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February 21, 2010

Wisconsin, currently in the limelight for the new Republican Governor’s ‘union-busting’ proposals, is one of the few states in the Union with a supposedly fully-funded pension system. But it has a looming budget problem. For while its current deficit is a bagatelle compared to that of many other states, it is expected to soar to US$800MM annually by 2013 for three reasons : rising healthcare costs, the end of Federal stimulus funding, & the US$3.7BN in tax cuts since 2003 by his then  Democratic predecessor that have ‘hollowed out’ the state’s revenue base.  

The states are being faulted for the cuts they have been made, & are proposing to make, to spending on educational & healthcare. But they haven’t got much choice; for on average over half their budgetary expenditures are accounted for by these two activities (elementary/secondary education & Medicaid 21% each, and higher education 10%). And since wage costs account for the lion’s share of their spending in these areas, cutting back means layoffs which in the short term  will undermine whatever employment growth may occur elsewhere in the economy, and longer term undermine America’s global competitiveness. The answer, of course, lies in getting a bigger bang for the taxpayers’ buck. In healthcare this means doing what many corporations did in the 80's,  eliminating layers of back office workers & middle managers whose work is more related to keeping each other busy than to delivering healthcare services. And in education the solution lies in a wholesale shake-up of the system towards performance measurement & the ditching dead-beat teachers (there is a video circulating that shows a teacher sitting at his desk reading a comic book while a couple of desks away two kids are doing crack cocaine). A good example of the inefficiency in the system was Washington D.C. where, when Michelle Rhee became School Superintendent in 2007, only 8% of Grade 8 students performed at their grade level despite having the third-highest spending per student in the nation & its 302 sf space in its schools being twice the national average. 

The Internet & social networks contributed hugely to the ability of protesters to mobilize their forces & coordinate their efforts, last year in Greece & more recently in Tunisia, Egypt & elsewhere in the Middle East. The Mubarak regime was successful in eliminating that ‘evil’ by shutting down the Internet & other electronic media, but only for five days before business considerations forced it to reconsider. The same thing now appears to be happening in other despotic Middle Eastern countries in the face of public protests. This, however, has created a wave of activity in the global software community to find ways to circumvent such government action in the future. In tank warfare it has long been all but axiomatic that any & all efforts to make tanks impervious to current anti-tank weapons are fairly quickly superseded by the development of new anti-tank weapons that can overcome the hurdles posed by the latest in tank design. The same will like hold true for governments’ efforts to deny demonstrators the use of the electronic media : it may buy them a temporary edge, but not for long.  

The depth of social turmoil in the Middle East can be gauged from the fact that two weeks ago 36 tribal leaders, the bedrock of the Jordanian regime, issued a joint statement accusing King Abdullah’s wife, Queen Rania, of corruption & of having been given land for her family that rightly “belongs to the Jordanian people.”, despite the fact that criticism of the Royal Family is punishable by a three-year imprisonment.   

A recent issue of Gleanings reflected on Canada’s hopelessly inadequate Arctic search & rescue capability. But this is a symptom of a much bigger problem, a Canadian Armed Forces acquisition system that is dysfunctional in part, but only in part, due to politicians’ never-ending attempts to wring maximum ‘Canadian content’, regardless of cost, out of any major equipment purchase programs, rather than buying it elsewhere more or less “off the shelf” at market prices (in a truly transparent society, as I argued 20 years ago with the then Governor of Kenya’s central bank, the cost of such economic development funding should not be off-loaded onto, & hidden in, other government department’s budgets).  While the “peg” media item talked about the dismal state of Canada’s 14 Cormorant helicopters, the Auditor-General recently said the latest program for replacing the Forces’ 40-year old Sea King helicopters (that were supposed to have been retired in 2000 & supposedly take 30+ hours of maintenance for every hour in the air), is now seven years behind schedule. And the cake was taken a decade ago, when the Navy talked Cabinet into buying four 15 year-old conventional (i.e. diesel- rather than nuclear-powered) mothballed submarines from the Royal Navy because ‘they were a good deal’. One of them, HMCS Victoria, in the decade since its acquisition has been at sea for only 115 days (i.e. a 3.2% utilization rate), & a sister ship, HMCS Chicoutoumi, experienced an onboard fire on its delivery voyage from Britain in 2004 that killed one crew member & has ever since been in dry dock (from which it is not expected to emerge until next year, 2012, if then). And when several years ago the Canadian Forces needed a heavy-lift Chinook helicopter capability in Afghanistan, it had to depend on the Americans & the Dutch to provide it (the latter using Chinooks bought from Canada a decade earlier when the government of the day had ruled them “excess to requirements”).  

