Jul 132014
 
 July 13, 2014  Posted by at 3:40 pm Finance Tagged with: , , , ,  4 Responses »


G. G. Bain Jewish Farmers Exhibit, East Broadway, NY 1909

Today looks like a good day to do a shout out and promo for our dear friends Kirsten and Serenity in Melbourne, Oz, who were responsible for the impeccable organization of the tour of Australia Nicole and I did in 2012. So we have living proof that they know how to organize something once they pour their hearts into it, which bodes well for the new project they’re busy setting up.

The Open Food Network focuses on building and facilitating an interactive platform to connect farmers and eaters that are dedicated to good, honest and local food, with full transparency. Of course there are many initiatives out there, from farmers markets to organic food stores, but many people still have problems getting access to good food.

Besides, most ‘fresh’ food is bought in giant supermarket chains, transported over large distances, and subject to centralized control, from Monsanto at seed level, ConAgra as super-producer, to WalMart as super-retailer. And we should not want centralized control, especially not of our basic necessities; that has never been a good idea and it never will be. If we can get the Monsanto’s and WalMarts of this world out of our lives, and at the same time improve the quality of our food, that can only be a good thing.

And if that still doesn’t swing it for you, just think of all the local jobs that will be created if we all buy local food as much as we can. Don’t forget that a dollar spent inside your community is worth 3-4 times more than one spent outside of it. And no, WalMart, and the entire supply chain it stands for, is not your community.

The Open Food Network aims to use the internet to provide a way of organizing all this, community by community. Check it out. Here’s their blurb:

Open Food Network – Building a Better Food System

The Open Food Network is an open, online marketplace that makes it easy to find, buy, sell and move sustainable local food. It gives farmers and food hubs easier and fairer ways to distribute food, while opening up the supply chain so eaters can see what’s going on. It’s good for farmers, good for eaters and good for the food hubs, local businesses and communities that want real food.

We are proudly open source and not for profit – creating software with and for the global fair food movement. Contribute now to get this platform launched for use by farmers and food hubs in Australia, with the software available for use all around the world! We know that OFN has the potential to really disrupt our food systems – in a good way. But we need you to get on board now and help make it happen.

How will OFN help fix the food system?

Lots of people are working to break the stranglehold that supermarkets and large agribusiness have over our food system. We’ve spent 3 years talking with many farmers, producers, eaters and local enterprises (like food hubs, independent retailers and co-ops) about how we can work together to take back control of our food. The Open Food Network is our response. By turning the existing food system on its head, the Open Food Network provides efficient ways for buyers (hubs) to connect with many smaller sellers (producers) and distribute food into their communities.

GOOD for Farmers and Producers: There is currently a big gap for farmers between selling through “the big guys” or doing everything themselves to distribute directly to eaters e.g. setting up and running their own online store, farm gate sales and farmers’ markets. For many farmers, these are not enough and take time away from the important work of growing our food. Farmers need scalable, sustainable systems for distributing their food.

OFN makes it easier for farmers to sell directly and possible for them to work together and with others (like food hubs) to streamline marketing and distribution, while maintaining full transparency and control. With the OFN, farmers have the freedom to set prices, choose who they trade with, when, how often and under what terms.

GOOD for Eaters: It’s time to reconnect with our food! We’re ready to abandon the supermarkets and get good, honest produce from people we know. But sometimes it’s hard work to shop and eat locally. OFN makes it easy to access locally grown food direct from the grower or transparently through hubs. Just go online, find what’s near you and shop . . It’s like an online shopping centre, full of local food!

GOOD for Communities and Food Hubs: “Middle men” matter . . the problem is when there are only two! We want every community to have many different ways to get sustainable, local food. Local food enterprises – like buying groups, co-ops or larger scale wholesalers, retailers (and everything in between) can make this possible. OFN provides simple online ordering and shopping tools that make it easy to set up a hub and start moving food – while keeping the farmers and prices transparent all the way through. It removes admin barriers to small and medium sized food hubs working with local farmers

The OFN provides an ultra-flexible system for food hubs, enabling communities to set up what they need. Food hubs using OFN have complete freedom over:

• Your customers – whether they are households, buying groups, institutions, food service etc
• Your mark-ups and fees – OFN has a flexible fee structure so you can set it up how you want it, easy, transparent, independent
• Who you work with – OFN supports diverse networks, partnerships and social enterprises, with relationships and flexible fee structures

The Open Food Network:

• is an online marketplace that farmers and local hubs can use to distribute food
• makes it easier to find, buy, sell and move sustainable local food
• is software that helps organise the trade and distribution of locally grown food
• lets you manage your ordering, scheduling, payment and delivery cycles
• lets eaters order locally grown food from their chosen hub
• puts eaters in touch with the people who grow their food
• lets farmers list their own produce, set their prices and tell their own stories
• basic trading is free for farmers and eaters to use
• is proudly open source and not for profit

Tipping Point Goal: $25,000
Total Funding Goal: $100,000

Tipping Point Goal: We’ve done the numbers and – together with grant funds and some blood, sweat and tears – an additional $25,000 will get the software to the point where we can launch an ‘open beta’ OFN service in Australia (open to anyone in Australia to use for profiles and basic trading). The money will go towards designers, engineers, developers and testers. This is our tipping point goal. If we raise this amount, the campaign will be a success and we’ll get your pledged donation. If not, we won’t get anything. Please help us at least make our tipping point which will get the basic OFN into the hands of all the farmers and communities that need it!

Total Funding Goal: Additional funds raised up to $100K will build the features we need for a full beta public launch in March 2015. Amazing volunteers, our own money, and seed grants from VicHealth and Sustainable Table have enabled us to get this far. And we’ve been able to provide enough features to do working trials with our fabulous hub partners in Australia and abroad. But there’s so much more that could be done.

We understand what is needed. If we raise more money, we can build more of it. Word is spreading and there are food hubs, networks and developers around the world who are keen to get on board. We want to help that happen . . so … Funds raised over $5,000 in any individual country will support a mini-pilot with partners in that country. It would be amazing to raise enough funds to build features AND set-up local chapters internationally.

ECB Interest Rates Too Low For Germany, Says Bundesbank Chief (Reuters)

The European Central Bank’s interest rates are too low for Germany, Bundesbank chief Jens Weidmann said on Saturday, adding that ECB monetary policy should remain expansive for no longer than absolutely necessary. Speaking at a Bundesbank open day for the public, Weidmann noted that many savers in Germany were irritated by low interest rates but said these were aimed at supporting investment and consumption. The ECB cut interest rates to record lows last month as part of a package of measures to breathe life into a sluggish euro zone economy, where inflation is running far below the central bank’s target and there is a dearth of credit to smaller firms. The German economy, Europe’s largest, has been outperforming other countries in the bloc, however.

“It is clear that monetary policy, when seen from a German viewpoint, is too expansive for Germany, too loose,” Weidmann told a crowd at the start of the open day. “If we pursued our own monetary policy, which we don’t, it would look different.” “But we are in a currency union,” he said. “That means that in our monetary policy decisions, we must orientate ourselves to the whole currency union.” Repeating a warning he has made previously about the risks of leaving policy loose for too long, Weidmann added: “This phase of low interest rates, this phase of expansive monetary policy, should not last longer than is absolutely necessary.” Bundesbank Vice President Claudia Buch said property prices were overvalued in some big city areas in Germany by up to 20-25%, but that there was no acute risk of a price bubble forming.

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CalPERS Ex-CEO Guilty Plea Explains Why Bankers Make So Much Money (Forbes)

The ex-CEO of CalPERS, Fred Buenrostro, has just pleaded guilty to accepting doucers, cash bribes and fees for placing investment business with a specific firm. The economic point that this helps us elucidate is why bankers and fund managers make such vast incomes normally. It’s a concept called “efficiency wages”. Essentially, when stripped right down, if people are handling or responsible for a large amount of money then pay them very well. So that it’s not actually worth their trying to do anything naughty, the risk of losing that high income is greater than what they can gain by being naughty. Here’s the actual announcement of Buenrostro’s plea:

Buenrostro is the former Chief Executive Officer (CEO) of the California Public Employee Retirement System (CalPERS). In pleading guilty, Buenrostro admitted to conspiring with Alfred J. Villalobos, founder and operator of ARVCO Capital Research LLC (ARVCO). Buenrostro acknowledged in court today that he understood that Villalobos operated ARVCO as a placement agent that solicited investments by public pension funds into private equity funds. Buenrostro also admitted that he understood that ARVCO was typically paid an agreed-upon fee based on the percentage of the total dollar amount invested by the public pension fund.

To put it simply (and do note that Villalobos has not been found guilty of anything at all as yet and is thus innocent of all charges) there’s a layer of agents, or introducers, in the fund management industry. A pension fund, say, is looking around for where to invest, various fund management firms are looking for people to invest and those who introduce one to the other will get a (small) slice of the amount invested. The accusation is that Buenrostro favoured Villalobos in such allocations and then received various parcels of cash, had his wedding paid for etc. as a result. Again, note that Buenrostro has pleaded guilty, Villalobos is innocent. So far so grubby: but this gives us an insight into why pay is so darn high right across the fund management and financial industry. Simply because these people are handling such vast amounts of money. There’s therefore obviously a temptation to make off with some of that vast river of cash that flows through such offices.

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80% Of The Light In Space Is Missing (RT)

Scientists now believe that a tremendous amount of light that would otherwise be illuminating our universe is mysteriously absent. How much light exactly? According to new research conducted by a team of international scientists and funded in part by NASA, the National Science Foundation and the Ahmanson Foundation, around 80 percent of the universe’s light is nowhere to be found. “It’s as if you’re in a big, brightly lit room, but you look around and see only a few 40-watt lightbulbs,” astronomer Juna Kollmeier – a Carnegie Institution for Science professor and the lead author of the new study on missing light said in a statement this week. “Where is all that light coming from? It’s missing from our census.”

