Related topics: Itron, Potash of Saskatchewan, China, agriculture, Jim Jubak
China, the world's largest wheat producer, is facing a severe drought in areas of the North China Plain that account for 67% of the country's wheat crop. In the 2010 harvest, China's wheat production fell to 114.5 million tons from 115.1 million tons a year earlier. This year's harvest could drop by an additional 4 million tons.
This is a big deal because China is also the world's largest consumer of wheat and accounts for about 17% of global wheat consumption.
The government is working to provide additional irrigation to mitigate the drought.
In Western Australia, across the continent from Australia's worst floods, drought has put the wheat crop in the country's largest wheat-producing state in doubt. The impact of the decadelong drought is intensified by a battle for Western Australia's scarce water supplies between farmers and miners. New mining projects totaling about $170 billion are on the books for the next five years. All those mines need water to help dig out and process ore, to remove waste rock and to suppress dust. Mining is already the largest user of water, taking 27% of the licensed supply, compared with 22% for agriculture. Six years ago, the proportions were reversed, with farming getting 37% of water and mining 26%.
Jim Jubak
I think you can see where I'm going with this, right?
No, no, not more about the increasing global squeeze on food supplies. I've dealt with that quite enough recently, thank you. (See my posts here and here.)
A difficult trend to invest in
This time I want to talk about water scarcity, the trend that everyone sees but that is so difficult to invest in. I'm going to give you some stocks for investing in water -- but not my usual 10, because, as I said, this is a tricky trend for investors. And I'm going to suggest how finding investment opportunities in water can serve as a model for investing in other trends that are difficult to invest in, such as food.
Let's start with the basic problem. The world, on average, has plenty of water. But the supply locations, populations, pollution controls, incomes and the very local nature of water make that average meaningless. According to the World Health Organization, in 2009 about 20% of the world's population lived in countries without enough water for their needs. The World Bank does the calculations in a different way, saying 80 countries now have water shortages that are sufficiently dire to threaten health and economic activity.
And the situation is getting worse. Growing populations; rapid urbanization that concentrates more people in less space and that often eats up farmland; rising and competing demands from farming and mining; increasing pollution of water supplies; and climate change that is exacerbating the severity and frequency of droughts will all stress water supplies even more in the future.
According to the U.N. Food and Agricultural Organization, by 2025, 1.8 billion people will live in countries or regions with absolute water scarcity, while two-thirds of the global population will be under what the agency calls water-stress conditions.
Human beings being what human beings are, all that stress is likely to lead to conflict. More than a dozen countries -- including Botswana, Bulgaria, Cambodia, Congo, Gambia, Sudan and Syria -- get most of their water from rivers that flow across the borders of hostile neighbors.
The biggest potential problem, though, is in Asia. Both China and India face severe water shortages due to fast economic growth, rapid urbanization and pollution. According to the World Bank, China could face a supply shortfall of 201 billion cubic meters of water by 2030 (that's about 53 trillion gallons).
