Is food the new oil? Fertiliser wars and Brazil as food superpower

August 30, 2010 5 By admin

Brazil combinesIn the Financial Times, Javier Blas gives us the back-story to the attempt by the world’s largest mining company, BHP Billiton, to buy its largest fertiliser company, PotashCorp. Suddenly fertiliser is big business: in the first eight months of the year, deals valued at $61bn have been announced by companies in the industry, a high that more than doubles the peak hit in 2008.

Why? “Countries are starting to see potash much as they see crude oil: as a hunted, strategic commodity. But, as with oil, potash deposits are not evenly spread. A handful of nations – led by Canada, Russia, Belarus and Israel – command the bulk of the reserves. Eight companies control more than 80 per cent of global supply. Two marketing groups – Canpotex for North American producers and BPC for the Russian and Belarusian groups – dominate the global trade.”

And just as with oil, China is getting worried: “[It] has to import about half of its needs, a dependency that “may become a major threat to China’s fast-developing national economy and long-term strategic needs”, according to the Chinese Academy of Social Sciences, a think-tank that advises the government. Little surprise, then, that its primary importer of the mineral, Sinochem, says it is paying “close attention” to the PotashCorp battle, suggesting the group could launch a counterbid.”

And Blas thinks this is just the start. “The bid for PotashCorp is a litmus test for how companies – and nations – view the prospect of a world with tighter food supplies. In the past century, anguish over who will feed the world has always been answered with breakthroughs that have more than compensated for growing populations. But if a Chinese state-owned company should plant its flag on the potash industry, it could indicate the introduction of a more cut-throat edge to the geopolitics of agriculture.”

Meanwhile, this week’s Economist focuses on the transformation of Brazil into the world’s first tropical food giant (see chart), without Brazil ag exportsdeforesting the Amazon (the action has been 1,000km away from the rainforest). It’s all down to the transformation of the cerrado, the Brazilian savannah, from scrubland to breadbasket.

How? Embrapa, the Brazilian Agricultural Research Corporation, set up in 1973. Embrapa shows what publicly-funded R&D can achieve, transforming the cerrado’s acidic soils by mass application of lime, importing and adapting African grasses to make cattle ranching feasible, developing nitrogen-fixing bacteria suitable for cerrado soils and most important of all, turning soyabeans into a tropical crop through ‘old-fashioned crossbreeding’, and now GM. It has also pioneered ‘no-till’ agriculture, in which the soil is not ploughed and so retains its nutrients (and its carbon): in 1990 Brazilian farmers used no-till farming for 2.6% of their grains; today it is over 50%.

‘Can the miracle of the cerrado be exported, especially to Africa?’, asks the magazine? Here’s its answer: ‘Brazil’s agricultural miracle did not happen through a simple technological fix. No magic bullet accounts for it—not even the tropical soyabean, which comes closest. Rather, Embrapa’s was a “system approach”, as its scientists call it: all the interventions worked together. Systems are much harder to export than a simple fix. “We went to the US and brought back the whole package [of cutting-edge agriculture in the 1970s],” says Dr Crestana. “That didn’t work and it took us 30 years to create our own. Perhaps Africans will come to Brazil and take back the package from us. Africa is changing. Perhaps it won’t take them so long. We’ll see.”’

What’s missing from these two articles on food? The people who grow it. The Economist dismisses Brazil’s millions of small scale farmers as ‘hobby farmers’, incapable of improving yields or playing a useful role. But countries like Vietnam have shown that given the right support, small farmers are perfectly capable of driving agricultural take-offs. Small farmers also constitute many of the world’s poorest communities. Will they benefit or lose as food becomes the new oil?