The waters around Prince Edward Island are prime bluefin tuna-fishing grounds. But prices for this popular species, that is hugely overfished, have been depressed. The reason is simple : Ottawa has a quota for the catch for the fleet as a whole, rather than for individual fishermen. So when the season opens, there is a gold rush-like atmosphere as each fishermen tries to catch as many as he can before the quota is filled. This gluts the market & depresses the price. Talk about dumb!  

On January 31st, in his speech before receiving British Columbia’s $40,000 National Award for Non-Fiction, writer John Vaillant said that both this award-winning book, The Tiger : A True Story of Vengeance and Survival (about a man-eating tiger & the man who hunts him) & his earlier celebrated work, The Golden Spruce, focused on the fact that “There’s this urgent need to shift the axis of our relationship to this planet from a vertical one of dominance ... to a horizontal one of collaboration.” This comment expresses more elegantly my observation for the last decade that “During the 19th & 20th century Man thought he could control Nature; but in the 21st century, if we are to survive as a species, we’d better learn to work with Nature.”   

Unnoticed by most people, an estimated $140MM was spent on mineral exploration in Canada’s Yukon Territory in 2010 & the Yukon Geological Survey expects that to more than double this year. Across the border in Alaska it is the same story for the same reasons, favourable geology, a stable political environment, decent infrastructure & a convenient location vis a vis Asia. The search in the Yukon is mostly for gold- & in Alaska for copper-gold deposits. In what could be called ‘The Yukon Gold Rush 2.0'  rumour has it that much staking North of Whitehorse has been done for Chinese interests. 

Cambridge, Mass.-based Cogent Research 2011 Survey of Affluent Consumers found that one-third of affluent Americans aged 55-64 years are now retired, but also that these ‘First Wave Boomers’ had 12% fewer assets than they did four years ago, an average of US$708,000 in investable assets vs. US$809,000 in October 2006.  

According to Robert Dreyfuss, a freelance investigative journalist writing in The Nation Sarah Palin’s initial reaction to events in Egypt was as follows “Nobody has, nobody yet complained to the American public what they know, and surely they know more than the rest of us know whom it is who will be taking the place of Mubarak, and no, not, not real enthused about what it is that that’s being done on a national level and from D.C. in regards to understanding all the situation there in Egypt. And in all these areas that are so volatile right now, because obviously it’s not just Egypt but the other countries too where we are seeing uprisings, we know now more than ever, we need strength and sound mind there in the White House. We need to know what it is that America stands for so we know what it is that America will stand with. And we do not have all that information yet.” (The Nation was founded in 1865 & is America’s oldest continuously published weekly news magazine, even though it has been a perennial money loser. And if this really is verbatim what she said - quotation marks, like many other things, are no longer as reliable as they used to be, she makes George W. Bush look like a veritable wordsmith. And one would have to assume that her $100,000+ speaking engagements are little more than rip-off trained seal appearances in which she merely reads & mouthes words other people’s words (like a singer who lip-synchs).



No. 397SP - February 21st, 2011 


    · Good harvests caused food prices to slide from their 2008 highs & global wheat stockpiles to rise by 50+% in the 24 months to June 30th, 2010, from 74 to 110 days of consumption. But this year this trend reversed itself, some prices now exceed their 2008 highs & USDA expects global wheat production in the year ending June 30th, 2011 to decline by 5.5% YoY to 646MM tonnes (i.e. 20MM tonnes less than consumption) & the yearend carry-over to 98 days of consumption due to adverse weather, floods or drought in Australia, Canada, & Russia & the Ukraine, Pakistan & now China), although a record rice harvest is expected in Asia & in East Africa bumper maize crops have caused price declines of up to 50%.

    · While the FAO & the Economic Intelligence Unit says speculators aren’t to blame for the price rises but merely made them worse, the World Development Movement (WDM) is bound & determined to curb this “betting on prices” by more regulation of the trade in  futures contracts which it says is ratcheting up prices to the detriment of the world’s poor.