Kollmeier and company have published their research in the latest edition of The Astrophysical Journal Letters, and there they explain further why they have reason to believe that the universe is missing around 400 percent of its light. Along with Benjamin Oppenheimer and Charles Danforth of CU-Boulder’s Center for Astrophysics and Space Astronomy, Kollmeier reported that the amount of light that should be emitted from ionized tendrils of hydrogen in the universe is only a fraction of what it should be. “Something is amiss in the universe,” they write. “There appears to be an enormous deficit of ultraviolet light in the cosmic budget.”

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Ebola Spreads to Sierra Leone Capital Freetown as Deaths Rise (Bloomberg)

The worst outbreak of Ebola moved to Sierra Leone’s capital of Freetown where an Egyptian was found with the city’s first confirmed case of the disease. The unidentified Egyptian national had traveled from Kenema, the largest city in the nation’s Eastern Province, and checked into a clinic east of Freetown, Sidie Yahya Tunis, director of Information, Communication and Technology at the Ministry of Health and Sanitation, said by phone today. The person was moved back to the Ebola center in Kenema, he said. “The Ebola disease usually spreads to other places when suspected or confirmed cases in one community move to another, they abandon treatment centers to stay with relatives or they seek treatment outside the Ebola centers,” Tunis said.

There have been 99 Ebola deaths in Sierra Leone out of 315 laboratory-confirmed cases, the ministry said in an e-mailed statement today. The ministry said yesterday that 92 people had died out of 305 cases. Cases of the hemorrhagic fever have killed more than 540 people in Guinea, Sierra Leone and Liberia in an outbreak that according to the World Health Organization may last another three to four months. The toll is greater than the 280 people killed in 1976, when the virus was first identified near the Ebola River in what is now the Democratic Republic of Congo. The rapid spread of the virus is largely due to people moving across borders as well as cultural practices that are contrary to public health guidelines, such as people touching the body of a deceased relative before the funeral.

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The Wall Street GDP Forecast “Escape Velocity” Scam (Stockman)

There is nothing more predictable than the bevy of Wall Street economists who come charging out of the blocks early each year proclaiming that money printing by the Fed will finally work its magic, and that real GDP growth will hit “escape velocity”. But this year the markdowns have come fast and furious. After the disaster of Q1 and the limp data reported for Q2 to-date, the revised consensus outlook for 2014 at 1.7% is already below the tepid actual results of the last three years. So much for the year when “screaming” growth was certain to happen. The graph below is all the proof that is needed to demonstrate that Wall Street has become a pure Fed enabled casino. If honest “price discovery” was actually functioning, the stock market would not be at nosebleed heights, capitalizing hockey sticks that never materialize. Instead, it would be discounting a badly impaired economy that is stuck in a sub-2% rebound—and one that is dangerously at risk owing to the third and greatest financial bubble the Fed has created during this century.

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More Incoming Q2 Data: No Escape Velocity (Alhambra)

The wholesale inventory estimates seem to have raised more than a bit of optimism. I think that is highly misplaced for both GDP and the economy. On the GDP calculation side, there needs to be another huge gain in inventory to be “highly supportive” due to the second derivative nature of the estimate. As for the economy, even on a seasonally-adjusted basis, wholesalers are taking a dimmer view of holding inventory. The mainstream narrative, which has been copied almost word for word across the media, is here:

U.S. wholesale inventories rose in May, reinforcing the view that economic growth should surge in the second quarter following a weak first three months of the year.

This flips around what is actually taking place, as sales are lagging not surging. Whether you take it in the form of seasonally-adjusted or raw nominal data, there is nothing to suggest the pace of sales is appreciably better than the first quarter. If anything, the sales pattern continues to lag what would actually be consistent with sustainable growth. In fact, wholesale sales in May were only slightly better on a year-over-year basis than January and February.

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Slowing Customer Traffic Worries U.S. Retailers (WSJ)

American retailers may have more than a weather problem. Family Dollar said fewer shoppers came into its stores in the three months through May 31, pushing sales down 1.8%, excluding newly opened or closed stores. In a move to win back traffic, the dollar chain said it would begin carrying beer and wine nationally next year, adding to the tobacco, frozen food and other consumables that now make up 73% of sales. “Our results continue to reflect the economic challenges facing our core customer and an intense competitive environment,” Chief Executive Howard Levine said. The discounter’s message echoed that of Container Store whose shares fell sharply midweek after its chief executive told investors that the company and its fellow store chains are in a “retail funk.” “We’ve come to realize it’s more than just weather,” Container Store CEO Kip Tindell said. Falling traffic led to the first drop in quarterly sales at the company in more than three years.

Investors flocked to the seller of bins, boxes and shelves when it went public last November, and shares more than doubled on opening day to close at $36.20. But so far this year, shares have dropped nearly 44%, as Container Store has succumbed to some of the pressures weighing on retail broadly. Results at retailers haven’t been uniformly bad this spring. But there are enough negatives to shake earlier hopes that shoppers would whip out their wallets and resume shopping after the long, tough winter. The mixed showing continues to cloud the optimism arising from stronger job growth and rising consumer confidence. The unemployment rate dropped to 6.1% in June, marking the best stretch of job growth in almost a decade. But five years into the economic expansion, big chains like Wal-Mart and Kroger remain divided over whether consumers are indeed bouncing back.

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Something Seems Off About The US Economy (BI)

Over a three-week span starting next Monday, 72% of the S&P 500’s members will report earnings, but some of the early indications about this earnings season, especially from companies highly exposed to the U.S. consumer, have not been encouraging. On Tuesday afternoon, two companies that are all about consumer spending, Bob Evans and The Container Store, reported earnings that were disappointing. But even more discouraging were the comments from company executives. Bob Evans, which wrapped up its fiscal year 2014 in its most recent quarter, said its results were impacted by severe weather (an oft heard refrain during the first quarter), as well as high food costs. In the upcoming year, the company’s CFO, Mark Hood, said, “consumer confidence continues to be adversely impacted by ongoing macroeconomic headwinds, including health care costs and unemployment which disproportionately affects lower- and middle- income consumers.”

Also on Tuesday afternoon, Container Store CEO Kip Tindell said in the company’s earnings release that, “Consistent with so many of our fellow retailer, we are experiencing a retail ‘funk.'” Wednesday evening, Lumber Liquidators, a specialty hardwood flooring retailer, said that the consumer demand it experienced following the tough winter didn’t carry into May and June. CEO Robert Lynch said, “The improvement in customer demand we experienced beginning in mid-March did not carry into May, and June weakened further. Our reduced customer traffic has coincided with certain weak macroeconomic trends related to residential remodeling, including existing home sales, which have generally been lower in 2014 than the corresponding periods in 2013.”

Thursday morning saw more downbeat commentary from a retailer, this time Family Dollar. Following the company’s report, which saw that same store sales fell 1.8% during the quarter, CEO Howard Levine said, “Our results continue to reflect the economic challenges facing our core customer and an intense competitive environment.” And then yesterday afternoon, Gap topped off the week of discouraging retail commentary by reporting June same-store sales that fell 2% year-over-year. According to data from Bloomberg, sales were expected increase 0.8%. Gap’s management, however, was light on additional color. This rash of discouraging retail data, however, makes the broader U.S. economic picture seem murky.

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US Stocks Will Be ‘Very Disappointing’ For 10 Years (MarketWatch)

U.S. stocks are overvalued – and have been for months. That is what six well-known measures of valuation show. While that doesn’t mean a bear market is imminent, there is a high probability that investment returns over the next decade will be below average, according to Yale University economics professor and Nobel laureate Robert Shiller. Investors shouldn’t expect that what has worked for them over the past five years will continue to work in the future. One way to gauge the market’s valuation is to compare it to past bull-market peaks. There have been 35 since 1900, according to Ned Davis Research, a quantitative-research firm. Five of these six valuation ratios show the market is more overvalued today than it was at between 82% and 89% of those peaks. They are:

• The cyclically adjusted price/earnings ratio championed by Shiller, calculated by dividing the S&P 500 by its average inflation-adjusted earnings per share over the past decade.
• The dividend yield, which is the%age of a company’s stock price represented by its total annual dividends.
• The price/sales ratio, calculated by dividing a company’s stock price by its per-share sales.
• The price/book ratio, calculated by dividing a company’s stock price by its per-share book value, an accounting measure of net worth.
• The Q ratio, calculated by dividing a company’s market capitalization by the replacement cost of its assets.

It is noteworthy that there is such agreement among these ratios even though each calculates the market’s valuation in a profoundly different way. The sixth data point — the traditional price/earnings ratio, which focuses on trailing or projected 12-month earnings — is the one that paints the least-bearish picture. Still, it shows the market to be more overvalued than it was at 69% of those past market peaks. Shiller argues that the P/E doesn’t have as good a forecasting record as his cyclically adjusted variant. Some investors are ignoring the warning signs from these valuation ratios, since the bull market has continued higher even though the measures have told much the same story for some time.

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Well, that seals it.

Economists Don’t Expect US Recession (CNBC)

Although economists have trimmed their estimates for second-quarter U.S. gross domestic product (GDP) growth, they don’t believe the economy will hit a recession this year or next. The National Association for Business Economics’ Outlook survey of 50 economist, taken just days after the release of the June jobs report, also found economists believe the Federal Reserve will hike rates earlier than previously expected. The panelists’ median forecast for annual second-quarter 2014 real GDP growth is 3%, down from the 3.5% median forecast when the full Outlook survey was last released in June. But in a positive sign, economists said the probability of the U.S. economy entering a recession in 2014 or 2015 is extremely low, with 60% of panelist saying the odds were less than 10%. “Notwithstanding the difficult start to the year, opinion is widespread that the economy is on solid footing,” said Timothy Gill, Outlook survey chair.

