· The European continent is facing its worst drought in 500yrs, leading to crop devastation, loss of livestock, wildfire, water shortages and accelerated glacier melting. The situation in about half of the continent is alarming – soil is losing moisture and vegetation is under stress. (read more)
· Western states of the United States have witnessed persistent drought conditions in the past couple of decades. It is the longest and driest stretch in the past 1400yrs. A study published earlier this year suggested that “there’s a very strong chance the drought will continue through 2030.” The soil moisture in the affected states is at historic low. Studies have indicated that a couple of good years of rain are highly unlikely to change the drought situation materially. (read more)
· Many provinces of China are witnessing the worst drought on record. River levels have diminished resulting in closure of hydroelectric projects and severe electricity shortages. Forest fires and grassland fires are common and severe. China's largest freshwater lake, Poyang Lake in Jiangxi province, has shrunk by about 75%. Thousands of farmers who relied on lake water or river waters have lost their crops. Drinking water is being rationed. (read more)
· Brazil, Argentina and Paraguay, the three major agricultural producers in South America, experienced a prolonged period of drought and low water levels in their main rivers in the 2021-2022 crop season. The dry and hot weather severely impacted harvests. The river transport of important summer crops, with maize and soybeans was amongst the main casualties. Various agencies estimated a 20 million tonne of shortfall in food production in these three countries alone. (read more)
· Many parts of Australia are also witnessing significant deficiency in rainfall. For Tasmania and South Australia, area-average rainfall for July was among the lowest on record compared to all years since 1900. Serious rainfall deficiencies (totals in the lowest 10% of historical observations since 1900) continue to affect western Tasmania, the Roper-McArthur district of the Northern Territory and south-west of Western Australia for the period starting December 2021. Crop yields have been poor and wildfires rampant. (Read more)
· Neighboring Pakistan is suffering from one of its worst floods in recent memory. The humanitarian situation in Pakistan has deteriorated further over the past two weeks as heavy rains continue to cause flooding, and landslides resulting in displacement and damage across the country. Extensive damage to crops and livestock has been reported. (read more)
· Central and Eastern India is also witnessing a drought that has impacted the summer (Kharif) crop in the key states of UP, Bihar and West Bengal. (read more here , here and here)
· To add to the climate pains, the war between Russia and Ukraine has further escalated the global food shortages.
It is obvious that “food scarcity” could be a major issue affecting the world population. Unfortunately, no central banker could help bring the food prices down under these conditions. The governments could help to a limited extent by rationing supplies, regulating wastages and rationalizing buffer stocks. However, they would also be helpless if the condition persists in 2023 also.
The question is how an investor could benefit from this situation. The traditional approach – investing in agro chemical, food commodities etc. may not work in this situation. The demand for agro chemicals could witness a sharp drop if the drought-like conditions persist. The food commodity trading and prices could be heavily regulated and controlled to discourage trading and profiteering. The farm equipment and irrigation infrastructure development businesses could also suffer from poor demand.
One of the obvious investment avenues in India could be cultivable land. However, a myriad of problems make this option less viable for most of the financial investors.
A recent tweet by Dr. A. Velumani, founder of Thyrocare Diagnostics, offers an interesting idea – investing in the goat farming business. However, in case of severe drought, fodder could be a serious problem for this business.
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