"A Resurgence in the Fight on Hunger and for Clean Water May Yield Opportunities"

Sydney M. Williams

Thought of the Day

“A Resurgence in the Fight on Hunger and for Clean Water May Yield Opportunities”

April 26, 2010

Opportunities often appear in unexpected places. An op-ed in last Thursday’s Wall Street Journal by Timothy Geithner and Bill Gates spoke of the launch of a Global Agricultural and Food Security Program (GAFS). They point out that, in terms of dollars spent as a percent of official development assistance world-wide, spending on agriculture fell by two-thirds over the past twenty years. The Fund was launched on April 22 with an initial funding of $900 million by the Gates Foundation, along with the United States, Canada, Spain and South Korea.

Six months ago an obituary marked the death of Norman Borlaug, an American agronomist who won the Nobel Peace Prize in 1970, who died at the age of 95. Via technology in seed and land use, he was credited with saving more lives – literally millions of them – than any other person. While most hard commodities rose in price during the first quarter, most food commodities declined, so that corn and soybeans are selling about where they were a year ago, whereas wheat sells 25% below where it was at the end of 2008. Fertilizer stocks such as Potash (NYSE: POT) and Mosaic (NYSE: MOS), while up 100% from their March 2009 lows are still 52% and 65% below their 2008 highs. Chemical companies with large ag-chemical businesses, such as Monsanto and DuPont (MON and DD – both rated at Neutral by MCH), have not fared much better, though DuPont has done better than Monsanto. Water companies, such as Veolia Environmental (NYSE:VE), Clean Harbors (NYSE:CLH) and Aqua America (WTR) show chart patterns similar to the fertilizer stocks.

There are just over 6.8 billion people in the world and we add about 75 million annually. It has been estimated that a billion or more of the world’s population are undernourished and that almost half of humanity has difficulty accessing clean water; yet, as Mr. Geithner and Mr. Gates write, only 5% of world-wide development assistance went to agriculture in 2008 versus 18% in 1979.

The decline in assistance is inexplicable, but I suspect in part it is due to an increasing consciousness (and spending) on environmental and climate-related concerns, areas that are more socially popular and have achieved a status of political correctness. Bjorn Lomborg, a controversial Danish academic and environmentalist, in 2001 published a book, The Skeptical Environmentalist. The main thesis of the book is that most claims and predictions on environmental issues have been wrong; the book, as one can imagine, that was not received well in the politically correct, man-created-global-warming world of Al Gore and Michael Moore. Nevertheless, he has written convincingly that most of the impoverished world is far more concerned about clean water and adequate food than the possibility of rising temperatures – whether natural or man made. Certainly, those of us in the developed world cannot forsake climate concerns, but to ignore the food and water problems is to worsen a situation in which it is estimated 24,000 children die every day due to starvation and/or contaminated water.

According to the World Development Report, 23 members of the Development Assistance Committee, the European Commission and non-DAC members spent $121 billion in 2008 on assistance to developing nations, about one quarter of one percent of those countries GDP for 2008. Assuming the Geithner/Gates numbers are correct, it suggests that something like $6 billion went for agricultural purposes. In contrast, over the last 20 years the United States alone has spent $79 billion on policies related to climate change. In 2008, carbon trading reached $126 billion – more than was spent in all global development assistance. Squeaky wheels get grease and very few wheels squeak louder than Al Gore and Michael Moore, both of whom have made millions of dollars personally in their pursuit of addressing man made global warming.

It is not that there are too many people. Malnutrition in the impoverished world is due to the lack of access to technology and irrigation systems that improve per acreage crop yields. For decades Norman Borlaug was worried that the growth in world-wide population would outstrip the ability of the earth to sustain its people. By 2000 he had changed his position: “I now say that the world has the technology – either available or well advanced in the research pipeline – to feed on a sustainable basis a population of 10 billion people. The more pertinent question today is whether farmers will be permitted to use this new technology? While the affluent nations can certainly afford to adopt ultra low-risk positions and pay more for food produced by the so-called ‘organic’ methods, the one billion chronically undernourished people of low income, food-deficit nations cannot.”

The world’s population growth rate has been slowing, as poor countries gradually emerge toward a middle class status. More people means more demand for food, and, as wealth increases, diets improve. So, assuming Mr. Borlaug is correct – and the doomsayers on population have always underestimated the ability of man to adapt – we have half a century to prepare. The Global Agricultural and Food Security Program (GAFS) launched by the Gates Foundation and a handful of countries may well provide a stimulus to help solve the food and water needs of a billion or more people, and that spending should allow for exciting growth in food, water, farming and ag-chemical industries. While more acreage may be tilled, the real opportunity means increased yields. The average African farmer, on a per acre basis, reaps about one fifth that of his American counterpart.

I recognize that I sound dismissive of climate change. I am not. The world’s climate has changed thousands of times over millions of years. It will continue to do so. We should do what we can to limit man’s impact, but with less shrillness and recognizing the costs. The Icelandic volcano that exploded out of the Ejfjalllajokull glacier was a clear manifestation of nature’s power. It is the implicit arrogance of so many in the vanguard of “global warming” that I find off-putting.

Last Friday was the 40th anniversary of Earth Day. While the papers were filled with the continued need to clean our water ways – in fact, there are those in Congress who are seemingly more fixed on removing the word “navigable” from the Navigable Clean Waters Act – but little was written about the plight of millions of underfed people around the world. The GAFS Program, besides being humanitarian, is demonstrable of the recognition of a far greater and more immediate need. It should also serve as a catalyst for an increase in funding to this sector of the economy.