The minutes from the Fed’s latest policy meeting did not indicate did not indicate that the central bank intends raise interest rates ahead of schedule. But with unemployment and inflation getting closer to the Fed’s target levels, analyst are predicting that rate hikes could come sooner rather than later. More than half of those surveyed forecast the Fed will next increase its federal funds rate target in the first half of 2015, with a plurality of almost 37% expecting a hike during the second quarter of next year. Another 36% said they expect an initial rate hike in the second half of next year. The results are nearly reversed from the June survey, when 33% expected a rate increase in the first half of 2015 and 53% expected a hike in the second half.

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Fed Presidents Differ on Timetable for Raising Interest Rate (Bloomberg)


Federal Reserve presidents disagreed today on whether a decline in the U.S. unemployment rate to the lowest level in almost six years warrants advancing the timing for an interest-rate increase. Philadelphia Fed President Charles Plosser said the Fed risks losing credibility by waiting too long to raise rates, and economic data are already suggesting a need to tighten policy. Chicago’s Charles Evans and Atlanta’s Dennis Lockhart countered that low inflation and labor-market slack will allow the central bank to wait until the second half of 2015 or 2016.

Plosser, speaking in a Bloomberg Television interview with Michael McKee in Jackson Hole, Wyoming, said “we are closer than a lot of people might think” to the first interest-rate increase since 2006. If the Fed waits too long, he said, “we’ll lose credibility. We may lose control of inflation.” Fed officials are approaching their goals for full employment and price stability faster than they had forecast, sharpening the debate over the timing of a rate increase. St. Louis Fed President James Bullard warned this week that inflation will rise above the Fed’s target late next year. “Monetary policy ought to be reacting to the data,” Plosser, 65, said. “We are on a path that says low for long and we have no plans to raise interest rates anytime soon, yet as the data keeps telling us, we ought to be raising rates.”

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Fed Fears Risks Posed By Exit Tools; Plan Almost Done (Reuters)

Federal Reserve officials are cautiously nearing completion of a new plan for managing interest rates, concerned that some of the new tools they are likely to rely on could pose unintended risks in a crisis. The central bank has devoted extensive debate to the matter over the past two months and officials “have made a lot of progress” on a strategy to return monetary policy to a more normal footing after years of coping with crisis, Chicago Federal Reserve Bank President Charles Evans said on the sidelines of an economic conference here. However, the sheer magnitude of the amounts of money used to combat the crisis – $2.6 trillion sitting at the Fed as bank reserves and $4.2 trillion held by the Fed in various securities – may complicate the U.S. central bank’s ability to control its target interest rate once the decision is made that it should be raised. A decision to begin increasing interest rates is expected in the middle of next year.

In recent weeks, the Fed has neared consensus that its workhorse tool will be the interest it pays banks on excess reserves on deposit at the Fed – giving the central bank a direct way to encourage banks to either take money out of circulation and leave it at the Fed, or lend it elsewhere. Another tool would have a similar impact but apply more broadly, using overnight repurchase agreements that would let money market funds and other institutions as well as banks essentially make short-term deposits at the Fed. The worry is that if financial conditions tighten, those large funds of money would flee to the repo facility as a safe haven, depriving the economy of credit and making a potential crisis even worse. “The broad concern is whether we want to facilitate what could be a period of financial stress by providing in a large or unlimited way that refuge, and whether that would tend to exacerbate a financially stressful situation,” said Atlanta Fed President Dennis Lockhart.

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Market Will Crash, Just Don’t Know Catalyst: Marc Faber (CNBC)

The market is setting up for a big decline that could be as bad as the crash of 1987, according to Marc Faber, known as “Dr. Doom.” He just isn’t sure exactly what will set it off. “The problem with crashes, you never know beforehand precisely what is the catalyst,” the publisher of the Gloom, Boom & Doom report told CNBC’s “Closing Bell.” It could come from the credit market, equities being perceived as too expensive or a geopolitical event, he added. His comments came a day after he told “Futures Now” that the asset bubble has begun to burst. “I think it’s a colossal bubble in all asset prices, and eventually it will burst, and maybe it has begun to burst already,” Faber said Tuesday.

He’s calling for a 30 percent decline in the S&P 500. “I think that the global economy does not support the current valuations,” he said Wednesday. Corporations “have had record profits, largely because they are buying back their own shares and so the number of shares is diminishing where revenue growth is basically flat.” In fact, he said the bond market, which is more sophisticated than the stock market, does not believe in a strong economic recovery and neither does he. Faber has been calling for a major correction for years. So far, the market hasn’t followed his theory, but he said that could be setting it up for an even bigger fall. “Since 2012, I said it would be healthy for the markets to have a meaningful correction, but it could be that we are in a year like ’87 when we go straight up and then we don’t have a correction but a more significant crash,” he said.

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6.8 Magnitude Earthquake Strikes Off Fukushima Coast (RT)

A 6.8 magnitude earthquake hit off the coast of Japan, with its epicenter located some 129 kilometers from the city of Namie in Fukishima prefecture, US Geological Survey reported. The quake was centered at a depth of about 10km, according to the Japan Meteorological Agency (JMA). Tsunami advisories have been issued for the Fukushima prefecture, as well as for nearby Iwate and Miyagi prefectures. There were no reports of abnormalities at Fukushima-1 nuclear plant following the quake, TEPCO reported.

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Portuguese Bank Crisis Is The Tip Of The Iceberg (MarketWatch)

The Portuguese crisis over Banco Espirito Santo should be a reality check for European markets. Espirito Santo is just the excuse – real problems lie far deeper. The European Central Bank has been playing with fire, with junk bonds ultimately funded by German taxpayers. Investors are waking up and smelling smoke, and at some point they will get singed. Three companies are involved in the Espirito Santo mess. Banco Espirito Santo is the largest publicly traded commercial bank in Portugal. Its controlling shareholder, Espirito Santo Financial Group, owns 25% of its shares. The privately held parent company, Espirito Santo International, owns 49% of Espirito Santo Financial Group (and therefore part of Banco Espirito Santo). It is this parent company that is likely to default on its payments. Even if Espirito Santo International defaulted, Banco Espirito Santo does not necessarily have to go under, but it might.

The problem is that Banco Espirito Santo is a weak institution irrespective of its parent holding companies, dabbling in risky assets in emerging markets that saner banks would not touch. Its risk management department needs a major shakeup. For instance, the bank has invested in Angola, setting up a subsidiary known as Banco Espirito Santo Angola (BESA). BESA has relied on Banco Espirito Santo for its funding, with loans in Angola amounting to 220% of deposits. Bad loans have exploded in Angola in recent years, rising by 84% from 2010 to 2013. BESA’s assets include €6 billion worth of loans payable, and Banco Espirito Santo has a 55% stake in the bank.

The government of Angola, a former Portuguese colony, has given the bank a “personal guarantee” amounting to 70% of the bank’s loans. There is doubt about whether the bank can retain solvency in the event of a crisis, even with the guarantee. An anti-corruption organization in the country, Maka Angola, has claimed that the reason for the guarantee was several hundred million dollars’ worth of loans given to powerful figures in the Angolan regime. However, the authenticity of these claims is unclear. There is also trouble closer to home for Banco Espirito Santo: It has lent over €1 billion to its various parent companies. Should Espirito Santo International default, Banco Espirito Santo will fall below the capital ratio mandates set by Basel III at the same time that the European Central Bank prepares to do stress tests.

Shares in Banco Espirito Santo were suspended from trading yesterday by the Portuguese government after they fell 17%. Prior to that, Espirito Santo Financial Group pulled its own shares from trading due to “ongoing material difficulties” at Espirito Santo International. The catalyst for the sell-off appears to have occurred July 9 when Espirito Santo International delayed repayment on short-term debt owed to customers of its Swiss bank. That was not the first time Espirito Santo International has been in trouble. In December, it sold €6 billion of debt to Espirito Santo Financial Group, exposing investors to even more losses should the company fail, in what the Wall Street Journal called “financial gymnastics.” In May, Espirito Santo Financial Group released an audit of Espirito Santo International, revealing that there were several irregularities on its balance sheet, making its outlook more negative that previously thought.

The debt of Banco Espirito Santo is government-guaranteed, leading to good ratings but also potential moral hazards. Given the size of the conglomerate, it is possible that one or more of the companies will require a bailout if things deteriorate. The Bank of Portugal has said it believes Banco Espirito Santo is not at risk, despite the problems at its parent companies. It also said explicitly that it had €6 billion on hand to rescue the banking sector if necessary.

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Piggy Banks Being Raided Signal Swedish Housing Dilemma (Bloomberg)

Increasing numbers of Swedes are turning to family and friends for help in buying a home, side stepping government efforts to cool soaring housing prices and growth in private debt. Swedes who received non-bank assistance to fund mortgages rose to 52% in the period from 2012 to 2014, the highest level since at least the 1970s and up from 25% in the early 2000s, according to data last month from state-owned mortgage lender SBAB. The rising numbers seeking help to buy a home are a sign that Sweden is struggling to find answers to rising personal debt even after the government capped mortgages at 85% of a property’s value in 2010 to slow house-price growth. Prior to that, first-time buyers could often get a loan covering 100% of the purchase price.

