Many of the world’s most important food-producing regions depend on freshwater from massive underground aquifers that have built up over thousands of years, i.e. the Ogallala Aquifer in the central US; the Upper Ganges, which sustain both India and Pakistan. However, many of those aquifers are now being sucked dry by irrigation and other uses faster than they can be replenished by rainwater. It’s still unclear when many of these aquifers will be completely emptied — scientists are still trying to measure just how much water these aquifers actually hold. In response to this worrying trend the Nature study, published by researchers at McGill and Utrecht University in the Netherlands, offers a map showing the regions where the use of water from these aquifers vastly exceeds the rate at which they are being refilled by rain. At first glance the map may appear to be somewhat complicated, but it essentially compares usage with the actual rainfall a particular aquifer receives. Blue areas receive more rain than is being used. The Floridian Aquifer in the US, for instance, tends to get quickly refilled by simply a big storm. As you can see Russia has plenty of freshwater, but orange or red areas indicate places where irrigation and drinking water use is drawing out more water from the aquifers than the rain can refill. Some areas are really struggling. Take for instance, the Upper Ganges in northern India, which sustains farm irrigation in both India and Pakistan. The underground reservoir there would essentially need 54 times as much rain as it currently gets to replenish the water that’s being used by farmers and the local population. (That’s what the gray “footprint” at the bottom of the map shows.) In the US, about 27% of irrigated farmland depends on the Ogallala aquifer, and it’s a key region for livestock, corn, wheat, and soy. But it’s slowly getting depleted. In some counties, the water table is dropping by as much as two feet per year. As many of you likely know, farmers have been experimenting for years with various water conservation practices, such as crop rotation, as well as more efficient watering techniques like center pivot or drip irrigation. Others are putting their hopes in technological advances — new crop breeds that can use water more efficiently. US pioneers and biotech engineers are helping to pioneer water conservation practices that can be used all over the world. And with the global population soaring past 7 billion, this is one of the biggest questions the world is now facing: Can better conservation practices and new technology enable farmers to keep feeding the planet without depleting its most important water resources?
A. There has been a ton of questions surrounding the recent 50% jump in US hog prices. The consensus and fear seems to be that the US pork production could drop by the most in 30-years due to the porcine epidemic diarrhea virus (PEDv). There is a wide array of guesses floating around right now in regard to how many hogs will be lost, but from what I continue to hear, slaughter could drop by anywhere from 15-20 million head in the next 12-24 months. There is some additional fear associated with worries that the PED virus spreads deeper into Mexico and even further into Canada. Keep in mind PEDv has now been identified in 27 US states, reaching as far south as Texas and Arizona and as far north as Montana, North Dakota and Minnesota…. Bottom-line, the virus seems to still be spreading and may be spreading in an even larger fashion to both our neighbors to the north and the south. The virus was first identified in Mexico last summer and seems to be taking a similar path to how it spread here in the US. In Canada, the virus has first identified just a few months ago but has recently been found in Quebec, Manitoba and PEI, but has largely been concentrated in Ontario, where it has now been reported on 35 farms…NOT GOOD! Processors here at home are currently estimating supplies will be the tightest during the Aug-Sept-Oct timeframe. In other words, I am thinking we still haven’t seen the top in hog prices and the severity of this virus may continue to grow. While hog producers who have NOT been hit hard with the PEDv virus are enjoining large profit margins , others are left hemorrhaging and feeling the massive pain. In fact there is talk this could be a defining moment for US producers, and a period of time when several hog operations are forced out of business. On the flip side there is talk that poultry producers will enjoy huge gains as chicken is called upon to replace the shortfalls in both pork and cattle. Moral of the story, keep your seatbelt on because I don’t think this wild ride is anywhere close to being over. The map below shows the number of cases in each state confirmed by the National Animal Health Laboratory Network.
Interesting Note: Smithfield recently announced it was going to cut back to four days a week in it’s Tar Heel, NC processing plant due to the setbacks and impact of the PEDv virus. Keep in mind, the Smithfield plant in Tar Heel, NC is the largest pork processing facility in the US and is thought to slaughter somewhere between 30,000-34,000 hogs each day. I have also heard talk that Smithfield might also reduces production in it’s Clinton, NC plant. Others are telling us that Hormel, Cargill and JBS are also talking about cutback plant hours.
Now that ethanol has officially become more expensive than gas there is some question about ongoing demand. With major logistical issues across the country, ethanol delivered into the New York Harbor is said to be close to $4.00 per gallon (up over 60% this year) vs. the final fuel product of gasoline blended with about 10% ethanol, which is going for just under $2.90 per gallon. With ethanol being so much more expensive the bears will argue it makes sense to simply not use it. However, those in side the industry say the refiners need to use the ethanol to reduce emissions and boost octane levels. Bottom-line, even though it looks a bit scary for ethanol at these price levels I doubt you will see a major setback in demand.
I hate to even bring this up, but what if these so called “economic sanctions” are exactly what Putin and the Russian’s wants to see happen. Considering the fact Russia is clearly the “underdog” when matched against the worlds #1 (the US), and the world’s #2 (China), Putin understands he needs to be smarter and more creative if he is to ever make a move towards the top spot. With this in mind, maybe he is trying to actually entice harsh US sanctions? This would then ultimately allow Putin to persuade his countrymen to abandon the US dollar all together. My point is if the US squeezes down hard enough and tries to enforce sanctions by limiting trade with the US dollar, Putin may simple create his own new world currency that buyers of Russian resources will use to exchange for goods. This little move could potentially run a ripple through the global financial system like one we have never witnessed. Remember, both Russia and China (and several others) have been looking for a way out of the US dollar system for years. If Russia and Putin believe the time is right to leverage their “natural resources” in order to gain a more favorable foreign currency reserve position then the price of poker, in my opinion, just went through the roof. If Russia decides to start demanding payments for natural resources in some NEW type of non US dollar denominated currency, all while blaming it on US sanctions, then you will know that a full-blow “financial war” is under way. Moral of the story, we might soon look up and find ourselves sitting at the chess table staring at a wise old Russian Grandmaster who has knowingly setting us up for a “deep game.” I am telling you now, Russia is clearly playing it’s own game…by it’s own set of rules and anything is possible!