Increasing temperatures globally will have an impact on the economy, and especially the supply of food.
“Scientists have high confidence that global temperatures will continue to rise for decades to come, largely due to greenhouse gases produced by human activities. The Intergovernmental Panel on Climate Change (IPCC), which includes more than 1,300 scientists from the United States and other countries, forecasts a temperature rise of 2.5 to 10 degrees Fahrenheit over the next century.” (1)
Temperature is a primary factor affecting the rate of plant development. Warmer temperatures expected with climate change and the potential for more extreme temperature events will impact plant productivity. (2)
A recent study by the Food and Agriculture Organization (FAO), an international organization, projects that global agricultural production will need to more than double by 2050 to close the gap between food supply and demand, due to rising population globally. “As this chronic pressure increases, the food system is becoming increasingly vulnerable to acute shocks.” (3)
The study points out, “The food system’s existing vulnerability to systemic shocks is being exacerbated by factors such as climate change, water stress, ongoing globalization, and heightening political instability.”
Supply and demand drives prices. The study points out, “Sudden disruptions to the food supply chain could reduce global food supply and trigger a spike in food prices, leading to substantial knock-on effects for businesses and societies. Crop production shocks could pose a systemic threat to food security.”
“Increases in the intensity and frequency of extreme weather events such as floods, droughts and wildfires, coupled with a rise in conditions amenable to the spread and persistence of agricultural pests and diseases, are expected to have a destabilizing effect on world food production. This is further exacerbated by the growing issue of water scarcity, which is accelerating at such a pace that two-thirds of the world’s population could live under water stress conditions by 2025.”
In 2020 Chinese floods threatened food security for the world’s most populous nation. “Despite several years of bumper harvests, China needs to maintain a crisis mentality for food security, especially after the COVID-19 pandemic,” Xi said. Climate change is disrupting weather patterns. “In recent months, heavy flooding has inundated large areas of southern China and caused the 3,900-mile-long Yangtze River and its tributaries to rise to dangerous levels. While heavy rains are typical in the summer, this year’s rainfall has far exceeded the norm, causing the worst flooding at the Yangtze in four decades. So far, the deluge has destroyed 13 million acres of farmland, affected 63 million people, and caused nearly $26 billion in economic damage.” (7)
Now what if food prices were to rise by 50 percent? Given families in Pakistan and Indonesia spend more than 40 percent of their budgets on food, might a price spike generate unrest in these countries? (4)
The social impact of food price spikes can be seen in the Arab Spring that occurred between 2010-2013, which was itself driven in part by food shortages and price spikes in commodities. Higher prices led to starvation and migration, which has in turn led to social pressure, violence, and chaos.
The Pentagon recognizes global warming as a significant strategic threat, saying that it could it could cause “instability in other countries by impairing access to food and water, damaging infrastructure, spreading disease, uprooting and displacing large numbers of people, compelling mass migration, interrupting commercial activity, or restricting electricity availability.” (5)
So how do we address this issue, so people can be more secure going forward? New technology can help address some of the risks posed by rising temperatures.
In a recent podcast interview Mike Straight of Farmpod shared insights on how fresh food could be grown regardless of temperature and location using aquaponics and hydroponics. He states that “farmers see that they can grow food year-round, and we don’t have to kill ourselves during the summer, or only have a crop in the spring or fall. We can grow food year round, even in December for restaurants.” (6)
He explains that farmers see the benefit of this new technology because it frees up time. “There is no need for weeding, or watering, there’s no thinking about fertilizer, no need to buy chemicals, you don’t need to worry about flooding or storms, or worry about it drying out and trying to find the money for water. All those things go away.”
Climate change is changing how the economy and markets perform. Understanding the risks and managing them is key. There are solutions as technology continues to improve.
Working with advisors that understand these risks is the key to long term success, because planning and not considering risks exposes portfolios and endangers financial security.
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2021-119553 exp 4/23
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