“The big problem for policy makers is the high household indebtedness,” said Bengt Hansson, an analyst at Sweden’s National Board of Housing, Building and Planning, in an interview last month. “It’s obvious by now that the loan-to-value cap hasn’t been sufficient to solve the debt problem and a stronger amortization culture is long overdue.” The lack of rental housing and the difficulty of being able to afford a first home have left many young adults struggling to start their own lives. Almost a quarter of Swedes 18 to 34 were living with their parents in 2012, compared with 19% a decade ago, according to Eurostat. “The combination of the mortgage cap and price gains have resulted in more people needing help with the down payment,” Tor Borg, chief economist at SBAB, said in an interview last month. “This is a big problem for the young in particular.”

That development looks unlikely to change, as policy makers contemplate further measures to stem debt growth. The financial regulator, which has twice raised the risk weights banks must apply to their mortgage assets, has said it would consider lowering the mortgage cap further if problems persist and the government is now preparing to force amortization. Low rates over the past years and a limited housing supply have fueled a surge in home prices and pushed debt levels to records in the $550 billion economy.

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Bulgaria To Allow Its Fourth-Biggest Bank To Collapse (Reuters)

Bulgaria is to allow its fourth-biggest lender to collapse and will hive off its healthy activities into a separate bank as it moves to clear up the mess from the country’s worst financial scandal since the 1990s. The central bank said it was removing Corporate Commercial Bank’s (Corpbank) license and alerting prosecutors to the possibility that its main shareholder stole money from the bank just before the central bank took over its operations. The scandal broke last month when Corpbank clients unnerved by media reports accusing top shareholder Tsvetan Vassilev of shady business deals dashed to withdraw their savings. The bank run spread quickly to another lender and saw Sofia announce a protective $2.3 billion credit line, a reminder that parts of Europe’s financial system are still far from secure despite progress from the worst days of the financial crisis.

“The results of the review of Corporate Commercial Bank speak, to put it mildly, about actions incompatible with the law and good banking practices,” the central bank said in a statement as it published the results of an audit. It said much of the documentation to back up 3.5 billion levs ($2.43 billion) out of Corpbank’s total 5.4-billion-lev loan portfolio was missing. The documents were, it believed, “most likely destroyed in the days before the central bank sent administrators there.” A significant part of the loan portfolio was linked to parties related to Corpbank’s main shareholder, the central bank said. Central bank administrators found Vassilev had withdrawn 205 million levs from the bank via a third party just before the state took control. Prosecutors would need to determine whether that withdrawal amounted to theft, the central bank said.

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Allianz CEO: “Euro Crisis Is Not Over” (Bloomberg)

When asking Allianz SE’s chief investment officer about the euro area’s sovereign debt woes, be prepared for an emphatic response. “The fundamental problems are not solved and everybody knows it,” Maximilian Zimmerer said at Bloomberg LP’s London office. The “euro crisis is not over,” he said. While extraordinary stimulus from the European Central Bank has encouraged investors to pile into the region’s government bonds this year, that’s not a sufficient remedy for Zimmerer, who oversees 556 billion euros ($757 billion) at Europe’s largest insurer. Countries are still building up their debt piles, and that’s storing up trouble for the future, he said. As Zimmerer was speaking, investors were getting a reminder of the volatility that was rife through the sovereign debt crisis that started in 2009, as sliding stocks and bonds of Portuguese financial institutions rippled across the region’s markets.

“There is only one country where the debt level last year was lower than 2012 and this is a signal the debt crisis can’t be over, only a recognition of the debt crisis has changed,” Zimmerer said on July 9. “If the debt levels are not going down in the end we will have a problem, that is for sure.” Euro-area governments are still grappling to get their debt under control in the wake of the region’s financial-market turmoil, which left five countries needing international aid and triggered the biggest restructuring in history in Greece. Only Germany reduced its debt-to-gross-domestic-product ratio last year, according to data published by the European Union’s statistics office in Luxembourg in April. Allianz is reducing holdings of euro-area government debt to avoid low interest rates after the bond-market rally incited by the ECB, Zimmerer said. The Munich-based insurer is planning to move cash from fixed income into “real assets” such as infrastructure and real estate, he said.

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Las Vegas Drought Drains Lake Mead to Lowest Since 1937 (Bloomberg)

Lake Mead, the man-made reservoir that supplies 90% of the water for 2 million people in the Las Vegas area, has been reduced by drought to the lowest level since it was filled in 1937, according to the federal government. The lake, now at 39% of capacity, has been dropping since 2012, according to U.S. Bureau of Reclamation data, as much of the western U.S. has suffered the most serious drought in decades. The shortfall is endangering water supplies to the residents and 43 million annual visitors to the driest metropolitan area in the country. Lake Mead, created by Hoover Dam in 1936 and 1937, holds mountain snowmelt from the Colorado River for farms, homes and businesses predominately in southern Nevada, southern California and most of Arizona. No metropolitan area depends on the lake more than Las Vegas, which lacks groundwater or other local sources.

“This is significant because it’s a resource used by three states,” said Rose Davis, a spokeswoman for the bureau, which manages the supply. “We all have to keep an eye on it because it’s the major water source for three areas. It concerns us all very much.” The lake’s surface, which reached a record high of 1,225 feet above sea level in July 1983, is now at about 1,083 feet, according to the bureau. If the level drops below 1,050 feet, one of the two intakes that feed water to Las Vegas will become inoperable. At 50 feet lower, the other would fail. Since 2008, contractors have been boring through rock to create a third conduit to draw water from as low as 860 feet. About 55% of Nevada, already the nation’s driest state, is under “extreme” or “exceptional” drought conditions, the worst grades on the U.S. Drought Monitor, a federal website. Portions of California, New Mexico and Colorado also are in the “exceptional” category, according to the monitor.

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1001 Blistering Future Summers (Climate Central)

If it feels hot to you now in the dog days of this summer, imagine a time when summertime Boston starts feeling like Miami and even Montana sizzles. Thanks to climate change, that day is coming by the end of the century, making it harder to avoid simmering temperatures. Summers in most of the U.S. are already warmer than they were in the 1970s. And climate models tell us that summers are going to keep getting hotter as greenhouse gas emissions continue. What will this warming feel like? Our new analysis of future summers illustrates just how dramatic warming is going to be by the end of this century if current emissions trends continue unabated.

For our Blistering Future Summers interactive we have projected summer high temperatures for the end of this century for 1,001 cities, and then showed which city in the U.S. — or elsewhere in the world, if we couldn’t find one here — is experiencing those temperatures today. We’ve highlighted several striking examples on the interactive, but make sure to explore and find how much hotter summers will likely be in your city. By the end of the century, assuming the current emissions trends, Boston’s average summer high temperatures will be more than 10°F hotter than they are now, making it feel as balmy as North Miami Beach is today. Summers in Helena, Mont., will warm by nearly 12°F, making it feel like Riverside, Calif.

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May 222014
 
 May 22, 2014  Posted by at 10:49 am Earth Tagged with: , , ,  14 Responses »


Dorothea Lange Sons of Negro tenant farmer, Granville County, North Carolina July 1939

This is the second installment of Nicole’s series on food security.

Nicole Foss: In part one of this series, we looked at finance as a major causal factor in the development of food insecurity. The boom and bust cycles that result from over-financialization are, however, only one aspect of a food crisis already present for many, and looming for many more in the years to come. Finance can, and does, generate artificial scarcity, initially through the manipulation of land and commodities for profit and, and latterly by over-reaching itself and crashing the human operating system, with tremendous negative impact on the supply of all goods and services. Food is one of the vital factors that will be substantially affected in a financial crash where connecting producers and consumers will be extremely difficult due to lack of money in circulation.

The inherent instability of our human operating systems is only one of a large number of limiting factors for food production and distribution. The very real scarcity coming as a result of limiting factors grounded in the physical world is far more serious in the longer term. While we can make changes capable of addressing both human and physical limits, we are highly unlikely to do so in a timeframe, or on a scale, that would prevent us from experiencing the consequences of of over-shooting our natural carrying capacity. Nevertheless, whatever we can achieve in the time available will be an improvement.

This series is not meant to be a comprehensive assessment of each limiting factor in relation to food supply, but an overview of vulnerability in its many forms, clarifying the imperative for re-engineering our food systems. Given the extent of the over-stretch of the current model, the possibility of rapid collapse in response to very predictable system shocks is uncomfortably high. We are at risk of cascading system failure. We cannot expect facilitation of this transition to come from the top down, however – far from it. The larger scale centralized human construct, highly over-stretched and inflexible, can only be expected to look after itself and defend the status quo at the expense of decentralization initiatives. Meaningful change will have to come from the bottom up, one local initiative at a time.

There is a considerable urgency to making this transition to a human-scale food system. While many are generally aware that our current means of producing and distributing food is unsustainable, few seem to realize that what cannot continue will not continue, that the limits are already being reached, and that the effects will most certainly be felt in our lifetimes, even in what are now wealthy countries. This is not an issue where we can continue business as usual and expect the impact to be felt only by distant populations or by subsequent generations. It will be one where we must take personal responsibility for change, both for our own benefit and that of society in general.

We are facing non-negotiable physical limits in terms of water and climate, which are the subject of this instalment, but also energy, soil fertility and carrying capacity, the subjects for the next part of the series. Our human systems for trade and agricultural regulation are frequently exacerbating the scope of the problems we face and will be covered subsequently. Ultimately we are going to have to face the root of the problem, which lies in the inherently expansionist nature of agriculture itself, as practiced not just in the industrial age, but from the dawn of the neolithic period. We will need to develop polycultural food production systems along permaculture lines if we are to avoid the worst consequences of over-reach. We will need to learn to live within limits.


