The Coming Food Crisis — and What It Has to do with Canada

In writing a bit about food production for BizVoice, it seems there is one daunting, unavoidable fact: With China and other Asian countries expanding their palettes to include dairy products, the pressure will be on Western food producers to raise the output in the coming years. While my talks with Hoosier producers indicated their eagerness to step up, Dan Gardner, a columnist for the Ottawa Citizen, argues Canada will have a much tougher time doing so:

With rare exceptions, discussions of food policy in Canada are limited to the joys of eating organic and how hard-pressed farmers need more help from the government.

What you never hear is this: As a result of rising population and wealth, global demand for food is soaring and the world faces a food crisis unlike anything seen since the 1970s if food production does not grow rapidly. Canada is among the very few nations with the capacity to dramatically boost production. But we’re not. In fact, Canadian agriculture is stagnant. And politicians will not even discuss how we can change that.

“There is a disconnect,” says Larry Martin, an agricultural economist at the George Morris Centre, an independent think tank devoted to agricultural policy.

“Canada has the third-largest endowment of arable land per capita in the world, after Australia and Kazakhstan,” notes Martin. “We have, depending on the set of numbers you look at, nine per cent of the renewable fresh water supply in the world.” Put those two facts together, add one of the greatest commodity booms in history, and money should be pouring into Canadian food production.

But Martin found something startling when he compared the ratio of investment in agriculture with the depreciation of existing assets. Over the last decade, as China boomed and food prices soared, there was no rush to invest. “The ratio in Canada in eight of the last 10 years is less than one. So there’s less new investment coming into the food industry than there is depreciation.”

In the United States, by comparison, the worst year in the last 10 saw 40 per cent more investment than depreciation.

“It’s just astonishing when you see these numbers. We think of ourselves as a great wheat exporter but our share of the wheat market is declining. During the ’90s and early 2000s, we had between 20 and 25 per cent market share and it’s gone down steadily to 15 in the last few years.”

The causes of the stagnation are many, Martin says. A big one is a regulatory system that stifles innovation. Martin recalls testifying at a parliamentary committee alongside a wheat breeder from the University of Saskatchewan. “He went through a whole list of wheat varieties that he came up with that are much higher yielding than the wheat varieties in Canada. He couldn’t get them registered in Canada but they got registered in Montana and we now have to compete with them.”

Then there’s “supply management,” the 1970s-era policy which effectively turned dairy and poultry production into an industry-controlled cartel protected by import tariffs. It’s good for existing dairy and poultry producers because it keeps prices high and stable. And it has made the lucky people with production quotas a lot of money: the quota for a single dairy cow can go for $30,000 and estimates of the total value of production quotas range between $30 billion and $50 billion.

Asia Continues Greenhouse Gas Emissions Growth, Not Concerned About U.S. Policy

Critics of cap and trade remain unconvinced that tightening the reins on CO2 emissions in America would have much impact on global pollution — and thus would hinder American businesses with little benefit. That’s a sentiment echoed by the Heartland Institute:

Already responsible for one-third of the world’s greenhouse gas emissions, China, India, and other Asian nations are on pace to generate more than 40 percent of the world’s emissions by 2030, according to data released at a climate change conference in Manila, Philippines…

Following a recent visit to Beijing by U.S. climate change envoy Todd Stern, Chinese foreign ministry spokesman Qin Gang indicated his country has no plans to curb emissions in the near future, regardless of whether the United States does so.

“China is still a developing country, and the present task confronting China is to develop its economy and alleviate poverty, as well as raise the living standard of its people,” Gang told reporters. “Given that, it is natural for China to have some increase in its emissions, so it is not possible for China in that context to accept a binding or compulsory target.”

Max Schulz, a senior fellow at the Manhattan Institute, observes China and India have both publicly stated they have no plans to slow their growth.

“The steep growth in emissions by developing Asian countries, combined with clear statements that these nations have no plans to curtail their emissions, further highlights the futility of the United States’ plans to make drastic cuts in emissions,” said Schulz.

What do you think? Would cap and trade be futile due to the impact of Asian polluters et al.?

Survey: Asia, India in Line for More VC Dollars

Venture capital has long been concentrated in California and Massachusetts. No news there. Many people, however, will cite improved efforts in recent years by Indiana private and public sector leaders to attract those VC dollars.

The 2009 Global Venture Capital Survey, though, indicates that job might become a little more difficult in coming years. Why?

  • More than half of venture capitalists are now investing outside their home country
  • Fifty-four percent of investors anticipate working with additional international partners in the next three years
  • Asked where their dollars are most likely to go over those 36 months, the top answers were Asia, 50%; India, 43%; and South America, 36%. Only 17% forecast increased U.S. investment

There is still room for states to set themselves apart. Nearly 60% responded that government can play a key role by establishing favorable tax policies. Fifty percent noted that more support for entrepreneurial activity is also important.

On the other hand, maybe more international dollars will find their way here. Another very good reason for the U.S. to avoid protectionist policies that shut the door on international trade and investment.

Less Time in School? You Have to be Kidding

The article we’re going to link to at the end of this post is from the Des Moines Register, generally regarded as a strong newspaper. The author, Staci Hupp, is a former education reporter for the Indianapolis Star who did an admirable job covering education issues while here in Indiana. (Both are Gannett publications, but we’ll save the fate of newspapers for another day.)

Staci writes a thorough story explaining why an Iowa school district wants a waiver to go to a four-day school week. Money is driving the move, with past questionable budgets and a bookkeeping error putting the district in financial trouble.

While saving money is good, this isn’t the proper route. The absolute most important two sentences of this story are the last two (at least in the online version; we’re sure the research box was a more prominent sidebar in print). They read: 

"Students in Asia and Europe typically attend school an average of 220 days a year. The U.S. average is 180 days, according to the National Conference of State Legislatures."

We can’t afford less classroom time. We’re already falling behind the rest of the world in educational achievement, particularly in the math and science areas.

Iowa, and Indiana, are at that 180-day figure. There are several bills in the Indiana General Assembly that, while not taking the four-day-a-week approach, would also dilute the education effort. The focus should be on more dollars to the classroom, expanding school choice and more. Instead, we’re fighting back gimmicks that would serve no useful purpose and, in fact, prove detrimental to our competitiveness and our young people’s futures.

Here’s the Iowa story. Read to the end as it also references a previous IU study that disputes the potential savings.

Time to Lower Federal Corporate Income Rate

If tax rates can in fact be said to influence where companies locate and invest, the U.S. has a problem. As our economy becomes increasingly global our combined (federal and provincial/state) income tax rate is higher than every other country in the world, except Japan. Both presidential candidates have recognized the need to do something. Sen. John McCain proposes a significant reduction of the current 35% federal rate to 25%. Although coupled with other proposals and not nearly as definite or assertive, Sen. Barack Obama also indicated he is open to lowering the rates.

The U.S. can’t afford to ignore what most other industrialized countries have already figured out: the corporate income tax rates affect investment. This year China dropped its rate from 33% to 25%; and Taiwan, Hong Kong and Korea, which already had much lower rates than the U.S., dropped theirs even more. And it is not just in Asia. The adjustments swept Europe with Germany, Italy, the U.K. and Spain all making rate reductions. It is truly a global thing. Other countries that are part of the wave of cuts: Turkey, Bulgaria, Israel, South Africa and Colombia.

So with so much talk of change in other contexts, it is important to point out that it is also time for a change to our corporate tax rate. A full listing of the corporate rates in nations belonging to the Organization for Economic Cooperation and Development, along with other revealing information on this subject is available from the Tax Foundation.