Urban Farming in SG?

It looks like the idea of urban farming could be going mainstream here in Singapore, if the above story from the Friday edition of TODAY is anything to go by.

Our Fundamental Vulnerabilities

I had a conversation recently with an old friend over Whatsapp, wherein we discussed issues pertaining to the challenges that Singapore faces.  I was surprised when he commented that the country was in general decline.  The reason for my surprise was not that I didn't know that the country was in decline, but that I didn't expect it to come from him, given, as it were, that he was knee-deep into the property market, having only recently bought a second property in what I consider a topping market.

Be that as it may, the idea of a coming crisis as a conversational topic is not particularly attractive to most Singaporean at this time, a point which I re-validated last week when a friend of mine who shares many of my views introduced me to another person.  After trying for 15 minutes to discuss the fundamental problems facing the country, I found that he was not at all interested, thinking that it was something too remote.

In fact, given that episode last week, I am quite close to giving up altogether trying to get the people I know to think about some of the challenges that I believe will come our way within the next few years.  I had also thought about closing down this blog permanently.

So while I ponder about my next steps in this area, let me list down some of the very basic vulnerabilities that we face, as an antidote to the maddeningly irrelevant issue of whether Feng Tian Wei deserves our praise or otherwise.

The list would include:

• Energy


• Food


• Dependence on foreigners in key areas of the economy


• Dependence on government to take initiative


• Loss of expertise in key technological area, which results in


• Key pieces of national infrastructure being increasingly vulnerable to systemic failure


• Excessive household debt due to overpriced COEs and property

The above is a short list, but it includes factors upon which the entire edifice of Singaporean life is built.

More on these issues in future, perhaps.

Rising Food Prices

In recent days, corn and wheat prices have hit record levels, based on futures trading data.  This is due in large part to drought in the US and heavy rains in the Black Sea region of Russia, which has affected output.  Furthermore, while soy beans have not risen as much, it could do so given similar fundamentals.

As such, it would not be surprising if food prices start to rise in the coming months in Singapore, leading to more hardship for us.  Riots in the poorer parts of the world may also happen, like 2 years ago.  Food security will likely come into public focus once again.

In that regard, the latest government initiative is a plan to import more vegetables from Indonesia.  This would not be the first attempt by the Singapore government to diversify our sources of vegetable imports (away from China and Malaysia) by seeking the help of Indonesia.  Previous attempts have ended in rather spectacular failure, based on information from some of my contacts.  I wonder why MND is leading us down the same wrong path again, given the serious lack of reliability of suppliers from that country.

In my view, time and money would be far better spent investing in the hydroponics ideas of Professor Lee Sing Kong of NIE, who has a feasible plan to make Singapore self-sufficient in leafy vegetables.  As much as I am for free-market solutions, the problem is that when it comes to natural resources, countries are becoming increasingly nationalistic.  As such, free-market solutions are not the way to go in the foreseeable future.  Food security requires non-market solutions.  And surely, if it is obvious to me, it ought to be obvious to our very highly-paid, American-educated elite Administrative Service officers.

PM Lee on Food Security

The Singapore government appears to be well aware of the issues surrounding food security and the need to address how we will feed ourselves in the future.

The following is an excerpt of PM Lee's keynote address at the 7th IISS Asia Security Summit in 2008:

Besides a peaceful ordering of global power structures and institutions, countries must also work together to tackle trans-border common security challenges. One immediate issue of concern is food. People have long worried about food shortages, resulting from population growth outpacing food production. Human ingenuity has deferred this Malthusian prediction for more than 200 years, but it could still happen in the future. On the demand side, the world population is steadily increasing. Furthermore, with Asia’s rise, hundreds of millions of people are becoming more affluent and, as one minister put it to me, ‘They used to eat one meal a day. Now they eat two meals a day.’ That makes an enormous difference to their poorer compatriots and to poor people in many other countries in the third world. On the supply side, misconceived green policies to subsidise bio-fuels are encouraging farmers to grow corn for fuel instead of food, and squeeze the supply of food. In the longer term, gradually, climate change will lead to more extreme weather conditions, and likely reduce the supply of fresh water and arable land.

