Is Agriculture Depleting Our Water Supply On Purpose?
Commodities / Agricultural Commodities Dec 09, 2010 - 01:34 PM GMTBy: Investment_U
Tony D’Altorio writes: Here’s a riddle for you: How do you fit 37 gallons of water into a single cup?
Answer: Just fill it with coffee. After all, the original beans need water to grow too, just like they need water to convert into a usable form.
Other common food items need even more fresh water to produce…
Take the almighty hamburger, which calls for 634 gallons in all. That includes the amount needed to grow the wheat that the cattle ultimately feed on.
Everyone recognizes water as an important part of the food chain. But people tend to overlook to exactly how much they rely on it.
They tend to forget that they can only consume a small portion of the world’s water. And that amount is under increasing stress… even here in the United States.
Is There Enough Water For Everyone?
Studies show that the amount of water people around the world use varies a great deal…
•In the United States, one survey put each person’s annual “footprint” at about 2,500 cubic meters.
•China averages only about 700 a year.
•Globally, the norm stands at 1,240.
So it’s no wonder that about a third of the U.S. looks set to suffer water shortages in the next two decades.
Take the Ogallala aquifer in the Great Plains, globally the third largest of its kind. At its current rate of depletion, it will dry up in 20 to 30 years according to estimates.
McKinsey, the International Finance Corporation – an arm of the World Bank – and a number of multinational companies put together a study on the larger issue at stake.
They found that by 2030, global water requirements are likely to rise from 4.5 trillion cubic meters to 6.9… at least 40% more than the current accessible and reliable supply.
Giulio Boccaletti, associate principal at McKinsey, has an explanation for those findings. “Population growth, urbanization [and] economic growth, especially where it leads to increased meat consumption, are all drivers of demand.”
The Issue of Agriculture’s Global Water Usage
Agriculture accounts for about 70% of all global water usage. It makes sense then that the world should focus there to address the issue.
Unlike industrially and domestically, agricultural water usage isn’t easy to regulate. Yet finding ways to utilize every drop is becoming extremely important.
One way to tackle the problem is by using more efficient methods, like drip irrigation systems. They dole out the right amount of water to crops, allowing farmers to target where they need it rather than spraying everything.
That way, they use only about half the water of the older “broadcast” irrigation systems. And they can also cut the quantity of chemical fertilizers and pesticides substantially too.
Some studies show converting to the newer systems can increase crop yields up to 150%.
Water-Ag Investments
Unfortunately for U.S. investors, few American firms focus on water efficiency and irrigation. Some of the best water investments are overseas, like India’s Jain Irrigation Systems.
But a few local players do exist, they’re just tucked inside larger firms…
•That includes Deere (NYSE: DE), with all the farm equipment it sells. The company also happens to be the world’s third-largest irrigation company through its water technologies division. It claims it has the industry’s leading drip and micro-drip irrigation products.
•Then there’s Toro (NYSE: TTC), with over 30 years experience in the business. It has a profitable micro irrigation unit and deals in large-scale irrigation markets too. In fact, it provided the systems used for the Beijing Olympics.
•However, Lindsay (NYSE: LNN) represents the purest irrigation play for U.S. investors. It manufactures center pivot and lateral move irrigation systems, which make up about 80% of its revenues. These GPS and computer-guided systems are ideal for large-scale and developed market farms in the U.S. Lindsay does not, however, provide much in the way of micro-drip versions, which developing countries rely more on.
One way or the other, it’s doubtful the world will find better ways to manage water. And it needs to do something to feed its rapidly growing population… forecast to hit over 9 billion by 2050.
But that’s what makes the aforementioned companies such outstanding long-term investments.
Good investing,
Source: http://www.investmentu.com/2010/December/fresh-water-scarcity-and-agriculture.html
Tony Daltorio
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