MAC/20: Mines and Communities

World hunger: is potash the solution or part of the problem?

Published by MAC on 2009-05-27

The world's biggest potash (potassium) miner, the Potash Corp of Saskatchewan in Canada, has returned to its theme that a world food crisis is "looming" because farmers aren't buying enough of its product for use in agriculture.

In April, the company singled out Indian farmers for criticism, blaming their government for urging that global prices of potash be reduced. See: http://www.minesandcommunities.org/article.php?a=9211

The London-based Chatham House group, echoing a report earlier this year by the G8 group of states, recently stated that: "long-term resource scarcity trends, notably climate change, energy security and falling water availability" will put pressure on fertiliser prices and production, along with "competition for land and higher demand resulting from increasing affluence and a growing population."

However, the negative contribution to global greenhouse gas emissions from chemical fertiliser-based agriculture is hardly negligible. "Agriculture needs to come to the table on climate change" said one authority last week. "[H]ow do you grow a crop of wheat without using fertilizer? How do you do that without nitrous oxide emissions? "asked another.

Potash mining itself demands huge amounts of water, and also has an impact on global greenhouse gas emissions and land availability. Moreover, a significant proportion of planned potash production is destined for ethanol and other so-called "bio fuels" crops - such as Rio Tinto's project in Argentina which it last year sold to Vale of Brazil.

Taking the lead in confronting prospects of increasing hunger for millions of poor families - especially in Asia - from a mining company whose bottom line is profit, seems highly dubious, if not downright dangerous.

[Comment by Nostromo Research, 25 May 2009]

Increased potash output key to avoiding global food crisis

As crop prices are beginning to rise again, both potash miners and global think tanks argue that increased potash production for fertilizers is vital to boost agricultural output worldwide.
by Marc Davis

BNW Business News Wire

21st May 2009

VANCOUVER- Global fertilizer use must be ramped-up to avert a permanent food crisis and world instability. This is the stark message that was delivered at the BMO Capital Markets 2009 Agriculture, Protein and Fertilizer Conference in New York last week.

Among the keynote speakers who addressed this urgent economic imperative was Bill Doyle, the CEO of Saskatchewan-based Potash Corp.- the world's largest potash mining company.
Doyle said that the value to mankind of this potassium-rich mineral cannot be overstated. When mixed with phosphate and nitrogen, potash makes it possible for fertilizers to boost crop yields by as much as 60%, he emphasized.

To avoid a looming food crisis, the world can no longer settle for anything less than optimal crop yields via the balanced application of potash-based fertilizers, Doyle insisted.

"Long term demand for fertilizers, especially potash, must increase if farmers are going to produce enough food for the world's growing population," he said.

However, the recent economic crisis has prompted farmers the world over to significantly curtail their spending on fertilizers, while also scaling back the planting of arable land, Doyle noted, adding that this could have "dramatic consequences" at least in the near-term.
"This drop in acres planted and fertilizers used could create a major problem for the world food supply as the world's grain stocks have been near historically low levels for the past several years," he said.

Furthermore, the under-application of potash-based fertilizers is not merely a reaction to the recession. It has been a pronounced problem for decades in the world's most populous nations such as China, India and Malaysia, Doyle warned. This is where "yields continue to suffer," especially as these major importers continue to procrastinate about the inevitability of having to pay higher prices for new potash inventories.

The inauspicious prospect of a drop in global food production in 2009 - the first annual dip in living memory - is a "recipe for trouble," he said. "It appears very likely that farmers will not be able to keep pace with grain demand in 2009."

Such an unprecedented turn of events will merely kick-start a return to higher food prices, Doyle warned. And last year's global food crisis served notice that the world can ill afford another surge in the prices of food staples, especially in poorer nations where there was widespread political unrest, including food riots.

Yet, even though crop prices have since retreated from 2008's lofty levels due to the crash in commodity prices, they have ominously started to creep higher since the start of 2009. Doyle noted, "You can also see that prices for major crops grown around the world are well above their ten-year averages."

Another speaker at the conference, Patricio Varas, the president of Western Potash Corp - one of only three serious exploration and development hopefuls in Canada - agrees with Doyle's concerns.

Varas told BNW Business News Wire that potash-based fertilizer is crucial to realizing meaningful cost containment while boosting crop yields. That is why a widely-expected abatement of the global economic crisis later this year should spur on a replenishment of potash inventories in key markets, Varas added.

In turn, the world must dramatically accelerate fertilizer application to meet the extraordinary challenge of feeding an additional 75-80 million mouths per year, he said. Then there's also the challenge of serving several billion people in emerging economies who are now demanding feed-intensive animal-protein in their diets.

"We view the need to find and develop the potash mines of tomorrow as a call to action, with the aim of helping to prevent a future a global food crunch," Varas said.

In recent weeks, various global government organizations, such as the United Nations, have also sounded the alarm bell by issuing grim warnings about the urgent need to exponentially improve year-on-year crop yields.