Over the next year or so, food prices may moderate with better harvests. In the longer term, the trends towards tighter supplies and higher prices will likely reassert themselves. This has serious security implications. The impact of a chronic food shortage will be felt especially by the poor countries. The stresses from hunger and famine can easily result in social upheaval and civil strife, exacerbating conditions that lead to failed states. Between countries, competition for food supplies and displacement of people across borders could deepen tensions and provoke conflict and wars. We are already experiencing a small foretaste of this today. The recent sharp rise in food prices, particularly rice prices, has led to riots and unrest in several developing countries. In vulnerable areas, such as in Darfur and Bangladesh, large numbers of people are moving across borders, often illegally, in search of food and water. It becomes part of the game. As one country says, ‘I am being blackmailed by my neighbours. They say, “Sell me one million tonnes at the friendship price or I will send you one million refugees”’. 

Even without a food crisis, movements of people like this have raised tensions and caused serious problems, as you can see in South Africa with the vicious xenophobic attacks on immigrants fleeing unstable regimes and desperate poverty in their home countries; from Lesotho, from Zimbabwe, and so on. They are now having to flee home because South Africans feel threatened and have viciously attacked them. In the event of a global food crisis, all of this will play out on a much bigger scale across the globe.

To avert a serious problem, we need a multilateral cooperative effort. Individual countries need to upgrade productivity and infrastructure in their farm sectors. International agencies like the World Bank and the UN Food and Agriculture Organisation need to promote research and development in agro-technologies to develop higher-yielding and climate-resistant crop varieties using the full power of modern bioscience, and, inevitably, using genetic modification techniques. Through the Doha Round, countries must work together to keep agricultural trade free and fair. Only then will farmers everywhere have the right market signals and incentives to produce more food to meet increased demand. If countries pursue greater self-sufficiency and try to keep food production and food output within their own borders, they will cause greater international tensions because the prices will become more unstable, food importers will scramble to secure their own supplies, and poor countries will suffer not just greater privation, but famine and starvation.

From this excerpt, we can see if the recent uprisings in North Africa and the Arab world would likely not have surprised our government, given that the link between food insecurity and social unrest.

Now I wonder what our government officials are thinking about the potential for instability in China. :)

Michael Snyder: A Food Crisis is Looming

Many Singaporeans have been complaining about rising food prices in the past 2 years and many have put the blame on the government. As is typically Singaporean, we prefer to look for someone else to blame rather than recognise the fact that irrespective of blame, the most urgent thing to do is the protect ourselves and our families by taking steps to ameliorate the effects of more expensive food.

For those who feel that something is not quite right but need a little bit of extra push to get going in terms of preparedness, here's a recent article on the possible global food crisis that we may soon have to face:

In case you haven’t noticed, the world is on the verge of a horrific global food crisis. At some point, this crisis will affect you and your family. It may not be today, and it may not be tomorrow, but it is going to happen. Crazy weather and horrifying natural disasters have played havoc with agricultural production in many areas of the globe over the past couple of years. Meanwhile, the price of oil has begun to skyrocket. The entire global economy is predicated on the ability to use massive amounts of inexpensive oil to cheaply produce food and other goods and transport them over vast distances. Without cheap oil the whole game changes. Topsoil is being depleted at a staggering rate and key aquifers all over the world are being drained at an alarming pace. Global food prices are already at an all-time high and they continue to move up aggressively. So what is going to happen to our world when hundreds of millions more people cannot afford to feed themselves?

The full article can be found here: 20 Signs That a Global Food Crisis is Coming.

IMF: Rising Food Prices May Be Here to Stay

The IMF has warned again that rising food prices may not be a temporary phenomenon.  In an article in the Finance and Development magazine, it has noted that food prices are now close to the highs of 2008.  A summary of the article can be found here.

