unused arable land, and Russia's upside is considerable - if it gets the foreign investment.

Blurb is about Russian company hoping to get investment.  The company, Rusagro, wants to modernize old collective farms and buy up new land previously given to rural dwellers who aren't using it for agriculture (but might like the money). 

Big hold up on investment is the climate - as in, business climate.  

Chart of the Day: World grain consumption

WSJ from early March.  

Good example of the impact of the rising global middle class.

Also tells you something about the timing of the 2.0/Facebook Revolutions in food-dependent Arab world.

Will we see National Food Companies?

FT story.

Marubeni is a Japanese trading company. Historically focused on importing energy and raw materials to resource-poor Japan (the map to the right show's the company's global network of independent power producers), Marubeni is also the world's sixth biggest grain trader by volume.  

Marubeni's chief exec just announced that he wants the company to break into the top tier, known as the "ABCD group" (for ADM, Bunge, Cargill, Dreyfus and "lowly" Glencore--which apparently doesn't rank a letter).  Marubeni's grain traffic has doubled in the last five years, so it's no idle boast.

My thought, which I've been toying around with in the Wikistrat global model, is that global ag markets already resemble energy markets in their tightness of supply and volatility of price, so, when you consider that France-sized chunk of arable land that's been taken off the market over the past few years through purchases and leasing, can't we start talking about the rise of National Food Companies, or companies that have, as their guiding logic, the securing of food networks abroad for a primary national customer back home?  

Economist chart found here.

I mean, when China or Saudi Arabia sign these contracts, I gotta bet we're talking investing entities with some serious ties to the government - advertized or not.

Actually, Marubeni's ambition reflects a region-wide focus, since China is already its bigger market.  What's especially interesting about its ambition is how Marubeni uses its grain trade to get into ancillary markets like milling and animal feed processing.  

Just got me thinking . . . 

On food, Asia can't keep pace with rising middle class demand

WSJ story on how Asia's food demand continues to rise while the amount of land devoted to food production is pretty much capped this decade due to urbanization and planned investments just aren't happening as envisioned (so yield per acre not rising enough to cover the delta in demand).

The plan was to dramatically boost farm investment in Asia's developing countries after the scary price spikes in 2007-08, which may be remembered in the same way as the original OPEC price spikes of the early and late 1970s--a harbinger of a permanently tight market where any de-synching of demand and supply leads to real and perceived crises of the highest order (as in, governments fear for their regime stability).  

Examples of the investment:  opening up land previously considered marginal and improving farm-to-processor infrastructure (mostly roads and storage facilities).  The big hold-up, unsurprisingly, is the financial crisis.  Then there's the usual uncertainty on land ownership and fears of environmental ruin.  

Why things won't get so bad globally this time around:  grain stores are up and the economy is weaker, but these are temporary conditions that do not obviate the strong underlying trends.  As one researcher on rice puts it in the piece, "2008 was not just a blip, this is the way things will be, with repeated shocks."

The financial crisis, in my mind, caught Asia about a decade too early--not enough rules and not enough positive evolution on politics (especially the talent level of leadership) and not enough development of financial markets (in terms of being more fluid and responsive).  Asia in general is still burdened by rules and leadership and mindsets better attuned to extensive growth (throw in more stuff!) and the ag scene calls for intensive-growth answers (much higher yields on same amount of land).  The Philippines, as the piece notes, produced 92% of its rice in 2000, but is already down below 80% today.  That gap will only grow, because most dreams of getting access to unused land won't come true (the urbanization going on is likewise intense) and even if access is had, yields won't be so high without serious investment.

In the end, all the brave talk about food self-sufficiency in Asia is just nonsense; ain't never gonna happen. But Asia certainly could do better, so that the demand doesn't outstrip local supply too intensely too fast.  We've seen more than a few Asian states move into that outsourcing trend of renting or buying up nice farmland overseas (in Africa, for example), but that only buys you a whole new load of responsibilities that I think a lot of these countries--especially China--are ill-prepared to follow through on.

I remember driving from Addis Ababa down to Awassa in southern Ethiopia and seeing huge chunks of the best farmland sort of tarp'd off--as in, covered on all sides and seemingly roofed with simple metal skeletons wrapped in this thin but opaque poly skin (I assumed the topsides where clear enough to let in the bulk of the sunlight).    It was a stunning sight to behold:  all this open, rich farmland still operated in very early 20th century terms and then these huge, fenced off and covered up tracts where--apparently--a whole new level of effort was being made.  Unsurprisingly, I saw labor barracks nearby with a Chinese flag flying out front.

Now, you can say, this all works so long as the local government makes it work, but if a food crisis really comes along and the local population is suffering in a way that's undeniable in terms of global news coverage, then that thin poly cover-up won't be enough to keep that food production secret and safe.  And China will find itself unusually responsible for what comes next in places like Ethiopia.