    · Similarly, the recent higher oil prices prior to events in Tunisia & Egypt, and now elsewhere in the Middle East, are due to supply problems, investor interest & rising demand (especially from China and other emerging economies), further adding to the pressure on food prices since higher fuel cost raise the cost of production & transportation.    

Like short sellers, speculators are less the problem than a symptom of other people’s foibles. 


    · After their worst January in two decades investors in precious metals still have a US$102BN bet on higher prices & are hoarding more gold than all but four central banks & more silver than the US can mine in 12 years (so what, the US is only the world’s 8th largest silver producer, producing only one-third of No. 1., Peru, & less than countries like Mexico, Chile & Poland). The median forecast of analysts surveyed by Bloomberg is for silver to be up 23%, & gold 20%, before yearend, and UBS expects the second-highest sales ever of ETF gold products & the strongest industrial demand for silver in  20 years as it finds new industrial uses in making things like solar panels & plasma screens. 

Demand for silver is strong. In January the US Mint sold 6.4MM Silver Eagles, the most in any month since their introduction in 1986. And China’s imports of silver in 2010 amounted to a net 123MM ounces, one-sixth of the total annual newly-mined silver output (& it already holds the world’s biggest silver hoard). And its price is still at an historic low vis a vis gold & would have to rise several-fold from its present US$32.65 to match its inflation-adjusted peak price 30years ago. 


(Reuters, Lesley Wroughton) 

    · Its internal watchdog, the Independent Evaluation Office, said on February 9th the IMF had failed to spot the financial crisis brewing because its economists had assumed the advanced economies, given their expertise in monetary & regulatory matters, would not spark a major financial crisis, and had fallen hook, line & sinker for the argument of the US, UK & others that their financial systems were sound & crisis-proof. And its staff had been more at ease prescribing (free market?) policies to emerging market countries (giving credence to allegations by China about a lack of evenhandedness in its surveillance).   

IMF economists, like many other policy advisers, live in an ivory tower environment in which all insiders regurgitate each others’ lies & misconceptions, and nobody wants to rock the boat. 

CNOOC PAYS $570M TO BUY INTO US OIL SHALE (CD, Jim Polson & John Duce) 

    · It is paying US$570MM (US$866/hectare) for a one-third stake in Chesepeake Energy’s 325,000 hectare land holding in the Niobrara oil & gas shale formation underlying parts of Colorado & Wyoming, will pay two-thirds of Chesepeake’s costs in developing the field up to US$697MM, and will have the right to one-third of all of Chesepeake’s further land acquisitions in the area. This comes on the heels of CNOOC’s  US$1.08BN acquisition, last November, of a one-third interest in Chesepeake’s Eagle Ford shale gas project in Texas. According to Chesepeake CEO, Aubrey McClendon, “This ... will provide the capital necessary to accelerate drilling of this large domestic oil and natural gas resource”.  

While in line with Beijing’s strategy to turn unwanted US dollars into real assets & secure long-term sources of supply of raw materials for its rapidly growing economy, this will also gain it experience with technology that it will bw able to use in deals with state-owned oil companies that control 90% of the world’s known hydrocarbon reserves. Meanwhile, after Chinese firms spent $13BN in the past year of so in Canada, mostly in the Alberta oil sands, PetroChina started 2011 in Canada with a bang by paying Encana $5.4BN for a 50% interest in its 250,000 hectare gas-prone lands in the BC’s Dawson Creek region (which increases the likelihood more pipelines will be built to BC ports to gain access for Alberta & BC oil & gas to the energy-hungry markets of Asia at world market prices & reduce their role as a captive supplier to the US.   


(NYT, Gardiner Harris) 

    · The US government is concerned about the slowing pace of new drug development. So it has decided to start a billion-dollar drug development centre to help create them. Drug makers are paring back research & have neither the will nor the resources (??) to develop new drugs. While their business model, to spent 2x as much on marketing as on research, has become suspect, the industry still supposedly spent US$46BN on research in 2009 compared to which the US$1BN initial funding for the new National Centre for Advancing Traditional Sciences is a drop in the bucket. It has been compared to a home owner who tarts up his house to attract buyers in a down market since the plan is have it do only enough research to catch the industry’s eye. Health and Human Services Secretary Kathleen Sobelius sent a letter to Congress outlining a plan to have it open its doors next October, only 10 months after the idea first surfaced. 