In fact, the world faces a permanent food crisis and global instability unless countries act now to feed a surging population by doubling agricultural output, a report drafted for ministers of the Group of Eight nations warned earlier this year.

The report, entitled "The Global Challenge: to Reduce Food Emergency", warns that global food production needs to double by 2050 to feed an additional 79 million-plus mouths each year. The G8 also warns of the food production challenges posed by "pronounced climate changes," leading to water shortages, as well as "higher input costs."

"The issue of price volatility remains a crucial element for the world's food security," the report also says. "There is a need for a fast increase of agricultural production in developing countries."

Although most agricultural commodities prices have fallen by as much as 40-50% since the 2008 price spike that saw them at all-time highs, they are still well above their average yearly levels prior to last year's food crisis. In fact, some staples have jumped in price since the start of the year.

They include wheat and corn prices, which have risen over 15%, and soybean, which is up over 20%. Additionally, domestic prices in many developing countries remain close to last year's records and have risen even further in some African countries.

Even international watchdog organizations such as the London-based think tank, Chatham House, are weighing-in on the pending food shortage. In a recent report, Chatham echoed Bill Doyle's assessment that the recent fall in food prices is only a temporary reprieve and that food prices are set to resume an across-the-board upward trend once the world emerges from the current economic downturn.

Over the medium term, the report states that: "long-term resource scarcity trends, notably climate change, energy security and falling water availability" will put pressure on prices and production, together with "competition for land and higher demand resulting from increasing affluence and a growing population."


ANALYSIS - Agriculture Poses Rough Road For Climate Bill

PlanetArk

25th May 2009

ST LOUIS - President Barack Obama is carrying through on campaign promises to fight global warming, challenging the car companies and energy industry to get on the carbon-cutting bandwagon.
But one of his toughest opponents may end up coming from his own US Midwestern back yard: Agriculture.

Obama on Tuesday forged ahead with landmark moves to remake the US auto industry, forging a coalition of unions and auto executives in an atmosphere of unprecedented financial crisis to retool automakers under a banner of "green cars."

A day before, Congressmen Henry Waxman and Ed Markey introduced a proposed American Clean Energy and Security Act of 2009, an attempt to reshape energy and environmental policy around a national mission of sustainable long-term prosperity.

But the largest US farm group, the American Farm Bureau Federation (AFBF), immediately panned the 932-page Waxman-Markey bill despite the fact the proposed law "does not include agriculture under the greenhouse gas provisions."

Centerpiece of the proposed law are provisions to put new limits on emissions of carbon dioxide and other greenhouse gas pollution and create a system of tradable "permits" that would reward polluters for changing to green systems.

"The (bill) is laden with so many policy prescriptions that its impact on the US is almost impossible to measure and evaluate," AFBF Bob Stallman said in a statement. "We can be certain of some things, however -- it will increase our operating costs and reduce our competitiveness abroad."

Even as Obama spoke, a new climate study by scientists at the Massachusetts Institute of Technology said global warming's effects this century could be twice as extreme as estimated just six years ago -- which could mean worsening droughts, water shortages, fires and other dire prospects for farmers.

RETHINKING COSTS, BENEFITS?

A tortured and uncertain road ahead for US climate change measures, and agriculture's complex role as both a source of greenhouse gasses and potential "sink" for carbon that removes the gasses from the air, got a full airing this week at the World Agricultural Forum industry meeting here.

"We have to have a sense of urgency and have to have serious action on the carbon mitigation challenge," Frank Tugwell, president and chief executive of Winrock International, a consultant on sustainability to rural communities worldwide, told the forum.

"I don't have any confidence that we are going to have legislation that is going to be effective in the United States," Tugwell said at a round-table on climate change.

"The main reason is that the democratic systems are not set up to pay a price in advance for a problem that is this far out. We can't even address Social Security in this country.
"We will not pay a price in advance for something that is hypothetical like this and in the future, even though it is catastrophic for us," Tugwell said.

"We are in a war but we are in a war against an invisible enemy," said Carole Brookins, managing director of Public Capital Partners, a consultant to emerging market governments.
She said voters absorb weather disasters like Hurricane Katrina or droughts without "connecting the dots" on climate.

"People don't want to think about it because ... to think about it is just too many systemic changes," Brookins said.

Mike Walsh, executive vice president of Chicago Climate Exchange, which stands to benefit from a mandatory "cap and trade" law, said putting a price on carbon is a solid first step but agriculture has a long way to go to buy in.

"The question is agriculture and forestry can help solve the problem and get paid for that service. How do we get there? The answer is step by step," Walsh told the forum.
"I'm not as optimistic. You tell me, how do you grow a crop of wheat without using fertilizer? How do you do that without nitrous oxide emissions?" said Allan Buckwell, policy director for Country Land and Business Association in the United Kingdom. "Agriculture is a net emitter."

Tugwell said such objections will have to be overcome.
"Agriculture needs to come to the table on climate change, recognizing it is an emitter and focus that it could be part of the solutions," he told Reuters in an interview.

(Editing by Christian Wiessner)

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