Ag "wars"! (fought with money and lawyers--damn it all!)

Target acquired!

FT full-page analysis on how economic (more calories) and demographic (more mouths) pressure on ag production is leading to an M&A fight over PotashCorp--the fertilizer giant.  The UN now predicts a 70% increase in food consumption by 2050.  

Mining giant BHP Billiton is making a hostile bid for the Canadian firm, prompting talk of a counterbid by a Chinese national company, presumably because China fears a loss of access down the road.  The fertilzer industry in general is experiencing heightened mergers and acquisitions deals (like the expected merger of two giant Russian fertilizer firms).  Potash, a key fertilizer component, has seen its per ton price rise from $150 to $1,100 over the past half-decade, leading more nations to view the drab component as being on par with oil--a as in, a strategic asset.

Another example of how China's appetites and resulting connectivity are racing ahead of its political-military ability to defend them.  Some look at that and see the rise of Chinese military power as the solution, but as I've explained many times, I don't think the Chinese political system could withstand an aggressive era of overseas wars--even to protect "vital interests." That vision just doesn't jibe with a nation of only-child "little emperors."

Alternative?  China better have a lot of military allies around the world to help it deal with the fact that it's becoming the more resource-dependent--and thus vulnerable--economy in the world.

As if global ag isn't stressed enough, don't forget La Nina

Per my recent WPR column, the global cereal production chain is already under enormous strain thanks to the heat wave/drought in the Black Sea countries.  Then there's the floods in Pakistan.

The La Nina effect has already begun and will strengthen for the rest of the year.  Biggest losers likely the ABCs of South America (Argentina, Brazil, Chile), South Africa and Australia.

No upside whatsoever.

WPR's The New Rules: The Changing Food Security Equation

While the world doesn't yet face a food crisis on par with the summer of 2008, it's clear that the drought currently affecting the Black Sea trio of Russia, Ukraine and Kazakhstan -- all big-time global exporters of wheat and barley -- has suddenly made food inflation a primary threat to the somewhat fragile and decidedly uneven global economic recovery. At the very least, it reminds us just how tight global food markets are, due to the contradictory combination of rising middle-class demand and the enduring commitment by brittle governments around the world to keep prices low -- at whatever the cost.

Read the entire column at World Politics Review.

US farmers: China's rise is good

Nice FT story with charts on how “US farmers cash in on China demand.”

US ag exports to China now surpass those to Japan, the EU and South Korea, all of which are declining while China’s imports come out of nowhere in 2000 to almost a five-fold increase since.

Biggest flows are soybeans (Indiana’s reason to live) at almost $10B, then cotton (under a billion), then nuts (peanuts at just $140m), tobacco, wheat and corn.

The bad spot:  China bans our beef since the minor BSE scare in 2003 that sent our beef exports plummet from $1.3T to about $.3T overnight (still hasn’t recovered).

Sign of the times:  the first US grain export depot built in 25 years since on the West coast, so say goodbye to a bunch of those barges heading down to the Big Easy on the Mississippi.

As US politicians lose sleep over the trade deficit with China and the dollar-renminbi exchange rate, American farmers are eyeing a record $14bn in exports there this year.  So naturally the logistical landscape is being reformatted.

Hyped this one a while back in a column, and yeah, exports “exploded” after the Chinese joined the WTO in 2001.  One expert says that one-third of the price on the Chicago Board of Trade is determined by China.

For now, US dairy exports held up, awaiting new Chinese certification reqs. Our poultry faces a lot of “antidumping” obstacles, so work to be done.

China’s government has made self-sufficiency in ag production a national goal, but that’s a dream at best, given how much of China’s breadbasket is located at or below the 35^th parallel, meaning more and lengthier droughts as global warming kicks in more extensively.

We are likely to have China over a breadbasket soon enough, my friends, despite Beijing’s attempts to buy up farmland all over the Gap.

For now, Canada remains the top destination for US ag exports (which I find stunning!) at $16B, then China at $13B, then Mexico at $13, then Japan at $11b, the EU at $8B and the ROW at $38B.

That’s a heap of billions—almost 100!

Drought-resistant GMOs: a key to managing the impact of global warming

Chart found here

Bloomberg BusinessWeek piece on Monsanto and Dupont working on drought-resistant GMOs.  Dupont predicts 150m acres of such drought-resistant corn will eventually be planted worldwide, or 10% of the global seed market and one-third of corn grown globally.

Monsanto CEO Hugh Grant says, "The biggest single issue in farming going forward is . . . water availability."

Monsanto hopes to be marketing the world's first drought-resistant seed in 2012.  It is also working on a cotton variant, which is crucial because of the large water requirements.

Global warming's impact on ag will be mostly about droughts, so this work is very important stuff to making farming sustainable in the Gap in coming decades.