Archive for April, 2007

2007-04-05 :: Food Price Inflation

Thursday, April 5th, 2007

In Chairman Bernanke’s recent Fed testimony, he noted that food price inflation is growing. There are a combination of things that are coming together to increase prices of food products – ethanol production raising the price of corn, biodiesel from soybeans, feed prices increasing for cattle, etc.

Below, I have cut/paste an interesting analysis of a phenomenon that I first heard about last week when a bill was introduced in congress (HR 1709) dealing with the collapse of bee colonies. Without bees pollinating our crops, we have a big problem, and another potential catalyst for food price inflation. If you’d like to follow this legislation, you can link to this: http://www.govtrack.us/congress/bill.xpd?bill=h110-1709

We are in the process of reviewing companies that can benefit from food price inflation, and we will be adding them to our client portfolios. I’ll be sharing those names with you in coming days. In the meantime, here is the article by Shannara Johnson from Investor Insight:

Honey Bees and Food Supply
By Shannara Johnson

“If the bee disappears off the surface of the globe, then man would have four years left to live,” said Albert Einstein. “No more bees, no more pollination, no more plants, no more animals, no more man.”

The question many beekeepers and scientists are asking themselves these days is, are we there already?

Recently, there’s been a great media buzz about the mysterious disappearance of hundreds of millions of honey bees in the United States. Beekeepers have helplessly stood by while up to 95% of their bees vanished into thin air. One Midwestern beekeeper lost 11,000 of his 13,000 hives, others in 24 states face losses of 60% to 80% on average. Internationally, the same phenomenon–to a lesser degree–has surfaced in Canada, Poland, Spain, Germany, and other European countries.

What’s the cause of the “colony collapse syndrome,” as it is now called? No one knows for sure, though there are plenty of theories.

Award-winning TV producer, investigative reporter and editor of Earthfiles.com Linda Moulton-Howe talked to various scientists about the bee bane. “Penn State entomologist Diana Cox-Foster, Ph.D., analyzed some bees found in deserted hives,” reports Moulton-Howe. “Dr. Cox-Foster has seen as many as five different viruses and unidentified fungi in the bees. She says that is two times more pathogens than she’s ever seen before in honey bees.”

Something is compromising the bees’ immune systems, other scientists agree; among the suspected culprits are modern pesticides and GM crops. And while no one agent might be solely responsible for the bees’ disease, Moulton-Howe wonders “what happens when farmers spray herbicides, fungicides, insecticides and rodenticides on land that has also genetically modified crops with pesticides built in?”

As an example, Monsanto’s “Round-up Ready” crops, which are modified to withstand the spraying of herbicides, are widely used in the U.S. Recently, though, weeds have developed a Round-up resistance–resulting in frustrated farmers spraying more and more of the weed killer, in combination with others, on their fields.

Eric Mussen, an entomologist and Extension Apiculturist at UC-Davis, also found that some fungicides approved by the EPA for bee safety, while not killing adult bees, are fatal for bee larvae and young bees.

How did the EPA react to his warnings?

“Well, they said they wanted to see some evidence or some data,” Mussen told Earthfiles.com. “So, I sent them the evidence. And I cannot see that anything has changed since then and that was a couple of years ago.”

Another hypothesis is that nicotine-based pesticides, which have emerged in the last six years, might be messing with the memory of the honey bees, rendering them incapable of finding their way back to the hive.

“The interesting thing […] is that bees are leaving the colony and not coming back,” states Jerry Hayes, chief of the Apiary section at Florida’s Department of Agriculture, “which is highly unusual for a social insect to leave a queen and its brood or young behind. They are seemingly going out and can’t find their way back home.

“Imidachloprid [the most common nicotine-based pesticide], when it is used to control termites, does exactly the same thing. One of the methods it uses to kill termites is that the termites feed on this material and then go out to feed and can’t remember how to get home.”

It also causes their immune systems to collapse, says Hayes, adding that imidachloprid has recently evolved from a mere seed treatment to a foliage spray, often combined with fungicides to increase its efficacy.

Mounting stress for the bees might be another factor, suggested a February 23 article in the New York Times. There are fewer and fewer beekeepers in the U.S., who are trucking their hives on 18-wheelers around the country to serve increasing demand from their customers.

“Bees are being raised to survive a shorter off-season, to be ready to pollinate once the almond bloom begins in February. This has most likely lowered their immunity to viruses.”

But it’s not just viruses. Mites are also a big problem, “and the insecticides used to try to kill mites are harming the ability of queen bees to spawn as many worker bees. The queens are living half as long as they did just a few years ago.”

But how dire is our situation due to the loss of honey bees?

Honey bees pollinate fruit and nut trees, melons and vegetables in the U.S., a $14.5 billion industry. A 2006 study by an international research team found that pollinators affect more than one-third of the world’s crop production, increasing the output of 87 of the leading food crops worldwide.

“Every third bite we consume in our diet is dependent on a honey bee to pollinate that food,” according to Zac Browning, vice president of the American Beekeeping Federation. And Paul Wenger, VP of the California Farm Bureau Federation, said that with fewer bees, “you’ll see lower pollination, lower yields, lower crop production.”

So, could we face a national food crisis soon?

It’s possible, says Jerry Hayes, wondering if honey bees are the canary in the coal mine. “What are honey bees trying to tell us that we humans should be paying more attention to?”

He thinks having to import more food could be a dilemma in itself: “How much of our food production do we want to turn over to other countries that might be friendly now and not friendly in the future? […] Then the question is: who fills the gap? And do we become reliant on them? I think I read a figure from the USDA that they project by 2015 that 40% of our vegetables would be coming from China.”

Given the, to say it mildly, less-than-perfect environmental track record of the Chinese, we wonder what agents our veggies may be laced with in the future. (Case in point: according to ABC News, it is now suspected that the recent pet food poisoning, which caused renal failure in hundreds of cats, may have been caused by melamine, a toxic fertilizer component found in wheat gluten from China that went into U.S. pet food.)

And as to Hayes’ question what honey bees are trying to tell us, it seems pretty clear to us: in the long run, you can’t mess around with Mother Nature without facing the consequences.