Farming and Water

Fresh, clean water is the ultimate precious resource – the lifeblood of the planet – yet it is increasingly scarce in many places already and set be become far scarcer in the foreseeable future. Only a tiny percentage of the Earth’s fresh water is sufficiently accessible to be available for human use, and of that, agriculture consumes the lion’s share. It takes 1000 tons of water to grow a ton of wheat for instance.

Irrigated land is far more productive in the short term, allowing us to use the cheap energy we have had access to to expand the areas under cultivation and increase yields in order to feed our expanding population. However, in the longer term, irrigation leads to soil water-logging and salinization, as evaporation of mineralized water leaves salts behind in the soil. Land can be badly damaged and eventually abandoned, while new land is then subjected to the same treatment:

Although only 17% of all cropland is currently irrigated, it provides 40% of the world’s food….But much existing irrigated land is threatened by salinization — a build-up of salts in the soil. This lowers yields and can damage the land beyond economic repair. Salinization is reducing the world’s irrigated area by 1-2% every year, hitting hardest in the arid and semi-arid regions. “No one is really certain of the figures, but it seems that at least 8% of the world’s irrigated land is affected,” says FAO water expert Julián Martínez Beltrán. “In the arid and semi-arid regions, it’s somewhere around 25%.”

In this way, land is being consumed as a non-renewable resource. Needless to say, there is a finite supply of land available, and with irrigation damage occurring most quickly in the most water-stressed regions, the risk of food insecurity is compounded.

Some 60% of irrigation draws on surface water sources, but chronic over-use has led to major rivers no longer reaching the sea, destroying the health and productivity of formerly fertile delta lands which had previously been substantial food sources for local populations:

For six million years, the Colorado River ran its course from its soaring origins in the Rockies to a once-teeming two-million-acre delta, finally emptying 14 million acre-feet of fresh water into the Sea of Cortez. But now, a multitude of straws are drinking from the river….Indeed, the Colorado River has not reached the sea since 1998 but ends rather in a cracked and desolate expanse of barren mud flats and abandoned boats — a “dry river cemetery.”….

….Referred to as the Nile of North America, the Colorado River is the arid West’s lifeline. It provides water to more than 30 million Americans, including people in cities like Phoenix, Denver and Los Angeles. Over 100 dams and thousands of miles of canals divert the river to nearly every farm, industry and city within a 250-mile radius of its banks. It is one of the most diverted and dammed rivers in the world.

Dry Rivers are increasingly common worldwide.

Where irrigation depends on aquifers, draw-down often exceeds the natural recharge rate. We are depending on fossil water that is also effectively a non-renewable resource, and when the limit of feasible extraction is reached, whole regions are at risk of becoming unable to support either the human population or what remains of the existing ecosystem. Water tables are falling by several feet per year in many parts of the developing world dependent on groundwater sources, notably beneath rapidly growing urban centres with an insatiable demand for water, but also beneath agricultural regions:

Shijiazhuang, China — Hundreds of feet below ground, the primary water source for this provincial capital of more than two million people is steadily running dry. The underground water table is sinking about four feet a year. Municipal wells have already drained two-thirds of the local groundwater. Above ground, this city in the North China Plain is having a party. Economic growth topped 11% last year. Population is rising. A new upscale housing development is advertising waterfront property on lakes filled with pumped groundwater. Another half-built complex, the Arc de Royal, is rising above one of the lowest points in the city’s water table. “People who are buying apartments aren’t thinking about whether there will be water in the future,” said Zhang Zhongmin, who has tried for 20 years to raise public awareness about the city’s dire water situation….

….The North China Plain undoubtedly needs any water it can get. An economic powerhouse with more than 200 million people, it has limited rainfall and depends on groundwater for 60% of its supply….But scientists say [the aquifers] below the North China Plain may be drained within 30 years.

The same phenomenon is occurring under the major breadbaskets of the world, for instance the Punjab in India and the Ogallala Aquifer underlying the great plains of the US:

The Ogallala Aquifer, the vast underground reservoir that gives life to these fields, is disappearing. In some places, the groundwater is already gone. This is the breadbasket of America—the region that supplies at least one fifth of the total annual U.S. agricultural harvest. If the aquifer goes dry, more than $20 billion worth of food and fiber will vanish from the world’s markets. And scientists say it will take natural processes 6,000 years to refill the reservoir….

….With a liquid treasure below their feet and a global market eager for their products, farmers here and across the region have made a Faustian bargain—giving up long-term conservation for short-term gain. To capitalize on economic opportunities, landowners are knowingly “mining” a finite resource.

As with so many aspects of our human systems, short term gains trumps long term ability to provide that which sustains existence. Unfortunately, as the shared resource diminishes, competition over what remains intensifies, and the potential for conflict increases enormously. Resources previously used in common often become privatized and used for the exclusive benefit of a dominant group. The land grabs we discussed in relation to financial aspects of food insecurity are also reflections of this competition over water resources, and in fact are often water grabs in disguise:

Water grabbing refers to situations where powerful actors are able to take control of or divert valuable water resources and watersheds for their own benefit, depriving local communities whose livelihoods often depend on these resources and ecosystems. The ability to take control of such resources is linked to processes of privatisation, commodification and take-over of commonly-owned resources. They transform water from a resource openly available to all into a private good whose access must be negotiated and is often based on the ability to pay. Water grabbing thus appears in many different forms, ranging from the extraction of water for large scale food and fuel crop monocultures, to the damming of rivers for hydroelectricity, to the corporate takeover of public water resources….

….The causes of water grabbing are similar to those of ‘land grabbing’: the phenomenon whereby investors acquire or lease vast tracts of land, with negative socio-economic and environmental effects. An investor’s control of land usually comes with a corresponding control of water resources. Indeed, access to water could be the most valuable part of the deal. This is especially so given that host governments seek to entice investors by offering them concessions with regards to water use….

….Acquiring land in order to access and control water is especially relevant to countries facing water scarcity. Renewable water resources in the Gulf states for example are set to run out in the next three decades. The implications of this water scarcity are profound. Saudi Arabia, once a net exporter of wheat, intends to phase out domestic production of wheat by 2016 due to the depletion of fresh water reserves in the country. It seeks to compensate for this loss in domestic food production by acquiring farmland abroad, thereby transferring much of the pressure on water resources caused by agricultural production to other countries. This is a strategy likely to be pursued by other water deficit countries as they seek to ‘lock in’ access to water reserves and resolve their own water constraints by acquiring land abroad.

The problem is compounded by the use to which acquired land is put, as this use, generally by absentee land owners, does not reflect a condition of resource scarcity. Water resources, which may already be under stress as local populations rise, are all too often being rapidly squandered in the pursuit of short term profit, with the result that ecosystems are damaged or destroyed and local populations forced to migrate:

All of the land deals in Africa involve large-scale, industrial agriculture operations that will consume massive amounts of water. Nearly all of them are located in major river basins with access to irrigation. They occupy fertile and fragile wetlands, or are located in more arid areas that can draw water from major rivers. In some cases the farms directly access ground water by pumping it up. These water resources are lifelines for local farmers, pastoralists and other rural communities. Many already lack sufficient access to water for their livelihoods. If there is anything to be learnt from the past, it is that such mega-irrigation schemes can not only put the livelihoods of millions of rural communities at risk, they can threaten the freshwater sources of entire regions.

The concept of virtual water trade refers to the quantity of water effectively exported when countries export agricultural products, which consume local water resources. Importing countries can save water at the expense of exporting ones:

When a country imports one tonne of wheat instead of producing it domestically, it is saving about 1,300 cubic meters of real indigenous water. If this country is water-scarce, the water that is ‘saved’ can be used towards other ends. If the exporting country is water-scarce, however, it has exported 1,300 cubic meters of virtual water since the real water used to grow the wheat will no longer be available for other purposes.

In 2007, the global water trade was estimated to be some 567 billion litres, double that in 1986 as the water trade has become increasingly globalized.


Exporting virtual water becomes problematic where exporting nations are water scarce. The decision to export virtual water anyway is generally a matter of short term economic gain, either for wealthy foreign purchasers of land, as we have seen in Africa, or for large domestic land owners. For instance, Australia is the driest inhabited continent, but also, according to UNESCO, the largest net exporter of virtual water in the world, with agricultural exports feeding 60 million people worldwide. This is currently possible due to the availability of the necessary energy to supply the water when and where needed, but it is obviously unsustainable. Australia has only just established an independent agency tasked with monitoring and setting sustainable limits on water use.

Similarly, drought-stricken California uses artificially cheap water provided with temporarily affordable energy to export thirsty hay and rice crops to Japan:

In the Imperial Valley of California, a region drier than part of the Sahara Desert, farmers have found a lucrative market abroad for a crop they grow with Colorado River water: They export bales of hay to land-poor Japan….Container ships from Japan unload electronics and other goods in the Port of Long Beach, and the farmers fill up the containers with hay for the trip back across the Pacific. Since the containers would otherwise return empty, it ends up costing less to ship hay from Long Beach to Japan than to California’s Central Valley.

“Everything is done for economics,” said Ronnie Leimgruber, an Imperial Valley hay grower who is expanding into the export market. “Japan cannot get hay cheaper. The freight is cheaper from Long Beach than from anywhere else in the world.” Water is cheap for valley farmers, too: urban rates there are four times as high. It costs only $100 to irrigate an acre of hay in the desert for a year. But what makes economic sense to farmers may not be rational behavior for California in the third year of a severe drought, say some conservationists. At the very least, they contend, the growing state debate over water allocation should take into account the exports of crops such as hay and rice — two of the most water-intensive crops in the West — because they take a toll on local rivers and reservoirs.