Anything sophisticated that is moved so quickly from the conceptual- to the operating stage is likely to turn into a major boondoggle. If ever there ever was a case for the government not to get directly involved, this would be it; so it’s amazing the Republicans haven’t jumped all over it. In any case, the costly part of developing new drugs is not finding it, but taking it through the government’s approval maze (which can require a semi-trailer full of documentation). 


    · Former First Lady Barbara Bush in a recent Op-Ed piece in the Houston Chronicle entitled We Can’t Afford to Cut Education pointed out that Texas students rank 47th in the nation in literacy, 49th in verbal SAT scores, and 46th in math. So the she asked “In light of these statistics, can we afford to cut the number of teachers, increase class sizes, eliminate scholarships for underprivileged children and close several community colleges?” For the State Legislature is looking to cut US$4.8BN from spending on education over the next two years. And while budgets are tight everywhere, Gov. Rick Perry made things worse in 2006 by reducing school property taxes on the theory that a higher cigarette tax & a new business franchise tax would make up the difference. Except they didn’t. Meanwhile, he won’t hear of any new taxes & has declined US$830MM in federal aid for education because  it stipulates that it must be used strictly for the kids (a provision inserted by some Democrat law makers since he used the earlier US$3.2BN in stimulus money intended for education to plug other holes in his budget.

    · When underperforming, overcrowded schools are not uncommon, when they are in Texas they become of national importance; for it has the country’s highest birth rate (in part due to the fecundity of the state’s growing numbers of Latino mothers)& will soon be required to  educate 10% of the nation’s children. Another reason for the large number of children is that Texas has the third-highest rate of teen pregnancies, & is tops in repeat teen pregnancies, because young people, even college students, cannot get contraceptives, except with their parents’ consent. And, while the state gobbles up more federal funds than any other state to teach sex education, it won’t allow anything to be taught other than that abstinence is the only way to avoid unwanted preganacies. 

So Gov. Perry c.s. are voting with their feet (because less well-educated people are more likely to vote Republican?), although one must wonder if their children attend public schools).     


    · Its sewage department is seeking to become an environmental steward, and reduce its US$400MM cost of sewage treatment & disposal, and the greenhouse gases it produces. The biggest potential source of energy is the methane gas produced by the city’s 14 sewage plants’ digesters: while half of it is currently used to meet 20% of their energy requirements, thereby keeping down its US$50MM electricity bill, the city now wants to turn the other half, that is currently burnt off, into cash). And heating fuel can be extracted from sludge & butanol, an alternative to gasoline, produced by algae from waste water. 

It’s always amazing how financial pressures will overcome corporate lethargy & lead to solutions where the common wisdom had hitherto taken the easy way out by saying there were none.



(Korea Times, Jane Han) 

    · Over the next 20 years an average 10,000 Americans will turn 65 each day. If you want to land a good job in America, the coming years may be a good time to do so. For as the 77MM Baby Boomers (i.e. one-quarter of Americans) leave the work force they will take their skills with them & will have to be replaced. This creates an opportunity for top notch foreign workers. According to the Mass.-based Kitty & Michael Dukakis Center for Urban & Regional policy “By 2018, with an expected return to economic growth but no change in current labor participation rates or immigration rates, there will likely be more jobs than people to fill them”. According to the Bureau of Labor Statistics the greatest needs will be in health care, education, accounting & computer services.  

As Obama talks about making America more competitive, fiscal pressures & Republican dogma make states ‘scorch earth’ their education budgets, and even as the country was already not educating enough mathematicians, engineers & scientists. Still, the article may indulge in ‘straight-line thinking’ because people’s attitudes to retirement are changing, as are employers’ attitudes to hiring older employees (whether ‘needing’ or ‘wanting’ to work, they are more dependable, & cheaper in benefit cost terms, than the up-and-coming generation). Canada’s medical schools dropped their age constraints on admission long ago (a number of years ago the UofA medical school even had a mother & daughter team among its students). Canada’s Army accepts recruits in their 40's if they can pass the physicals & can get at least six years in before age 55. Last year the Edmonton Transit hired a new driver aged 63. And in one Safeway where I shop occasionally one check-out ‘girl’ is three years older than I (& dressed & coifed as she is, unlikely to be doing it because otherwise she’d be eating dog food).  


