Water scarcity, high food costs to hit poor nations

SINGAPORE: Developing economies will be “hammered” as declining water supply adds to problems confronting farmers who are struggling to meet food demand, pushing prices even higher, said CH2M Hill Cos.

Countries in short supply of water including China will continue to boost food imports, draining resources in some of the largest agricultural producers including the U.S. and Brazil, said Lee McIntire, chairman and chief executive officer. The company provides services from treating waste water and building irrigation systems to cleaning up nuclear sites.

Food costs tracked by the United Nations advanced in June for the 10th time in the past 12 months, staying near a record on higher sugar, dairy and rice prices, while meat reached an all-time high. The World Bank estimates higher food expenses have pushed 44 million more people into poverty.

“Food prices are going to go up,” McIntire said, without giving a timeframe. “The countries that are trying to grow their economy, I think they’re going to be hammered more and more. They’re going to be short of water.”

“Global food production is not keeping up with demand,” Fred Neumann, co-head of Asian economic research at HSBC Holdings (HSBA), said in an interview from Hong Kong. “Countries such as China have seen droughts over many years. Now we see other parts of the world facing some water shortages, which is starting to impact the global price of certain goods.”

The US corn-belt is among the areas in the US with the most “virtual-water” exports, as they ship food products that use a lot of water to grow, according to a study published by the Proceedings of the National Academy of Sciences in December.

The corn-belt includes the states of Iowa, Illinois, Indiana, Minnesota and Nebraska, according to the website of the US Department of Agriculture.

The five states made up 62% of the corn harvest last year and 55% of the soyabean crop in a nation that supplies almost half of the global trade, according to the USDA data.

“There’s a connection between energy, water and food,” said 62 year-old McIntire. “It’s very hard to ship water. The best way to export water is through food.” It takes about 900 liters of water to produce a kg of corn, and double that amount for a kg of soyabeans, according to the Water Footprint Network website.

China, the world’s biggest importer of soyabeans, bought 24 million tons of the 37.97 million tonne shipped by the US from September 1 through June 23, according to USDA data. “How do they get water to China? Soyabeans,” McIntire said.

“You could see a lot of investments by the Chinese, buying land to grow soyabeans so they can ship water,” he said, referring to investments in countries including Brazil.