Commodities

David Fickling is a Bloomberg Gadfly columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.

The world we grew up in is disappearing.

From the tropics to the poles, the effects of climate change are transforming environments that humans have known since prehistory.

Chances of saving the world's coral reefs are disappearing because of mass bleaching, according to a paper by scientists on four continents published in the journal Science last week. Such events, caused by warmer-than-usual waters, had never been observed until the 1980s, but are now occurring once every six years. Many marine biologists now believe they'll see the demise of coral reefs worldwide within their lifetimes.

Similar trends are afoot in colder climes. The Arctic shows no signs of returning to the conditions of reliable ice cover that have persisted at least since data was first collected in the late 19th century, scientists at the U.S. National Oceanic & Atmospheric Administration wrote in an annual review last month. Permafrost temperatures hit record-high levels in 2016, and the region as a whole is warming at twice the global rate, they wrote.

If you think that's the worst thing the coming century of climate change has in store, check what's happening to agricultural land.

Location, Location, Location
Land at least moderately suitable for agriculture will barely grow this century
Source: Global Agricultural Land Resources – A High Resolution Suitability Evaluation and Its Perspectives until 2100 under Climate Change Conditions (PLOS ONE, 2014)

Production from the world's farms needs to grow at a headlong pace over the coming decades. Rising populations and growing incomes that are already driving up consumption of land-intensive produce such as meat mean demand for farm products will rise between 70 percent and 110 percent between 2005 and 2050, according to the UN's Food & Agriculture Organization.

Usable land, though, is expected to barely increase. Despite warmer climates opening up frigid stretches of Canada, Russia and China to agriculture, desertification and degradation elsewhere means the area of land considered moderately or highly suitable for agriculture will only rise from 33.2 million square kilometers to 34.1 million square kilometers toward the end of this century, according to one 2014 study.

Climate change is already playing a part here. Heavy spring rainfalls in the U.S. Midwest, which have been linked to the effects of global warming, are one of the main causes of a dearth of protein in wheat that's already caused ructions in U.S. grain markets. The current freezing winter weather could exacerbate the same problems, while rising carbon dioxide concentrations themselves could be reducing the nutrient content of crops on a global scale.

It's too soon to despair. While the 19th and 20th centuries' devastating famines in the British and Chinese empires initially seemed to confirm economist Thomas Malthus's predictions that the world risked running out of food, recent decades have demonstrated that hunger is more a result of bad or wicked policy than environmental constraints.

Better Fed
Prevalence of undernourishment has slumped in emerging economies so far this century
Source: Food & Agriculture Organization

Undernourishment, which ran as high as 20 percent of the world's population in the early 1990s, fell to just 10.6 percent in 2015, before rising in 2016 for the first time in 14 years. The existing stock of land would be quite adequate to meet 2050's agricultural demands so long as farmers manage to use it more efficiently and profitably, according to a 2015 study.

Indeed, at present the world appears to be drowning in a surfeit of farm produce. The Bloomberg Agriculture Subindex touched a record-low 46.8 last month due to slumps in the price of sugar, coffee, wheat and corn.

Lying Fallow
The Bloomberg Agriculture Subindex touched a record low in December
Source: Bloomberg

Such conditions won't last forever. In years to come, China National Chemical Corp.'s takeover of Syngenta AG and the mergers that created DowDuPont Inc. and Nutrien Ltd. -- not to mention the pending or possible takeovers of Monsanto Co. by Bayer AG and Bunge Ltd. by Glencore Plc -- may come to be seen as moments when far-sighted managers looked past temporary farm gluts to see a leaner, and more profitable, future. Investors who value Mosaic Co. and Deere & Co. at a premium to the S&P 500 already seem to believe as much.

Selling the Farm
Blended forward 12-month price-earnings ratios for fertilizer company Mosaic and tractor maker John Deere have edged ahead of a richly valued S&P 500
Source: Bloomberg

Still, events in the tropical oceans and the frigid Arctic should be of concern. Coral and ice cover can survive warming events as long as the anomalies are rare enough to allow ecosystems to recover -- but when the blows come too close together, the path to destruction becomes inexorable.

The 20th century's green revolution in agriculture took place against the backdrop of a global climate in a steady state that allowed similar recoveries from crop failures, but those conditions are rapidly passing into history.

For decades now, humanity has mostly kept its edge in the race between farm productivity and starvation. In the future, we'll be running faster just to keep up.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. "Marginal" land will see a more substantial increase, from 21 million square kilometers to 24.8 million square kilometers.

To contact the author of this story:
David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story:
Katrina Nicholas at knicholas2@bloomberg.net