(Postmedia News, Shannon Proudfoot) 

    · The March issue of Urban Economics will carry a study by two economics professors, Charles Courtemanche of the University of North Carolina at Greenboro & Art Carden of Rhodes College, who studied health- & population data between 1996 & 2005 (when 1,569 new Walmart ‘supercentres’ selling groceries and household  goods opened in the US) & concluded that one per 100,000 residents resulted in a per capita weight gain of 0.75 kg as Walmart exerting more price pressure on processed foods than on fruits & vegetables, and raised obesity rates by 2.3%, and that women, low-income families & those living in less densely populated areas are most likely to gain weight after their arrival.   

This may be too simplistic. What role was played, for instance, by the mega caloric content of the various fast food chains’ “Whopper meals”? Many people, especially young ones, apparently consume 60+% of their daily caloric intake after 4:00 p.m. (i.e. before the onset of their lowest energy-burning part of the day) thereby training their bodies to store the excess energy overnight as fat. It reminded me that in my youth the typical farm family in Holland always had their “big meal” at noon which made sense because most of their hardest work was done in the afternoon (at the end of this year, after opening 40 new super centres in Canada this year, Wal-Mart expects to have 333 stores in this country, half of which will have grocery sections). 


(G&M, James Bradshaw) 

    · Manipulating genes to create genetically modified (GM) seeds has long provoked fiery debates between those who say this is “playing God” & producing ‘Franken Foods’ and  the scientists involved who seek to stiff-arm them by, as MPs were recently told at the University of Guelph, that GM farm produce is a fact of agricultural life. And on February 9th the Conservatives & Liberals in the Commons joined forces to defeat, 178-98, a bill that would have strengthened regulatory laws that govern the export of GM farm products. 

In the US 85% of all soybeans, 75% of all canola & 40% of all corn fall in the GM category even though North Dakota & Montana won’t allow GM wheat to be planted. And the list of countries that have banned or restricted the import, distribution, sale, utilization, field trials & commercial planting of GM seeds includes : Algeria, Australia, Austria, Brazil, China, Egypt, France, Germany, Greece, Italy, Japan, Luxemburg, New Zealand, Norway, Philippines, Paraguay, Portugal, Saudi Arabia, Spain, Sri Lanka, Thailand, UK, 13 Pacific island nations that between them account for one-third of the world’s non-North American population. Did our lawmakers miss an opportunity to develop a global niche market for our farm products to protect Monsanto’s virtual monopoly on GM seeds, or was this just another case of traditionalist thinking & slavishly following any US lead?     


(G&M, Chris Atchison) 

    · In Canada the recession of the early 90's drove companies into the suburbs where rents & taxes were cheaper, and many employees welcomed the move. But during the Great Recession era the opposite occurred as companies, led by financial service firms & other service providers, started migrating back to the downtown, in part, but only in part, by the appeal of strengthening their brand by having it adorn the buildings they occupy.  

It also befits the wishes & desires of highly-motivated & desirable Generation Y employees who increasingly prefer to live downtown for convenience reasons. 


(G&M, Mark Hume) 

    · Prof. Daniel Pauly & Senior Research Fellow Dirk Zeller of UBC’s Fisheries Centre were astounded to find that the FAO has no reports from Canada about its fish catches in the Arctic waters (which they feel would have strengthened Canada’s Arctic claims). But Canada is not alone; both the US & Russia have grossly underreported their catches : Prof Pauly believes that from 1950 to 2006 a total of 950,000 tonnes of fish were taken out of the Arctic waters, 75x the amount reported to the FAO. 

In any dispute as to who owns which, if any, part of the Arctic, answers to questions like “Has Canada ever used it ... (and/or) used it regularly?” could be important. And polls show a significant majority of Canadians surveyed agreed with the statement “Security of the Canadian Arctic is extremely important and we should be putting more military resources in that area even if that means putting fewer resources on our military presence in other parts of the world” 


    · A planned LNG export terminal in North Eastern BC moved one step closer to reality after two of the project backers, Apache Canada Ltd. & Houston-based EOG Partners bought out Pacific Northern Gas, their 50% partner in a proposed $1.2BN pipeline project to Kitimat. The 463 kilometre pipeline would bring gas from (a major shale gas reservoir in the Montney/Horn River region in) Northeastern BC to the town of Kitimat where it would be compressed at a proposed $3.5BN liquifaction plant & exported to Asia. 

