Oct

18

Agriculture, by Craig Mee

October 18, 2006 |

For those interested in the recent move up in agricultural products like wheat and corn, you may enjoy this read by Jim Sloman. Here is an extract:

The Great Plains of the United States is the world’s bread basket. Half of all the grain exported in the entire world comes from the U.S. Great Plains.

Beneath the Great Plains is a vast underground reservoir of water called the Ogallala Aquifer, laid down through eons of geological time. Water drawn from this aquifer through millions of wells has helped to greatly increase grain yields in the last half century because the water can irrigate crops whenever and wherever desired.

Similarly, there are vast underground aquifers beneath the farmlands of China and India-who along with the U.S. account for half the grain grown on the planet-as well as in many other countries around the world.

The experience in the United States is being replicated in these other countries. That is, water from these gigantic aquifers has been tapped in the last 50 years to greatly increase crop yields worldwide, particularly on lands that are dry or somewhat dry.

However, there’s a catch. The increased use of electric and diesel pumps since 1950 has hugely increased the amount of water that can be brought to the surface, but in doing so the amount of water in these deep aquifers has been dropping.

I certainly know that things here in Australia (the drought) haven’t been this bad for a very very long time, from the West to East Coasts almost all areas — cotton, wheat, and fruit crop lands –are in dire straits and most have had only one decent season in six years. And the weather and rainfall are worst than ever. (Sydney has just had its hottest October ever with consecutive days of 35C)

Prof. Gordon Haave replies:

This story is a little bit alarmist, at least as far as the U.S. goes. The U.S. has been harvesting its aquifers for a long time now, and the decline has been slow (although I suppose that is a relative term). What is obvious, although not mentioned in the article, is of course that aquifers are replenished over time. Now, we might be taking water out faster than it is being replenished, but it’s not like one day the water runs out and there is no more. The required cutback might be rather small.

The real problem, of course, is simple economics. Scarcity dictates that the sum of wants for any particular good that is free is greater than the supply. Property rights, the free market, and the rule of law overcome the scarcity problem.

However, property rights have not really been extended to aquifers in any meaningful sense. Extending property rights in some form or another will solve the aquifer problem, but of course those who get something for free have a strong interest to lobby the government to keep it that way.

J. T. Holley replies:

I would definitely like to say that the “invisible hand” of Smith shall take care of overage of price and the underage of water. Latin America is slowly and rather quickly in other aspects becoming the “bread basket” of the World. In the “Global Economy” in which we all chip in, food is Latin America’s contribution. Need I mention most U.S. restaurants in the last five years having “Chilean Sea Bass” on their menu’s? Also, Julian Simon if alive might make a bet with you concerning the upswing in prices of corn, wheat and such? I certainly will sell you some long term calls if you’d like? Desalination will most certainly be a technological breakthrough in years to come with entrepreneurs flooding (no pun intended) the space in my opinion. If we can produce “grass seed” for my yard to make “drought resistant seed” then I assure you that corn and wheat can be accomplished in the same manner.


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