“This is water that is literally being shipped away,” said Patrick Woodall, research director at Food and Water Watch, an international consumer advocacy group with headquarters in Washington, D.C. “There’s a kind of insanity about this. Exporting water in the form of crops is giving water away from thirsty communities and infringing on their ability to deal with water scarcity.”

Increasingly, limits are going to be reached and hard choices are going to have to be made. The current pursuit of individual or corporate economic benefit at the expense of rational resource use cannot continue where the resources in question are increasingly limited and therefore subject to competing interests. Those competing interests will increasingly make themselves know in a highly socially disruptive manner destined to force change.

Competition over water access is already inflaming regional tensions in areas of water scarcity, with unequal provision reflecting relative power. The powerless may be prevented, by lack of sufficient water, from growing food at all, cementing a state of dependency where the powerful hold hostage the ability to provide basic essentials:

Published Monday by the Ramallah-based human rights organization Al-Haq, “Water for One People Only: Discriminatory Access and ‘Water-Apartheid’ in the Occupied Palestinian Territory”, reports that Israel has claimed up to 89% of an underground aquifer that is largely located in the West Bank, giving Palestinians only access to the remaining 11%. The water grab has fueled increased discrepancy in water usage in the region with the 500,000 Jewish settlers consuming approximately six times the amount of water used by the 2.6 million Palestinians living in the West Bank—with the discrepancy growing even greater when agricultural water use is accounted for.
“There is a grave injustice in the division of water, and the results have been catastrophic,” Tawfiq Salah, mayor of West Bank village al-Khader, told Al-Monitor….

….Writing about the report, Al-Monitor’s Jihan Abdalla quotes Musa, a Palestinian father of six, who had attempted to build a rainwater cistern in his field before the Israeli authorities quickly issued it with a demolition order. Abdalla continues: Musa says if they had access to sufficient, affordable water, his family would be able to live off their ancestral field, selling their grapes, olives and fruit in nearby markets. That, he says, is the reason why Israeli authorities prevent them from building a cistern, and why they do not have any running water. “They don’t want us to plant or grow anything, they just want us to have barely enough water for drinking and that’s it,” Musa says looking at the unfinished, empty hole in the ground.

It is not only in situations of long term ethnic conflict where actions such as collecting rainwater for self-sufficiency are seen as competing with established interests. In drought prone regions of the US southwest, precious water rights are considered to be threatened by domestic rainwater capture, even though the water captured would otherwise have been more likely to have evaporated than to have made its way to the fully allocated river:

The Rocky Mountain state uses a convoluted mix of first-come, first-serve water rights, some of which date back to the 1850s, and riparian rights that belong to the owners of land lying adjacent to water. A single person catching rain wouldn’t make a difference to water rights holders, according to Brian Werner of the Northern Colorado Water Conservancy District. But if everyone in Denver captured rain, he says, that would upset the state’s 150-year-old water-allocation system. The Colorado Department of Natural Resources estimates that 86% of water deliveries go to agriculture, which is already stressed by dwindling supplies. And because 19 states and Mexico draw water from rivers that originate in the Colorado Rockies, backyard water harvesting can have widespread implications….

….With water systems across the country already highly or fully appropriated, and with drought aggressively depleting supplies, Aiken predicts that legal battles over who owns the rain won’t go away anytime soon. Old water-allocation systems remain in direct conflict with a growing movement for DIY water conservation, including rainwater collection.

Bulk water transfers are being contemplated in a number of locations, but these are highly controversial as they would have significant environmental impacts. They are so highly capital and energy intensive that limits on those parameters may prevent this kind of development, although it would depend on which critical resource first became limiting in a given location. Both farms and cities, increasingly competing for water in arid regions, could prioritize water over money and energy if the latter remain available.

An illustration of the emerging tension between critical resources can be seen in relation to the water requirements of fracking for unconventional fossil fuels:

The move to tap petroleum-rich shale reserves in some of the country’s driest regions, including Colorado, may be setting up a battle between oil and water. The water is needed for hydraulic fracturing, a process that pumps millions of gallons of sand and water into a well to crack the hard shale and release oil and gas. Nearly half of the 39,294 reported “fracked” wells drilled in the U.S. since 2011 are in regions with high or extreme water stress, according to a report by Ceres, an investor and environmental-advocacy group….

….In Colorado, 86% of the state’s water is used by agriculture. Municipalities and industry use 7.4%. While oil and gas companies have created a small market for water, it hasn’t had a major impact on farms, said Bill Midcap, a spokesman for the Rocky Mountain Farmers Union. “There are cases where companies have bid up water to more than farmers can afford, but it is in a few cases,” Midcap said.

Over-use of water sources and inappropriate or uncontrolled land use has had a substantial impact on water quality in many regions, damaging both surface water sources and also the oceans into which those surface waters emerge. Both urban pollution and agricultural runoff have major impacts. Fertilizers and animals wastes from agricultural land wash into water courses, causing eutrophication – the nutrient enrichment of the water to an extent that allows algal blooms to form. As these decay, the available oxygen is consumed, suffocating the inhabitants of the river and creating dead zones at river mouths. For instance, the one at the mouth of the Mississippi is the size of New Jersey.

Of China’s 23,000 miles of large rivers, 80% are no longer able to support fish and aquatic ecosystems are on the brink of collapse. This will have a profound effect on food security is the world’s most populous country. Of course, food security is hardly the only issue with regard to rampant mis-use of water resources. Water-borne diseases are also going to prove to be strongly limiting factors in many places where more and more people have no access to safe drinking water.

Given the critical nature of water availability for drinking, for food security and for ecosystem health, a global water crisis represents a systemic threat.


Farming and Climate:

Climate change is already proving to be a factor in food insecurity, and is likely to have an increasing impact over time. The effects are complex, interacting with, and exacerbating, other factors, most notably the availability of water. Water will be affected by climate disruption through melting glaciers reducing surface water, increased evaporation, shifting rainfall patterns, droughts, an increasing number of extreme weather events and instances of coastal flooding. Where changes happen relatively quickly, they are much more difficult to adapt to, particularly in places where the local food system is already operating near a number of limits. This could easily lead to conflict:

“Battles over water and food will erupt within the next five to 10 years as a result of climate change,” said World Bank President Jim Yong Kim of the IPCC report. “The water issue is critically related to climate change. People say that carbon is the currency of climate change, water is the teeth. Fights over water and food are going to be the most significant direct impacts of climate change.”

Droughts have have had an increasing impact in recent years, with the shifting of of atmospheric jet stream patterns being a contributing factor. These upper level rivers of air guide low pressure systems and determine the storm track, with its attendant rainfall patterns. Where there are jet stream disturbances, weather patterns can be substantially altered:

Scientists expect the amount of land affected by drought to grow by mid-century—and water resources in affected areas to decline as much as 30%. These changes occur partly because of an expanding atmospheric circulation pattern known as the Hadley Cell—in which warm air in the tropics rises, loses moisture to tropical thunderstorms, and descends in the subtropics as dry air. As jet streams continue to shift to higher latitudes, and storm patterns shift along with them, semi-arid and desert areas are expected to expand.

For instance, the historic drought in California this past winter is a reflection of exactly this dynamic in action:

From November 2013 – January 2014, a remarkably extreme jet stream pattern set up over North America, bringing the infamous “Polar Vortex” of cold air to the Midwest and Eastern U.S., and a “Ridiculously Resilient Ridge” of high pressure over California, which brought the worst winter drought conditions ever recorded to that state. A new study published this week in Geophysical Research Letters, led by Utah State scientist S.-Y. Simon Wang, found that this jet stream pattern was the most extreme on record, and likely could not have grown so extreme without the influence of human-caused global warming. The study concluded, “there is a traceable anthropogenic warming footprint in the enormous intensity of the anomalous ridge during winter 2013-14, the associated drought and its intensity.”

California is a major food producing region, and the lack of water is already reducing production, with on-going effect.

Farmers in the state probably will leave as much as 500,000 acres unplanted, or about 12% of last year’s principal crops, because they won’t have enough water to produce a harvest, which will mean fewer choices and higher prices for consumers, said Mike Wade, executive director of the California Farm Water Coalition, a Sacramento-based group of farmers, water district managers and farm-related businesses. “Any job that’s associated with agriculture is hurting,” Wade said. While some farmers were able to conserve water in years past, they won’t get “any preferential treatment” over uses by municipalities, he said.

Extreme weather around the world is wreaking havoc with farmers and threatening global food production. Dry weather in China turned the world’s second-biggest corn grower into a net importer of the grain in 2010, and ranchers in Texas have yet to recover from a record dry spell three years ago. One in eight people in the world go hungry, some of which can be blamed on drought, according to the United Nations.

Although California is a relatively wealthy place, food security is affecting an increasing number of people as the financial bubble leaves more and more people behind, unable to keep up with a treadmill that keeps running faster and faster. As a result, the drought is impacting food security for the poorest residents:

The effects of California’s drought could soon hit the state’s food banks, which serve 2 million of its poorest residents. Fresh produce accounts for more than half the handouts at Bay Area food banks, but with an estimated minimum of 500,000 acres to be fallowed in California, growers will have fewer fruits and vegetables to donate.

With less local supply, food prices will spike, increasing as much as 34% for a head of lettuce and 18% for tomatoes, according to an Arizona State University study released last week. With fewer fields planted, there could be as many as 20,000 unemployed agricultural workers who will need more food handouts, especially in the Central Valley. And if urban food banks like those in Oakland and San Francisco can’t get produce from the valley, which grows a third of the nation’s fruits and vegetables, their transportation costs to haul in out-of-state produce will soar.