Getting outlets on the Pacific Coast for moving Canadian oil & gas to Pacific Rim markets, incl. California, so as to have an option to mindlessly pipelining it ‘South is critical to Alberta’s, & to a lesser extent BC’s, future wellbeing, especially now that North America is chock-a-block with shale gas & a huge price gap has opened up between the primary global oil pricing benchmark, Brent crude, & North America’s, West Texas Intermediate (WTI). But there are two problems : a raft of First Nations that don’t like the idea  of pipelines crossing “their” lands and/or see an opportunity for some blackmailing profits (& who should be told, to take a hike : national interests are more important than theirs) & environmentalists who oppose any oil & gas tanker traffic through the admittedly some time narrow waters off the BC coast on principle, referencing the Exxon Valdez debacle in Alaska two decades ago when most tankers were of the single hull variety, whereas today double-hulled tankers are the standard.  


(G&M, Steven Chase)     

    · The $35BN order for new ships for Canada’s Navy & Coast Guard will be the biggest new vessel acquisition program since WW II. It is loaded, however, with political landmines  since Ottawa has ordained that the work will be split between only two shipbuilding yards while there are three major contenders, one each in Vancouver, Quebec & Halifax.  

The plot has since thickened because Ottawa has announced that yards bidding on the $28 BN  “big” ship portion of the program must be “financially sound” and the Davy Shipyard in Levis, Québec has been in bankruptcy protection for the last year (& thus will have to get busy & find itself a, likely foreign, partner with deep pockets in a hurry. One can only wonder whether building these ships in Canada really represents a judicious use of Canadian tax payers’ money. At the outside it will involve the building of 40 ships, at an implied cost of $1BN or so each. And yet the last US 100, 000+ dwt Nimitz class carrier, the USS George W. H. Bush, that was delivered to the US Navy two years ago, cost just US$6.2BN to build & 15,000 TEU container ships of a similar-, & VLCC oil tankers with far bigger-, water displacement can be built for US$200MM, or less ( & the total tonnage of all the ships to be built under the program is less than two, or possibly even one, such vessels. With recent peak employment in Canada’s shipbuilding industry being little more 10,000, this program seems to entail a very high cost job creation program, and tax payers money would likely be used by giving all 10,000 of them a big, fat pension as “goin-away money. Another likely far more cost effective approach might be the construction of the hulls & basic ship infrastructure contracted to foreign yards, and the finishing (hi-tech) touches added in Canadian yards. The Army buys it materiel abroad, as does the Air Force (up to a point); why should the Navy be treated any different?      


    · Master Cpl. Shawn Grove recently completed his third tour of duty in Afghanistan. During his second tour, partly out of boredom, he started studying Pashto, the local language in the Kandahar region, the Canadians’ area of responsibility, in his day-to-day dealings with locals & on his own in his spare time. So during his third he frequently surprised Afghan civilians by addressing them in their own language &, not unsurprisingly, found that this did for his relationship with, & the building of confidence among, them. 

This demonstrates, as Greg Mortenson has done, that, contrary to the Common Wisdom, in Afghanistan power doesn’t necessarily “grow out of the barrel of a gun”. Democracy & security cannot be imposed top-down, & certainly not with the West’s scant resources there, but must come from the bottom up.  Too bad, & what a waste, that Master Cpl. Grove is planning to leave the Army. He ought to be ‘commissioned from the ranks. For his linguistic ability would come in handy in the next non-combat, training role of the CAF in that country.     

A WARNING TO CANADA (G&M, Jessica Leeder) 

    · On February 7th the Canadian Agri-Food Policy Institute, a non-partisan think tank headed by a former Agriculture Canada Deputy Minister, issued a report saying Canada had lost its status as a food-producing super power & dropped from being the world’s third-largest to its seventh-largest food exporter. Furthermore, that a drastic overhaul of its farm policy frame work is needed to compete in world markets & produce more of its own people’s food at a time that population growth & climate change are putting unprecedented pressures on the global food supply system.