Unfortunately, the IMF has only attributed the problem to poor harvests, the use of biofuels and higher energy prices. It has ignored the fact that aggressive money printing by the advanced economies have also contributed a large part to the problem.

Future Growth Amidst Resource Scarcity

It appears to be axiomatic amongst our policy makers that the future of Singapore depends on raising the productivity and knowledge intensity of our economic activities. While this strategy is undoubtedly important insofar as it helps to reduce our dependence on foreign labour, as someone who subscribes to the global resource scarcity thesis, I sometimes wonder how far we can go as a country given the fact that we have little control over the most fundamental aspects of all human economic survival - food, energy and water. (As an aside, our ability to produce Newater has merely transformed our water problem into an energy problem, since Newater production is energy-intensive.)

Two days ago, I came across an analysis by John Taylor, Chief Investment Officer of FX Concepts, a forex research company. He argued that with the Internet and the proliferation of knowledge, it has become less scarce a commodity:

Countries that control more of the factors of production will be dominant. Today, the tables seem to be turning on the West. As education has become almost universal, knowledge, intellectual expertise, and competent labor have become less expensive and less valuable as a result.
[...]
Because the playing field has become level for the first time in history, we would argue that, at this time in history, the battle has shifted to raw materials. If we assume that today's critical resources are gas, oil, agricultural output, and rare earths, Europe is totally out in the cold and the US is supported only by its strength in food production. Although commodities have played a diminishing role in economic history and, thanks to scientific advances, should continue this long-term trend, the scramble for scarce resources should impact economic cycles and growth in the decades ahead.

Given that knowledge is intangible and it's production is not directly constrained by the physical reality of limited resources, his argument certainly has some merit, in my view. And if he is correct in his assessment, there will be very important and serious implications for Singapore's economic future. This is an issue which neither the government nor the opposition parties has addressed publicly.

Food for thought as we savour Chinese New Year delicacies.

Food Crisis 2011 - Will Politics Trump Markets?

While we in Singapore complain about the high price of barbeque pork slices, a favourite Chinese New Year food, high food prices have had far less sanguine effects on the poorer parts of the world, as we have seen from the political turmoil in Tunisia, Egypt and the rest of that region of the world. Wheat prices have hit a 30-month high and have doubled since a low in mid-2010, and this has obviously had a negative impact on Egypt, who has to import around half of its annual consumption.

With developing countries close to screaming in pain from the inflation exported by the United States through Bernanke's disastrous quantitative easing policy, I have to wonder how much more food prices have to go up before Hillary Clinton tells Bernanke and the President's Working Group on Financial Markets (the so-called 'Plunge Protection Team') to step in and cool things down.

As an aside, I tend to think that Obama is a mere teleprompter-reading puppet who has neither the intelligence nor experience to deal with such complex issues, and that Mrs. Clinton is the real brains behind such matters. Being a Marxist agitator ('community organiser') in the Saul Alinsky tradition in Chicago is not a real job.

Such an intervention in the commodities market is not without precedent. It had happened before in 2008 during what Donald Coxe, chairman of Coxe Advisors LLC, called the 'Saturday Night Massacre', where it was thought that the US government, working through its Wall Street connections, hammered down commodity prices through the futures market. The only difference between now and 2008 was that the US political class had a vested interest in having commodity prices down due to the then-impending Presidential Elections. As for the present situation, I would argue that being the sole (albeit declining) superpower in the world, the US has a vested interest in trying to keep things under control, especially when it comes to the Middle East, where it is engaged in protracted wars in Iraq and Afghanistan that it has no hope of winning. Allowing things to further deteriorate will definitely have a negative impact on the global economy, on the stability of the Middle East and possibly on the supply and price of oil.

Be that as it may, looking at the various charts of agricultural commodities, rice has just broke its sideways pattern to move up to a 27-month high while wheat and corn may still have further upside. That said, I am wary of getting into long positions, as my sense of the consensus view is that too many people think prices will keep going up due to supply challenges underpinning the fundamental picture of food commodities. The fundamentals are correct, but with the CCI breaking record after record on the upside, I am just worried that the opinions are too one-sided and that there is a speculative frenzy feedback loop fed by the ongoing social unrest. Since I am somewhat a kiasu person, I am most likely going to sit out this episode of price movements.