Jet stream fluctuations are now driving the development of dangerous heat conditions further inland, exacerbating persistent drought conditions reminiscent of the 1930s. In fact the US Department of Agriculture has recently issued what is effectively a dust bowl warning:

Meanwhile, US Department of Agriculture officials issued a warning Tuesday that conditions in the US Heartland were rapidly deteriorating along lines last seen during the infamous 1930s Dust Bowl as expectations for the US domestic winter wheat crop again fell after the USDA’s most recent agricultural tour.

Even prior to the extreme early May heatwave emerging over the Central US Sunday, Monday and Tuesday, the% of the US wheat crop in either good or excellent condition had fallen another 2% to 31% late last week. Meanwhile, crops listed as ‘very poor’ rocketed from an already abysmal 34% to 39% over the same period. The net result is that the US wheat crop is in its worst condition since at least 1996, according to findings by Commerzbank analysts.

For Oklahoma, at the epicenter of current agricultural harm and flash heatwaves, only 6% of the state’s entire wheat crop was listed as in either good or excellent condition. Department of Agriculture crop scouts described the Oklahoma situation in, perhaps, the starkest possible terms during their most recent report stating: “Producers in the Panhandle continued to experience high winds … and low moisture conditions similar to the Dust Bowl in the 1930s.” Overall, analysts now expect a US wheat crop of just 762 million bushels, the third lowest in 15 years despite record areas planted.

In other parts of the world, climate-driven changes in rainfall patterns over longer periods could have catastrophic effects where rain is highly seasonal and the food security of very large numbers of people depends on its regularity. For instance, the Indian summer monsoon is critical for farming in a country of over a billion people, but is predicted to be significantly affected in a future of rising temperatures:

Global warming could cause frequent and severe failures of the Indian summer monsoon in the next two centuries, new research suggests. The effects of these unprecedented changes would be extremely detrimental to India’s economy which relies heavily on the monsoon season to bring fresh water to the farmlands. The findings have been published November 6, in IOP Publishing’s journal Environmental Research Letters, by researchers at the Potsdam Institute for Climate Impact Research and Potsdam University….

….The Walker circulation usually brings areas of high pressure to the western Indian Ocean but, in years when El Niño occurs, this pattern gets shifted eastward, bringing high pressure over India and suppressing the monsoon, especially in spring when the monsoon begins to develop. The researchers’ simulations showed that as temperatures increase in the future, the Walker circulation, on average, brings more high pressure over India, even though the occurrence of El Niño doesn’t increase.

Unfortunately, surface water resources in both India and China will also be badly affected by the on-going melting of the Himalayan glaciers, with additive effect:

The world is now facing a climate-driven shrinkage of river-based irrigation water supplies. Mountain glaciers in the Himalayas and on the Tibet-Qinghai Plateau are melting and could soon deprive the major rivers of India and China of the ice melt needed to sustain them during the dry season. In the Ganges, the Yellow, and the Yangtze river basins, where irrigated agriculture depends heavily on rivers, this loss of dry-season flow will shrink harvests.

The world has never faced such a predictably massive threat to food production as that posed by the melting mountain glaciers of Asia. China and India are the world’s leading producers of both wheat and rice — humanity’s food staples. China’s wheat harvest is nearly double that of the United States, which ranks third after India. With rice, these two countries are far and away the leading producers, together accounting for over half of the world harvest.

The Intergovernmental Panel on Climate Change reports that Himalayan glaciers are receding rapidly and that many could melt entirely by 2035. If the giant Gangotri Glacier that supplies 70% of the Ganges flow during the dry season disappears, the Ganges could become a seasonal river, flowing during the rainy season but not during the summer dry season when irrigation water needs are greatest.

The combination of shifting seasonal rainfall, disappearing glacial meltwater, and the falling water tables already discussed adds up to a major predicament for Asian food security going forward:

Asia is home to some of the world’s biggest natural-disaster hot spots, and no other continent is more prone to the cumulative impact of droughts, flooding and large storms. This fragility is compounded by the region’s unmatched population size and density, and its concentration of people living in deltas and other low-lying regions.

The specter of a hotter, drier future for Asia can be seen in the degradation of watersheds, watercourses and other ecosystems, as well as in the shrinking forests and swamps and over-dammed rivers. Such developments undermine the region’s hydrological and climatic stability, fostering a cycle of chronic droughts and flooding. To make matters worse, Asia is likely to bear the brunt — as the report by the U.N. Intergovernmental Panel on Climate Change warns — of the global effects of extreme weather, rising seas and shortages of drinking water. Water wars may only be a matter of time.

Asia’s droughts are becoming longer and more severe, and the availability of water per capita is declining at a rate of 1.6% a year. This is a troubling trend for a region where agriculture alone guzzles 82% of the annual water supply. The rapid spread of irrigation since the 1960s has helped turn a continent once plagued by food shortages and famines into a food exporter. But it has also exacted a heavy toll on the environment and resources.

Higher temperature in many locations are also set to lead to substantially higher rates of evaporation, compounding the problem:

Sure, scientists expect the changing climate to bring on more drought. There’s going to be less rainfall in already arid regions, that’s fairly certain. And that alone would be bad news for denizens of the planet’s dry zones—in some places in North Africa, the American Southwest, India, and the Middle East, water shortages could well become an existential threat to civilization. But new research shows that evaporation may be more of a problem than previously thought: Climate change could dry out up to a third of the planet.

The study, published in the journal Climate Dynamics last month, estimates that climate change will cause reduced rainfall alone to dessicate 12% of the Earth’s land by 2100. But if evaporation is factored in, the study’s authors say that it will “increase the percentage of global land area projected to experience at least moderate drying by the end of the 21st century from 12 to 30%.”

“We know from basic physics that warmer temperatures will help to dry things out,” the study’s lead author, Benjamin Cook, a climate scientist with Columbia University and NASA’s Goddard Institute for Space Studies, said in a statement. “Even if precipitation changes in the future are uncertain, there are good reasons to be concerned about water resources.”

Writing in a 2011 literature review in the science journal Nature, the physicist Joe Romm elaborates on how increased heat and evaporation can lead to a vicious cycle: “Precipitation patterns are expected to shift, expanding the dry subtropics. What precipitation there is will probably come in extreme deluges, resulting in runoff rather than drought alleviation. Warming causes greater evaporation and, once the ground is dry, the Sun’s energy goes into baking the soil, leading to a further increase in air temperature.”

Disappearing soil moisture is likely to be a greater problem than previously thought, and the occasional downpour won’t sate year-round crops. As Columbia University notes, “An increase in evaporative drying means that even regions expected to get more rain, including important wheat, corn, and rice belts in the western United States and southeastern China, will be at risk of drought.”

Australia, already the driest continent, is set to become drier as a result of reduced rainfall and higher evaporation. While the continent  current produces a huge excess of food for export, it’s ability to continue doing so is likely to be substantially compromised in an increasingly arid future:

Australia emerged from a decade-long drought in 2009, which was said to be the worst in the country’s history. The report states the drought was estimated to have caused an 80% reduction in grain production and a 40% reduction in livestock production, and climate models predict that rainfall in southern and eastern Australia will continue to decrease as the century progresses.

Increasing aridity can lead to additional risks, notably the threat of wildfires. California is facing a potentially catastrophic fire season this year following on from its recent drought:

Even before this year’s drought, forest officials were reporting a longer fire season, and more catastrophic mega-fires, in California and other western states. Half of the worst fires in recorded Californian history have occurred since 2002. Climate change and land-use patterns are adding fuel to those fires. Higher temperatures, with recurring and intensifying droughts are drying out landscapes. Pest invasions, such as the pine bark beetle, have killed off stands of trees.

California’s state fire chief, Ken Pimlott, said: “We can’t recall when we have seen this level of fire activity early in this year. “This is usually the time of year when much of the state is greening up. We haven’t even got into the months that historically are the worst in California – late August, September and October – so that’s a big red flag right there.”

Similarly, Australia is facing increased risk of major conflagrations as climatic shifts cause further drying. There have been an increasing number of hot, dry and windy days over the last 30 years, amounting to greatly increased fire risk. The country only recently emerged from the worst drought in its history, which was accompanied by huge fires. Fire has always been a feature of the arid landscape, reflected in the fire tolerance of many trees, but not on the scale seen in recent years. These intense fires are a far bigger threat. They incinerate all before them and remove all the oxygen from the air as they pass by:

The 2009 Black Saturday bushfires in Victoria were also preceded by extreme fire danger conditions: a decade-long drought and a number of record hot years, all compounded by a heatwave in the week prior. The ferocity of these fires was unprecedented, and so severe were they that they broke the record for the Forest Fire Danger Index, and a new category – ”catastrophic” or ”code red” – was added. Worryingly, since 2009, we have experienced more days of ”catastrophic” fire danger, and this number will very likely increase in the future. Fire frequency and intensity is also predicted to increase in already fire-prone areas – areas in which a large proportion of the Australian population lives. We are now also seeing the season of bushfire weather lengthening from October to March, and this will continue to extend in future….

….So, while bushfires are part of the Australian story, more intense and frequent bushfires are part of the Australian climate change story. The current environment in which we experience bushfires is changing. The lengthened bushfire season, and increased frequency and intensity of heatwaves, mean that the overall risk of bushfires in Australia has amplified.

Bushfires are capable of wiping out areas of food production. This is of particular concern for tree crops which take many years to re-establish. Intense fires can also cause soil damage.