And that's when the whole "non-interference" things gets revealed as so much empty talk.  There is no way China rises and becomes what it is becoming without have huge interfering effect all over the planet, and people will hold it responsible for all that change--both the good and bad.  

Don't get me wrong:  I think China's impact will be overwhelmingly positive overall, as the sustained demand for resources does plenty to jump start and fuel development in places like Africa in ways that the boom-and-bust cycle previously offered by the West did not.  But with the good will come the bad, and that means China gets dragged into all sorts of uncomfortable dynamics it has previously sought to avoid.  

This is why I argue that serious strategic partnership with the U.S. is hardly just in America's short- and medium-term interest (due to its current straining to meet its global security obligations). Over the long term, it's far more in China's interest. Back in "Blueprint," I said America needed to "lock in China at today's prices," but the obverse is equally true now:  prices will never be lower and China will never find a more pragmatic leader than Obama, because if he loses in 2012, expect the usual "apres moi, le deluge!" reactions to kick in. 

This is another example of why I think the 2010s are a turning-point decade--as in, get it right and globalization's future is secured, but screw it up, and far different global pathways are made possible.  Inside all those dynamics, the US-Chinese relationship is the long pole in the tent:  get it right and nothing can go wrong, but get it wrong and nothing will likely go right. Why?  The rise of the global middle class means there will be so little slack in so many systems, that it'll feel like we're collectively in constant crisis.  This environment yields the "keeping all the balls in the air" mindset currently on display at State with Clinton (who needs to aspire to higher goals than just this).  The same is unfortunately true in Beijing.  All this kicking-the-cans-down-the-road lack-of-ambition serves the world poorly at this moment of great structural change: everybody of note seems to avoid leadership.

But there's no question about China becoming far more of a global leader; it has no choice.  The question is how much of this leadership emerges pro-actively from Beijing, and how much is teeth-pulling from the rest of the world.

China's JFK is yet to emerge, but he was one of the "heroes of the future" I cited at the end of "Blueprint for Action":  the leader who steps up and asks China to think less of what the world owes it (after all those decades of "humiliation" and the long slow climb back up from widespread poverty) and more about what China owes the world.  That moment/leader will be a defining dynamic for the 21st century and how the world evolves.

And food is more likely to drive that process than energy or anything else.

Industry stewardship of the genetic code

Reuters @ Yahoo via my spouse, Vonne.

An interesting public-private partnership here:

Candy maker Mars Inc., computer company IBM Corp. and the U.S. Department of Agriculture have mapped the cacao genome in an effort to improve cocoa crop quality and sustain the world's supply of the key ingredient for chocolate.

The companies and the USDA's Agricultural Research Service (USDA-ARS) on Wednesday released the preliminary genome sequence for the cacao tree, which produces cocoa beans used to make chocolate.

The goal:

The results of this collaborative project -- delivered three years early due to Mars' scientific leadership, advances in genome technology and constant real-time collaboration -- marks a significant scientific milestone that is already starting to benefit millions of farmers, particularly in West Africa, where more than 70 percent of the world's cocoa crop is produced.

"The collaboration with Mars and the USDA-ARS leverages more than a decade of IBM Research's experience in computational biology, as well as the power of the Blue Gene supercomputer," said Ajay Royyuru, senior manager, IBM Computational Biology Center.

The kicker:

The results of the research will be made available to the public with permanent access via the Cacao Genome Database www.cacaogenomedb.org.

To me, that's a counter-intuitive choice by Mars, a privately held company.  I'll be curious to see if this precedent encourages other private sector gifts of this size to the scientific community, because, in my opinion, this is what sustainable resource utilization is all about.

A much bigger global middle class will want to consumer a whole lot more chocolate.  Mars will logically seek to capture as much of that growing market as possible, but it took the time and effort here to make this downpayment on our collective future.

And I admire that.

Russian farmers double-down on the wheat bet

WSJ story on Russian farmers taking the gamble of planting their winter wheat crop absent clear signs that the drought will abate.  Given the lack of slack in global food production chains, everyone will be tracking this planting.

Russia not only needs rain, but well-timed rain.

Elsewhere, Australia faces some locust problems and Argentina comes under the impact of La Nina, so a lot of uncertainty plaguing the system.

American farmers have been making the same calculation that the Russians are doing now:  get in another planting to take advantage of Russia's woes or not, understanding that if the Russian winter wheat crop succeeds, the market could go from too little to too much overnight.

Thrilling days to be in ag futures, one supposes.

Charts of the day: Brazil as rising ag superpower

Economist briefing:  Two compelling take-aways are that Brazil has more potentially farm-able land than anybody in the world and that it's successfully raising its productivity on the land it's using.