And given that rice prices have start to move, we need to be on a lookout for protests and social unrest in those parts of the world where rice is the major staple food. So far, our region has been spared unrest, but don't count on that to continue if rice prices start to move aggressively up like wheat and corn.

In the meantime, I'll be thankful for the abundant food available here in Singapore and enjoy my Chinese New Year.

Not Only About Price

Earlier in the week, the Straits Times featured a series of articles on the issue of food inflation. Some of the economists interviewed in one of the articles commented that rising food prices hurt Singaporeans less than other people in the region as we spend a lower percentage of our income on food compared to them.

While this view is correct under normal supply/demand conditions, I found it to be rather short-sighted in relation to the current global food situation. This is because with record low levels of inventory, food producing countries have become increasingly likely to ban food exports in order to keep prices low at home so as to appease the masses. As such, rising prices not only signal rising demand or relative scarcity, in the present context, they also serve as a risk indicator for shortages due to export bans. Our willingness to pay more for goods is meaningless if there are no willing sellers.

The thing about us Singaporeans is that we tend to assume that international trade will always happen, given that our entire history as an independent country has occurred within the context of a global environment that is conducive to trade. This has perhaps made us less conscious of the risks of trade not happening as countries protect their precious resources for their own internal use. The recent ban of wheat exports by Russia and the cutting down of rare earth exports by the PRC should serve as warnings of what can happen.

Given that we import everything that we need to sustain human life on this island, it will serve us well to keep the risk of resource shortages in mind.

Possible Food Crisis in 2011 - UN

The UN's Food and Agriculture Organisation's latest Food Outlook has reported that there could be a global food crisis next year, and asked that the world be prepared for greater price volatility.

According to the report:

• World cereal production will contract by 2% instead of the 1.2% expansion in an earlier forecast.
• Inventory in world cereal is expected to drop by 7%. Barley will decline by 35%, corn by 12% and wheat by 10%
• Only rice stockpiles are expected to increase, by about 6%.
• Prices of some food types may rise up to 2008 levels.

If the FAO report is accurate, it will mean food riots next year as had happened in 2008. I think for the problem to be fixed at least partially, we have to stop the idiocy of biofuels, especially palm and corn-based fuels. It's ridiculous to devote so much land and resources to produce motor fuel when people run the risk of starvation.

For us here in Singapore, it is perhaps time again to look into preparing for this possible crisis by means of food storage and some limited forms of urban agriculture. Preparing early could mean saving some money if food inflation should become a serious issue. In China, it already is. So we need to be watchful.

Storm Clouds Over the Horizon

While the drumbeat of Singapore politics has become louder in recent months, I am of the opinion that the focus of the discourse has so far been too parochial. There are some of the storm clouds that I see over the horizon and that could have impact on Singapore within the next 5-10 years, but which has so far not been covered in the discourse.

In this article, I shall outline some of the issues that I think will have major consequences for the long-run viability of our country. Admittedly, since I don’t have the power to predict the future, these points are somewhat speculative, although I have done some homework in all areas.

Peak Oil

Some experts such as Dr. Colin Campbell and Prof. Kenneth Deffeyes have argued that global peak oil production had actually peak in 2005, based on current available data. Production of liquid fuels has kept up with demand so far due to other sources like coal-to-liquids and gas-to-liquids technology. While new ways will be found for extracting oil and gas, the fact that the Brazilians have to drill for oil more than 7 km below the earth's surface for their Tupi field shows that the era of cheap oil is over.

Peak oil will result in very high volatility in the crude oil market, as high oil prices triggers recessions in economies. Such recessions will bring down demand and thus prices for a while until recovery takes places, at which time prices move up again and the cycle repeats.