Apart from the problem of too little water, climate change can also lead to too much. Flooding can inflict enormous damage on food production, often in areas where food insecurity is already prevalent:

The impact of extreme weather events on food production and consumption are well documented. For example, extreme floods in Pakistan in 2010 destroyed an estimated two million hectares of crops, killed 40% of the livestock in affected areas, and delayed the planting of winter crops, causing the price of basic foods such as rice and wheat to rocket. As a consequence, an estimated eight million people reported eating less food and less nutritious food over an extended period of time.

Increasingly intense storms can bring deluges, but also damaging winds and storm surges high enough to cause serious coastal flooding. For instance, Typhoon Haiyan, which hit the Philippines in late 2013 was the most powerful to make landfall since records began, with winds reaching 310km/h. While one cannot say definitively that any one event is caused by climate change, warmer air and oceans, leading to greater evaporation and therefore more moisture in unstable air masses, would be expected to raise the probability of increasingly intensity of storm events. Storms draw their energy from warm water, and their impact is enhanced by rising sea levels, the disappearance of protective coastal wetlands and coastal over-development.

Storms threaten not only land crops, but also the biologically diverse and highly productive coastal food production relied upon by so many people. Some 95% of marine food production originates from coastal ecosystems, but damage to mangrove forests and coastal wetlands destroys spawning and feeding grounds for fisheries.

Increasing temperature, even in the absence of acute threats such as drought, wildfires and severe storms, are capable of lowering crops yields, particularly for grains:

Warmer temperatures may make many crops grow more quickly, but warmer temperatures could also reduce yields. Crops tend to grow faster in warmer conditions. However, for some crops (such as grains), faster growth reduces the amount of time that seeds have to grow and mature. This can reduce yields (i.e., the amount of crop produced from a given amount of land).

Yield declines are expected to be significant as heat and aridity increase:

“Almost everywhere you see the warming effects have a negative affect on wheat and there is a similar story for corn as well. These are not yet enormous effects but they show clearly that the trends are big enough to be important,” Lobell said. Wheat is the first big staple crop to be affected by climate change, because it is sensitive to heat and is grown around the world, from Pakistan to Russia to Canada. Projections suggest that wheat yields could drop 2% a decade….

….Declines in crop yields will register first in drier and warmer parts of the world but as temperatures rise two, three or four degrees, they will affect everyone. In the more extreme scenarios, heat and water stress could reduce yields by 25% between 2030 and 2049.

In addition, seasonal boundaries, and therefore vegetation zones, are shifting, which is making it far more difficult to produce food in the ways people have traditionally done in a given area:

Paul Roberts has been producing wine in Friendsville in Garrett County for 17 years. Last year, for the first time, his growing season began in March — six weeks earlier than the historical timeline. It was “unprecedented,” he said. For farmers and gardeners, climate change is making the art of coaxing a flower to blossom or fruit to grow precarious and unpredictable….

….A midwinter thaw or an early frost can kill many plants and ruin crops. With increasingly extreme and unpredictable weather due to climate change, plants’ health is at the whim of the weather. An early warm spell triggers fresh growth that is vulnerable to frost, Roberts said. When the growing season starts early, it means more nights for him to worry about the temperature dropping below freezing and damaging his crops….

…The mismatch of pollinators’ and plants’ schedules also threatens plants’ ability to reproduce and produce food. Plants and insects respond to changes in hours of sunlight and temperature. But if a pollinator emerges during an early temperature spike, the plants it pollinates may not be in blossom. Crops rely heavily on insects such as bees, whose populations have struggled in recent years.

Very rapid change can destabilize ecosystems in this way, as climate sensitivities for different species can vary. As prime growing temperatures shift to higher latitudes, they may no longer coincide with suitable soils and nutrients. In addition insect and plant pests may thrive without cold winters to control their populations. Novel pests may also invade with shifting temperature and humidity. Over time, land use patterns are expected to change as ecosystems shift:

Vegetation around the world is on the move, and climate change is the culprit, according to a new analysis of global vegetation shifts led by a University of California, Berkeley, ecologist in collaboration with researchers from the U.S. Department of Agriculture Forest Service….“This is the first global view of observed biome shifts due to climate change,” said the study’s lead author Patrick Gonzalez, a visiting scholar at the Center for Forestry at UC Berkeley’s College of Natural Resources. “It’s not just a case of one or two plant species moving to another area. To change the biome of an ecosystem, a whole suite of plants must change.”…

….Some examples of biome shifts that occurred include woodlands giving way to grasslands in the African Sahel, and shrublands encroaching onto tundra in the Arctic. “The dieback of trees and shrubs in the Sahel leaves less wood for houses and cooking, while the contraction of Arctic tundra reduces habitat for caribou and other wildlife,” said Gonzalez, who has served as a lead author on reports of the Intergovernmental Panel on Climate Change (IPCC). “Globally, vegetation shifts are disrupting ecosystems, reducing habitat for endangered species, and altering the forests that supply water and other services to many people.”

Important shifts with major implication for food security are happening not just on land, but also in the oceans. Climate change is compounding the impact of fish stocks collapsing due to over-fishing. Oceans are warming. This translates into rising sea levels due to thermal expansion, combined with the effect of melting glaciers and ice sheets. Ocean currents are being altered as temperature changes in the atmosphere drive changes in wind patterns and therefore surface currents, and ice melting changes the ocean density profile. As thermohaline circulation in the oceans provides nutrients through upwelling, changes have the potential to cause much damage to marine ecosystems by starving the base of the food chain.

Changes in ocean heat flow have the potential to alter the climate on land as well. For instance, a weaker Gulf Stream would be expected to cause substantial cooling in northern Europe. Cold periods in Europe’s past have been associated with a weaker Gulf Stream, and climate change is predicted to pose a risk this may happen to a greater extent:

“The strength of the Gulf Stream was about 10% weaker during the Little Ice Age,” David Lund, of the Massachusetts Institute of Technology/Woods Hole Oceanographic Institution, told Reuters. He and two colleagues studied sediment cores off Florida and the Bahamas, and found evidence of a weaker flow that may have contributed to the Little Ice Age from about 1200-1850, when Alpine glaciers grew and London’s Thames River froze. “The possibility of abrupt changes in Gulf Stream heat transport is one of the key uncertainties in predictions of climate change for the coming centuries,” the scientists wrote in the journal Nature.

In addition, ocean acidification, as the oceans absorb CO2 from the atmosphere, is also impacting at the base of the food chain, affecting the millions of small organisms increasingly unable to form their carbonate shells:

Ocean acidification is sometimes called “climate change’s equally evil twin,” and for good reason: it’s a significant and harmful consequence of excess carbon dioxide in the atmosphere that we don’t see or feel because its effects are happening underwater. At least one-quarter of the carbon dioxide (CO2) released by burning coal, oil and gas doesn’t stay in the air, but instead dissolves into the ocean. Since the beginning of the industrial era, the ocean has absorbed some 525 billion tons of CO2 from the atmosphere, presently around 22 million tons per day….

….When carbon dioxide dissolves in seawater, the water becomes more acidic and the ocean’s pH (a measure of how acidic or basic the ocean is) drops. Even though the ocean is immense, enough carbon dioxide can have a major impact. In the past 200 years alone, ocean water has become 30% more acidic—faster than any known change in ocean chemistry in the last 50 million years. Scientists formerly didn’t worry about this process because they always assumed that rivers carried enough dissolved chemicals from rocks to the ocean to keep the ocean’s pH stable. (Scientists call this stabilizing effect “buffering.”) But so much carbon dioxide is dissolving into the ocean so quickly that this natural buffering hasn’t been able to keep up, resulting in relatively rapidly dropping pH in surface waters. As those surface layers gradually mix into deep water, the entire ocean is affected….

….Reef-building corals craft their own homes from calcium carbonate, forming complex reefs that house the coral animals themselves and provide habitat for many other organisms. Acidification may limit coral growth by corroding pre-existing coral skeletons while simultaneously slowing the growth of new ones, and the weaker reefs that result will be more vulnerable to erosion. This erosion will come not only from storm waves, but also from animals that drill into or eat coral. By the middle of the century, it’s possible that even otherwise healthy coral reefs will be eroding more quickly than they can rebuild.

Coral bleaching, as a result of environmental stressors such as rising temperature and increasing acidification, is an indicator that highly productive marine ecosystems are under threat. Marine food webs can collapse, with reefs dying and top predators over-fished, leaving the simple organisms such as sea urchins and jellyfish to proliferate unchecked. This is a tragedy in its own right, but will inevitably have knock-on consequences for human food security as well, as so many people either make, or supplement, their living from the sea.

While specific climate impacts are only probabilistically predictable over the longer term, there is every reasons to think that these impacts are going to exacerbate the the problem of food security.


The Bottom Line

Water will be in increasingly short supply as more and more people attempt to provide for themselves in regions where the supply is diminishing and resources are being used at far greater than replacement rate. Climate change is expected to accentuate water shortages in many ways, as well as having destabilizing effects on ecosystems forced to shift latitude or altitude rapidly. The potential for conflict is already increasing, as we saw in part one of this series in relation to food prices. Water and climate change are going to add to the pressure, and this is likely to precipitate some very unfortunate situations.

Our relentless human expansion is running up against hard, non-negotiable limits to food security, which is already threatened in so many places. Our current extractive methods amount to a draw down of natural capital, allowing us to feed (most of) ourselves today, but in highly wasteful ways which are already compromising our ability to feed ourselves and our descendants tomorrow. Those in a position to do so chase short term economic gain at the expense of burning through non-renewable resources in ways which clearly make no sense with respect to any logic other than short term economic benefit. Those at the other end of the financial food chain also prioritize what could, in a sense, be called short term gain, but for them is in fact a matter of short term survival.

The next part of this series will address the equally pressing issues of energy, soil fertility and carrying capacity.