    · Canadian food imports have grown by 50%, & research in agriculture steadily declined, in recent years at the very time global demand & prices of food stuffs is ramping up. Part of the problem is on the farm : for two decades farm incomes have stagnated & debt levels soared despite $8BN in annual subsidies. And food processors have been squeezed by retailers who find it more profitable to sell cheap imported products & by consumers who, used to spending relatively little of their income on food, demand low prices

    · Food policy theorists are split into two camps : those who believe that salvation lies in improving the farm industrial system & those who seek a more radical change to a system  based on sustainability, respect for the environment and prioritizing domestic needs. 

From 2001 to 2008 Canada’s market share in the global food trade increased by 25% to 5.5% while Brazil’s rose 120% to 8.6%, Argentina’s doubled to 5.4% & China’s rose 40% to 4.5%. In farm exports Canada’s track record is typical of that for a resource-rich country, exporting primary products & importing value-added ones (not unlike what happened in the US in the 30's when freighter after freighter left the US West Coast loaded to their  Plimsoll Lines with scrap metal that built the war machine that Japan a few years later deployed against the US in World War Two). 


    · In 2010 China produced 546MM tons of grain, 39MM tons of cooking oil & 78MM tons of meat. According to Chen Xiaohua, China’s Vice Agricultural Minister in the five year period ending in 2015 China each year will consume an additional 4MM tons of grain, 800,000 tons of cooking oil & 1MM tons of meat. To meet that demand the government plans to  provide more funding for agriculture, subsidize technology development for farmers, and enhance agricultural market regulation & boost farmers’ income. 

Meanwhile, North China’s main wheat growing regions have seen little by way of rain for three months. Although the official line is “the winter wheat-growing areas in the North are frequently hit by drought and the situation is less serious than in 2008/09", Beijing declared an emergency over drought in the same region, incl. Henan Province, the country’s top wheat-growing area).   


    · On February 6th China National Petroleum Corp., China Petrochemical Corp. & CNOOC were informed by the National Development & Reform Commission (China’s economic planning body) they couldn’t sell fuel to other customers until all farm-related orders had been filled since the country’s farms will face pressure in the coming years to supply the nation’s needs & ensuring enough fertilizer for crops is “a precondition for the grain harvest ... and essential for stabilizing the prices of agricultural products and managing inflation.”  

Industrialization & urbanization have eaten into China’s stock of arable land to a point that Beijing believes it is approaching the minimum consistent with national food security. 


    · From January 19th to February 2nd, the first 15 days of the 40-day Spring Festival China’s railways moved 77.34MM passengers, 9.5% more than during the year-earlier period. This included 4.80MM departures from Beijing, 5.69MM from Shanghai & 8.39MM from Guangzhou (the latter up 15% YoY). And on February 4th, Day Two of the Lunar New Year the flowback started with the railways carrying 3.89MM passengers, up 11.3% YoY, with the crest expected on Day Six, February 8th

Not surprisingly, people are more anxious to go home than back to their jobs (where they often live under anything but ideal conditions).   


(G&M, Andy Hoffman) 

    · Chinese telecom manufacturer Huawei Technologies Co. Ltd. last spring said it planned to build a $50MM R&D facility in Ottawa to tap into its pool of highly-skilled  technology workers (incl. Many who used to work for the now defunct, but once mighty, Nortel. And a survey of 1,300 Chinese SMEs (Small and Medium-sized Enterprises, those with < US$45MM in annual revenues) found that 8% were planning to invest an average $16MM in Canada over the next three years under Beijing’s “Go Global” strategy (which encourages companies to invest abroad), much of it in the manufacturing sector.      

Its impact on Beijing’s efforts to recycle unwanted dollars will be minimal; the real reasons are to gain better access to North American market & to high-end North American technology that will  enable its domestic manufacturers to move up the value-added manufacturing chain.  

RED ALERT IN BRITAIN’S FORESTS (DT, Christopher Middleton) 

    · In England & Wales 1.4MM Japanese larches were cut down in the past 18 months & 1.2MM more are scheduled to bite the dust in the next three. The culprit is a pathogen, Phytophthora Ramorum, thought to have originated in Asia, that is killing them like Dutch elm disease did elms 40 years ago, only more aggressively so. It first showed up nine years ago on a viburnum bush in Essex, then ‘leaped  species’ onto rhododendrons whence it launched its attack on the larches. Until 2009 forestry officials were fairly relaxed since only 100 infected larches had been found, usually next to diseased rhododendrons. But now it is spreading among Japanese larches 5x as fast as on  rhododendrons  

So far  it hasn’t affected other larches, but the fear is it may spread to other species.    


