This year is the fortieth anniversary of Paul Erhlich’s “population bomb,” in which he warned that population growth could overtake food production and lead to global famine.  Declining fertility rates and rising agricultural productivity, however, defused the “bomb,” and led to grain surpluses, rather than grain shortages.

But is that still true?  For the past several years, grain reserves have been drawn steadily downward.  At present, world grain reserves are estimated at just 1.7 months, a level that Bill Doyle, head of PotashCorp, a Canadian-based fertilizer manufacturer, described last month as “precarious.”  He said that the world is facing a food crisis, that “is not getting nearly enough attention from global leaders.”  He went on to say, in an article that was published in the Canadian Press, that:

Countries have consistently drawn from long-held inventories to meet their food demand.  This has masked the grain deficit for many years and kept crop and food prices artificially low.  That can’t continue.

Since his company is in the business of selling fertilizer to countries like China and India, it would be easy to dismiss Doyle’s comments as self-serving alarmism.  But maybe not.

If a global food crisis was emerging, we would expect to see soaring commodity prices for wheat, corn, and soybeans.  Furthermore, we would see the value of farmland rising and the cost of key inputs, like fertilizer, increasing.  We would further expect that nations would begin taking emergency steps to protect their citizens from possible food shortages.

In fact, that’s exactly what’s happening.  In the past few months, wheat and soybean futures have reached record highs, and corn prices are approaching historical highs.  The value of farmland is increasing sharply in many parts of the world, and so is the cost of fertilizer. 

And, as for emergency steps, a story in this week’s Newsweek, reports that China is dipping into its emergency “pork reserve.”  Soaring grain prices have sharply increased the cost of feeding livestock, including pigs.  The Newsweek story reports that,

A new breed of criminal has emerged in China: "pigjackers." Soaring pork prices in the People's Republic have sent thieves roaring off with truckloads of hogs—and sometimes with smaller hauls, as was the case with the gang that was busted last year in Shenzhen trying to make off with 275 pounds of pork on a motorbike. A local newspaper valued the meat at upwards of $420, or roughly three times what a stolen motorbike might fetch in the city.

The article goes on to report:

In an effort to head off serious trouble, Beijing has tapped the country’s official “pork reserve.  That’s no joke, either; it’s the actual term for the special stash of meat the Chinese government keeps frozen in case of a sudden crunch—not unlike America’s Strategic Petroleum Reserve….And the country’s underlying agricultural shortages will only get worse…Experts predict that China, long a major exporter of corn products, will soon become a net importer—possibly this year.  When that happens, global grain prices could jump like this year’s oil market.

If, as this article suggests, global grain prices do takeoff like oil prices, it will renew concerns about global food security.  In the rush for grain, countries—like China—that have large “sovereign funds,” will gain access to the food they need.  And so will the United States and other developed nations, but what about the rest of the grain-importing world?  Already, record-high food prices have led to protests and rioting in many developing countries. 

After U.S. corn producers began selling more of their crops to ethanol producers last year, major protests erupted in Mexico over the rising costs of corn and tortillas.  In Pakistan, where wheat prices have jumped more than 20 percent since November, the government—fearing domestic food shortages—is cracking down on illegal grain exporters.

The hope, of course, is that soaring commodity prices will lead in a year or two to higher food production, but if the costs of farmland and fertilizers continue to rise, and drought conditions intensify, supply may not be able to keep up with rising global demand. Grain reserves could shrink and a genuine food crisis could be upon us.