As high prices take its toll on the global economy, trade will be reconfigured as businesses seek to move their production closer to their customers in order to cut down on the distance over which they have to ship their goods in order to cut transportation costs. A preview of this happened in 2008 when some US manufacturers found that moving production from China back to the US or Mexico made a lot of sense when oil was over US$100 per barrel. Besides this, tourism will be affected as high fuel prices forces airlines to cut routes and ground planes, as had happened in 2008.

Since the Singapore economy is very dependent on trade and tourism, peak oil could have a very large negative impact on our livelihoods.

To make things worse, high fuel prices will definitely lead to higher food prices since we import almost all of our food from abroad, sometimes over long distances.

Resource Scarcity

Due to changes in the weather cycles (not anthropogenic global warming), global food production could consistently fall short of demand. This explains the current ‘land grab’ that many countries are engaging in over in Africa and South America, as previously covered by this blog. Furthermore, the availability of potash and phosphorous could also be constrained, resulting in lower fertiliser production.

In terms of other minerals, peak oil proponents like Richard Heinberg have argued that we will soon experience declines many key industrial commodities.

And let us not forget the issue of water scarcity. As covered by the National Geographic magazine in April 2010, water conflicts are starting to surface, especially in the Tibetan plateau (China and India) and the Nile region.

As resources get scarce, there could well be conflict between countries competing for those limited supplies to satisfy their own economic needs. Global cooperation will decline and the world will become more unstable, again not good for Singapore's economic model.

End of USD as Reserve Currency

If the US Federal Reserve continues current policy of debasing the USD, it could well only be a matter of time before confidence in the currency collapses and the world is forced to move to a new currency regime.

While I don’t claim to know what the likely impact of such a scenario will be for Singapore, the fact that our country is a large holder of US government debt makes the possibility of financial losses quite high should the USD lose its reserve currency status. What this means for us as citizens is that our CPF savings will suffer losses as well.

Besides this, since our independence, we have only had experience with a USD-based global currency system and nothing else. One could even argue that our economic policies were designed to take advantage of the global trade system made possible by the USD’s reserve currency role and the attendant global credit expansion cycle since the early 1970s. Once that changes, we will have to figure out how to adjust our economy to the new global architecture, and whether or not we will be up to the task remains to be seen.

War

That the US is in decline is by now quite obvious, except for people like Stratfor’s George Friedman. As we move toward a multi-polar world, there could actually be more instability, if the Hegemonic Stability Theory is correct. This is especially so as the world faces the reality of resource scarcity and there is heightened competition.

Besides this, based on historical analysis, some cycle theorists and market experts believe that we are now in a Kondratiev Winter, and some believe that major wars have to occur before the next upswing in the global economy. From a generational cycle perspective, John Xenankis of Generational Dynamics predict a war between China and the US.

If the world were to move into a period of conflict, it would again mean that Singapore’s economy will be affected, since we depend on peace for our economic model to work.

Conclusion

Since this article is about threats to Singapore, I have not covered the more optimistic factors that will affect our future (e.g. Asia’s rising economic power etc). What I hope is that more Singaporeans will take a look at these possible threats and make preparations to deal with them in whatever way they can, and of course, pray that they don’t come to pass.

Sourcing more food from China

The New York Times reported that Singapore is looking to enhance its food security by engaging in food production projects in the north-east of China. A project by the familiar Singapore Food Industries to operate a pig farm and another by Singbridge International Singapore to develop a large scale food production zone in Jilin was mentioned.

Given that China is a net importer of food and that its own population's diet is improving and thus requiring more food, I wonder how sustainable China's food exports will be. Furthermore, when the effects of peak oil hit, the north-east of China will be considered a very far place from which to import food, which will mean much higher costs. Can we afford such imports in the future?

It will be interesting to watch these 2 projects to see whether or not they are sustainable given the aforementioned constraints.

Asian Farm Projects Stall

The Wall Street Journal reported that a new report released by the the Asia Society and the International Rice Research Institute in the Philippines noted that farm investments in Asia that were started in response to the global food crisis in 2008 have stalled for a variety of reasons, including disputes over land ownership, lack of capital and concerns over environmental issues. This is very unfortunate given that much of the increase in global food demand currently comes from Asia itself.

