Top Hedge Fund Guy Sees Worsening Global Food Crisis

Famine, as visualized by sculptor Rowan Gillespie on Custom House Quay in Dublin, Ireland. Famine is what hedge fund manager Jeremy Grantham is really talking about in his latest investor letter. (Photo by William Murphy/Flickr)

The skipper of one of the larger hedge funds on the planet — $100 billion under management — has just laid out, again, in wonkish detail and with financial sophistication, the evidence that the industrialized world has fallen to its knees and is about to topple onto its face. He says, in short, Brace for Impact, and anyone who has  any interest in surviving the next couple of decades on Planet Earth would be well advised to read his report — and act accordingly.

His name is Jeremy Grantham, he is a founder and manager of GMO Capital, based in Boston. As I reported here 15 months ago [“Hedge Fund Manager Says Brace for Impact“], he warned his investors and us then that the days of abundant resources and falling prices were over forever. In other words, the benefits of massive global industrialization have played out, and the real price tag is coming due.

The title of his new letter to investors is “Welcome to Dystopia! (Hint: that’s the opposite of Utopia.) Entering a Long-Term and Potentially Dangerous Food Crisis.” In his new assessment, the only correction he makes to last year’s letter: he thought things were going to get better this year, and they got worse. (One of the only criticisms I made of his 2011 letter was that unfounded note of optimism.)

If you read the articles you find on The Daily Impact but withhold your belief on the grounds that the writer is not sufficiently wealthy, well-known or credentialed, here’s a famous rich guy with a hell of a resume who says most of the same things.  Please read his entire letter. If you think it may not be worth your while, consider a few of his main points.

  • Ten years ago we entered a period of rising prices for all resources as their supply began to dwindle. That trend will continue for the foreseeable future.
  • Five years ago we entered a chronic global food crisis — rising prices and falling reserves — that is going to continue, and get worse.
  • The dramatic increase in food supply required to support the projected world population of 2050 cannot be realized, because of exhaustion of water supplies, loss of topsoil, increasing droughts, and rising costs of fuel and fertilizer.
  • As the food crisis worsens , especially if it is accompanied by simultaneous fuel price increases, “the risks of social collapse and global instability increase to a point where they probably become the major source of international confrontations. China is particularly concerned (even slightly desperate) about resource scarcity, especially food.”
  • “The general public, the media, the financial markets, and governments badly underestimate these risks.”

Three reservations: as throughly as Grantham understands the gravity of our plight, for all that he knows it has got much worse in the past year, he clings to optimism like a slight board in a towering sea, hoping that technology will save us. He reports, for example, that genetic engineers may be able to improve the efficiency of photosynthesis in wheat and rice — in 20 or 30 years!

He also insists that cures for the food crisis, and the fuel crisis, and the water crisis, and the weather crisis, exist, and “work on paper.” If only we can find the will, he suggests, we might somehow be able to carry on. In my view, we don’t have 20 or 30 years, the solutions do not work on paper, we will not find the political will to do anything, and in any case time has run out.

Thirdly, I wish he and other writers who understand where the world is headed would not avoid the nature of the consequences. When he says, for example, that “waves of food-induced migration will threaten global stability and global growth,” or “increasing numbers will not be able to afford the food we produce.” it is easy to skip merrily on our way without absorbing the meaning of what he just said. He said that millions of people will die.

When the Horsemen of the Apocalypse ride, it is not for recreation. They are out to kill, in very large numbers.

This is the consequence that the world’s leaders and institutions are ignoring.

These differences aside, Grantham has made a mighty contribution to our understanding of exactly how and why the industrial world is crumbling — while we discuss Mitt Romney’s tax bracket.


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7 Responses to Top Hedge Fund Guy Sees Worsening Global Food Crisis

  1. Gail Zawacki says:

    From a UNEP report: “Feeding a growing world population has become one of the major issues of our century and we cannot afford to lose millions of tons of crops each year because of air pollution. Present day global relative yield losses due to tropospheric ozone exposure range between 7-12 percent for wheat, 6-16 percent for soybean, 3-4 percent for rice, and 3-5 percent for maize.”

    This also begs the question, if annual crops are drastically reduced from absorbing ozone, what is the effect on perennial crops like artichokes and asparagus…and what of wild plants, and tree?

    UNEP report linked to here:

  2. c. says:

    1. I interact with a number of Chinese immigrant types here in the US. Their descriptions of their food system are scary. They take for granted that oil at the lowest price in the store has been used and re-filtered more than once or twice and is being sold as “new”, something shady under the law. I can only imagine that the concept of food scarcity is on top of doctored and bulked foods unlike anything seen in this country in the last 90 years.

    2. You might want to do a tad bit of research on typical plant breeding. There is some strong evidence that regular breeding can adapt plants faster than genetic engineering. Which is one more reason to save your seeds from your garden, the earliest fruit bearing, the ones that tolerate heat/drought and the latest setting of fruit. Label them separately. Pay attention to the drought forecast. Plant out the ones who set fruit in the heat/drought if the drought is long-term forecast to continue. If you have a chance to give seeds to someone moving somewhere with a longer or shorter season, give them those seeds.

    • Tom Lewis says:

      Amen, C. Working with nature has completely different outcomes from trying to manage and improve nature.

  3. Sara says:

    When I was a kid, I saw a diagram in MY Weekly Reader showing an oil well. The well had what seemed like a huge straw, sucking the well from a bowl. Like any kid, I knew that bowl was gonna go dry once I’d sucked all the chocolate milk out of it. I asked my teacher what would happen when the “bowl” was empty. She yelled at me, told me it would never go dry, that the diagram was just a picture. Blah-blah-blah. I wish she were here now.

  4. Jay Sciavone says:

    Perhaps these issues would get broader discussion if we were to explain the link between “Mitt Romney’s tax bracket” and our crumbling world. The issues are hardly mutually exclusive.