    · On February 16th its Parliament approved a new deal with the UK & Dutch governments to reimburse them for the 3.9BN Euros (US$5.3BN) they had paid out to their citizens for their losses in their IceSave account deposits in the collapse of Iceland’s Landsbank in the fall of 2008 (Iceland reimbursed its own-, but refused to reimburse foreign-, depositors). 

While not yet a done deal, it is a much better deal than what Icelanders soundly rejected 93-7 last year in a referendum; for it features a lower interest rate and a longer term & upfront grace period (i.e. it is a much ‘softer’, longer term loan). 


(NYT, Nicholas Wade) 

    · Some people in remote Ecuadorian villages have a rare condition, called the Laron Syndrome or Laron-type dwarfism, that causes them to be very short in stature, typically < 3½ feet (105 cms) but also makes them virtually completely free of cancer & diabetes (the latter despite many of them being obese). Ninety-nine of them have been studied for 24 years by Dr. Jaime Guevera-Aguirre who spotted the cancer & diabetes anomaly (that seems to be related to a mutation in the gene that produces  growth receptor hormones). 

Most people would likely prefer to be a normal size & take their chances with these two diseases, especially since the risk of getting them can be ameliorated by life style changes.  


    · The Proceedings of the National Academy of Sciences on Jasnuary 24th published the results of a more than 30 year-long study by New Zealand researchers on what makes kids successful as adults. The study suggests that success hinges on a single factor : teaching kids self-control.  For it found that children who had strong self-control skills as three year-olds, including conscientiousness, self-discipline & perseverance, were less likely than those with low self-control scores at that age later in life to abuse drugs, develop health problems, become a single parent, experience financial difficulties or commit crimes. 

Research over such an extended period has more credibility than the kind of quickie research done to test the safety of chemicals & food stuffs (that seldom, if ever, takes even 30 months).   


    · FAO Assistant Director General Eduardo Rojas-Briales, at the launch of the International Year of Forests, said that despite trees still being cut down at an “alarmingly high” rate in the Amazon & Africa, the world’s forest area could start growing again in a few years. Its latest State of the World’s Forests Report noted that, while the world’s 4,032BN hectares of forests in 2010 was down from 4,085BN hectares a decade earlier, the annual rate of deforestation had declined during the decade from 8.3MM to 5.2MM hectares (both of them way down from the 50MM hectare annual cut 30 years ago). China had launched a major reforestation program to take its forested area from 120MM to 200MM hectares, the forests areas of Europe & North America had increased in the past decade, and South Korea & India had helped to boost Asia’s forested area by one-third in the past decade. One the other hand, South America’s forested area had dropped from 904MM to 864MM hectares & Rojas-Briales criticized its governments for not using more of their recent economic growth to help their forests. One problem, however, he said was that many of the new trees are “junk” trees good only to dispose of greenhouse gases.    

He is both over- & under-, doing it. By definition the new plantings will never be “old growth” forests, at least not during our lifetimes but that doesn’t make plantation trees ‘junk’ trees, if only because that wouldn’t make economic sense for those planting them. And he makes no mention of the value of trees, junk or otherwise, in reducing desertification, soil erosion & water retention. 

OYSTERS GOING EXTINCT (Epoch Times, Jack Phillips) 

    · A study in BioScience reported that researchers from the Nature Conservancy & the University of California, Santa Cruz who had studied oyster reefs in 44 ecoregions, comparing current populations with historical records & catch data. They found that 85% of the world’s oyster reefs have disappeared, that in Holland’s Wadden Sea & other regions “more than 99% of the oyster reefs have been lost and are functionally extinct”, & that 75+% of the world’s remaining oysters now come from five regions in North America although, other than in the Gulf of Mexico, “the conditions of reefs in these ecoregions is poor at best.” It blames over-harvesting & the introduction of non-native species. 

Another study found the over-harvesting of predator fish species like tuna & swordfish has upset the balance of nature & led to an explosion in the numbers of prey species like mackerel, herring & anchovies.

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