It was interesting to hear the government’s scientific adviser tell us this week that there is a problem with the long term supply of agricultural produce and energy, as if this were news! He thinks this ranks alongside the climate change issues which have been the sole worry they have talked about for a long time. Anyone who has been watching the markets in oil and wheat will know there has been a price surge despite the active talk of slowdown and recession in the western economies. It is a sign of how the balance of economic power is shifting to Asia. It is proof that many more people in world now can afford western standards on their dining tables.
There are two main causes of extra demand for food and energy. The first is a rapidly rising world population, and the second the increasing affluence of formerly poor countries. Each new birth brings another mouth to feed and another body to keep warm. Every increase in the average incomes of India and China brings more families who wish to eat meat and can now afford to. Meat production requires much more grain per head than if people ate the grains themselves instead of eating an animal which has eaten them. The richer countries are unlikely to increase their demand for food very much, although there can be substantial changes in food fashion. Very poor countries boost their demand for food as they get richer, as they tackle undernourishment and demand more foodstuffs that require more argicultural effort to produce.
The government’s adviser told us that the solution is greater agricutural productivity, because he said the amount of land available for agriculture is limited. That seemed a strange idea. If we are to be successful in allowing the world population to expand by a futher 3 billion people, and accommodate the reasonable wish to many of the poor to have a better diet, we are going to require more agricultural land as well as a farming revolution. As one cynic said, it sounded like a prelude to more government support for gm crops, when there are a range of options.
There are still many parts of the world where farming is not nearly as efficient as the best. Much of our grain comes from the US prairies, where huge farms yields big crops of grain, planted and harvested by enormous machinery that enables relatively low cost production on an industrial scale. In many other parts of the world small farms and small fields prevent using the largest machinery, and lack of capital forces farmers to use less efficient ways of sowing, tending and reaping. There may need to be an agrarian revolution elsewhere to feed the multitudes.
British agrarian history shows you that the cultivated area can expand substantially when prices go up and when there are shortages. Today we concentrate our farming in fertile valleys. There are signs that in past crises farming has worked its way up less promising hillsides. There are huge areas of the world that are unfarmed, where natural vegetation could be replaced by crops given the application of capital and in some cases irrigation. Some soils will need improvement, but that too can be achieved over time. We should not rule out the possibility that part of the answer to the growing scarcity of grains will be more acres under grain crops.
We may also have to accept that more people will have to stay on vegetarian diets, or more people used to eating meat once or twice a day will need to find substitutes and other dishes some of the time. There needs to be a twin response to more supply – more land and better techniques, whilst changes in demand patterns will achieve the rest.
We also see the impact of greater demand from Asia for energy. As people get richer they want to drive cars, run fridges, use more hot water, install more light bulbs. It’s what we have done, so naturally we should expect Asians to do the same. We need to remember there are many more of them than there are Americans and Europeans, so all things being equal we should expect a big price impact on energy.
Rising prices will force the rich west to be get smarter with energy use, just as it will delay the growth in energy demand in rising Asia. it should also begin to unlock a better longer term answer to the problem. There are three main components to a longer term solution.
The first is energy efficiency. Progress has been made creating more fuel efficient cars, washing machines and homes. There is a long way to go even to adopt the best modern technology into every western home, whilst there is every reason to believe there are huge gains still to be made through better design in the future. High prices for energy will accelerate investment in more fuel effiicent devices,and in innovations for more fuel efficient products.
The second is discovering and developing energy substitutes. There is a big expansion possible in renewables and combined heat and power, and we may be close to a breakthrough in the use of a variety of cleaner technologies like hydrogen.
The third is to find and exploit more of the carbon based reserves there are still available.Within the family of carbon based energy itself there is scope for developing clean coal technology, so we can use more of the large coal reserves many western countries enjoy. Many oil and gas fields have been run down or closed with considerable gas and oil still in them, as the means did not exist to take it all out. As prices rise so technology to manage reservoirs will improve, making higher extraction rates possible.
The government’s adviser is right to warn of the importance of food and fuel. The big price increases we are witnessing will send strong signals to the market to do something to raise supply. Governments should ensure that their purchasing patterns and regulatory requirements reinforce the message that we need to do more to find alternatives and use energy more wisely.