Sadly, I am not surprised that such a situation should arise. The legal infrastructure in this part of the world is very poorly developed, which makes agricultural investments very risky. As an example, I was involved in a very small-scale project in a neighbouring country to produce certain cash crops. The project ran into problems from the start, as some of the local parties colluded to attempt to cheat us of the money for the land lease, despite the fact that we had hired a reliable local lawyer to complete all the required due diligence. In the end, because we had done all the necessary paperwork, it was easy to prove criminal intent in the other party, and they backed down after being threatened with jail time.

Another problem that I can see from the ground is corruption and cronyism, all too rampant in this part of the world outside of Singapore. In many instances, well-connected people tend to get land concessions from the government, who then turn around to try to extract 'rent' from foreign investors. These cronies are big on talk and small on implementation skills, and thus the boosting of food output end up often being mere pipe dreams.

All these things are unfortunate because there is still plenty of under-utilised fertile land in this part of the world, which can be used to substantially increase food output when combined with the right technology and managerial know-how.

Food Security for Singapore?

The recent spate of news about agricultural land grabs highlight an important fact - that countries are concerned about the stability and security of their food supplies. For investor countries like China and India, food security is an issue due to their large populations that are improving their diets due to prosperity from strong economic growth. For countries that are at the receiving end of such investments, their concern is that their own poor peasants may be deprived of land to sustain their subsistence lifestyles.

What has this got to do with us in Singapore? Well, given that we import everything we eat from elsewhere, it is important that we pay attention to developments in the global agriculture industry. So far, the only apparent policy we have in terms of food security is the diversification of our sources of supply. For example, the Singapore government has started to promote the import of vegetables from Indonesia, so as to reduce our dependence on Malaysia for our leafy vegetables. While this is definitely a positive move, it is still far from addressing longer terms issues such as climate change and peak oil.

Take climate change. In an interview with the Financial Sense Newshour, Evelyn Garriss of the Browning Newsletter, the current setup of the Pacific Decadal Oscillation and the Atlantic Multidecadal Oscillation will mean that the type of droughts in Russia and floods in Pakistan are more likely in the coming years, resulting in lower food production in our part of the globe while US farmers who can adapt to this weather pattern will prosper.

As for the coming effects of peak oil, consider the mileage that our food currently travels in order to reach us. Will be be able to afford imports from more distant lands like US apples or NZ beef? And what about the high carbon footprint of our food, for those who are concerned about this area?

Given these concerns, are there things that we can do to mitigate the risks? Personally, I think there are. For example, some time back, I recall watch a documentary on the National Geographic TV featuring a project by Prof. Lee Sing Kong of NTU, where he was growing vegetables on rooftop gardens through aeroponic methods. According to him, with some changes to our urban architecture, it is possible for Singapore to be self-sufficient in leafy vegetables. This will not only improve our food security but also reduce the carbon footprint of our vegetables. The question now is when we as a country will be awaken to the risks in our food supply and start to make a concerted effort to reduce those risks.

Backlash against foreign agriculture investments

The Telegraph UK has an article today about the backlash in Third World countries against investments in farmland by foreign businesses and investment funds. Due to growing populations, increases in demand for meat and slowing growth in output, many richer nations have been busy trying to secure land for the growing of crops for export back to their own people. And given that the recipients of such investments are often poor countries where people do not have enough to feed themselves, the backlash against such investments are understandable. Furthermore, if global food supplies come under more strain, as I believe they will, the chorus of protectionist voices will grow even greater for the safeguarding of food for 'our own people' in many countries.

For Singaporeans, this is not a time for an economic debate on whether free trade is better or otherwise. Like it or not, we are dependent on imported food and this makes us vulnerable to the political reality that protectionism will always rise up in times of economic distress. We need to be aware of this thread and to prepare accordingly. Perhaps it is time for us to consider urban agriculture as a means of supplementing our food supplies.