Forget the financial crisis - its food you should be worried about - Steel Girder Bridge

In a recent article, " An Argument for a Contrarian Investment " I wrote: "...the most investable trend over the next 20 years is going to bein the resource sector, the renewable and non-renewable resources,the minerals, ores, fossil fuels and biomass a wealthier andgrowing global population is increasingly demanding from finitesupplies and already strained production capabilities." Two of these resources/commodities are undoubtedly going to bepotash and uranium, here's why I think so.... Water There's a lot of water on the planet we inhabit - an estimated 326million trillion gallons or 1,260,000,000,000,000,000,000 liters. That makes it hard to believe that there are somewhere between 780million to one billion people without basic and reliable watersupplies and that more than two billion people lack therequirements for basic sanitation. Harder still to believe are reports water is going to get muchdearer in our near term future - yet Peter Voser the chiefexecutive of the world's second-largest energy company, Royal DutchShell, warned us in June 2011, that global demand for fresh watermay outstrip supply by as much as 40 per cent in 20 years ifcurrent fresh-water consumption trends continue. Our planet is 70 percent covered in ocean, ninety-eight percent ofthe world's water is in the oceans - which makes it unfit fordrinking or irrigation because of salt.

Just two percent of the world's water is fresh, but the vastmajority of our fresh water, 1.6 percent, is in its frozen stateand locked up in the polar ice caps and glaciers. Our available freshwater (.396 percent of total supply) is foundunderground in aquifers and wells (0.36 percent) and the rest ofour readily available fresh water, 0.036 percent, is found in lakesand rivers. Freshwater aquifers are one of the most important natural resourcesin the world today, but in recent decades the rate at which we'repumping them dry has more than doubled. The amount of water pumpedhas gone from 126 to 283 cubic kilometers per year - if water waspumped as rapidly from the Great Lakes they would be dry in roughly80 years.

Another effect of over pumping is saltwater intrusion. If too muchgroundwater is pumped out from coastal aquifers saltwater may flowinto them causing contamination of the aquifer. A growing number of rivers do not make it to the sea. Streams,rivers and lakes are almost always closely connected with anaquifer. The depletion of aquifers doesn't allow these surfacewaters to be recharged - lowering water levels in aquifers is beingreflected in reduced amounts of water flowing at the surface.

Thisis happening along the Atlantic Coastal Plain, groundwaterdepletion is also responsible for the Yellow River in China notreaching the ocean for months at a time, the failure of theColorado River in the U.S. and the Indus River in Pakistan failingto reach the ocean every day. There is widespread surface and groundwater contamination thatmakes valuable water supplies unfit for other uses. One of the greatest issues facing us in the 21 st century is how we will share this less than half a per cent ofusable freshwater to feed our increasing population - if thepredicted 40 percent shortfall occurs, and United Nations (UN)population growth estimates are correct, we'll need to feed ninebillion people - two billion more people than today - by 2050 usingfar less fresh water than we have available today. Advances in technology, innovation, and best practices/conservationare already clashing with finite water resources, relentlesspopulation growth, changing diets, a lack of investment in waterinfrastructure and increased urban, agricultural and industrialwater usage.

Investment in water management as a percentage of GDP has droppedby half in most countries since the late 1990s. Climate Change The Earth's climate has been continuously changing throughout itshistory. From ice covering large amounts of the globe tointerglacial periods where there was ice only at the poles - ourclimate and biosphere has been in flux for millennia. Approximately every 100,000 years or so our climate warms uptemporarily. This temporary reprieve from the ice we are now experiencing iscalled an interglacial period - the respite from the cold lockerbegan 18,000 years ago as the earth started heating up and warmingits way out of the Pleistocene Ice Age.

These interglacial periods usually last somewhere between 15,000 to20,000 years before another ice age starts. Presently we're at year18,000 of the current warm spell. As studies of past ice ages continued and climate models areimproved worries about a near term re-entry into the cold lockerhave died away - the models now say the next ice age will not comewithin the next ten thousand years. The study "Climate Trends and Global Crop Production Since 1980"compared yield figures from the Food and Agriculture Organization(FAO) with average temperatures and precipitation in major growingregions.

Results indicated average global yields for several of the cropsstudied responded negatively to warmer temperatures. From 1981 -2002, warming reduced the combined production of wheat, corn, andbarley - cereal grains that form the foundation of much of theworld's diet - by 40 million metric tons per year. The authors said their study demonstrated a clear and simplecorrelation between temperature increases and crop yields at theglobal scale. Arable land Arable land covers just three percent of the world's surface.

Basedon historical data arable land decreases by 25 million acresannually - it is estimated that one hectare (one hectare equals2.47 acres) of productive land is lost every 7.67 seconds. Thegreatest causes of lost productive land are desertification andurbanization. Desertification - new deserts are growing at a rate of 51,800square kilometers per year. As an example Nigeria (Africa's mostpopulous country) is losing almost 900,000 acres of cropland peryear to desertification because of increased livestock foraging andhuman needs.

Urbanization - The change of diet among newly prosperous, urbanpopulations in developing countries is the most important factorstoking the rise in global food demand. A rising income means more money in the household budget. The newmiddle class consumers forgo plant based calories in favor ofadding more protein from meat and dairy products to their diets. Ittakes up to 8 kilograms of grain to produce one pound of beef -less for pork, chicken, milk or eggs - between 2kg and 6kg.

As meatconsumption soars, more grain is needed to feed more livestock. In 1995, the Chinese ate an average of 25kg of meat per person, by2007, the Chinese were consuming 53kg of meat per person. In 1980, the world ate 133 million tonnes of meat and drank 342million tonnes of milk. By 2002, consumption had increased to 239million tonnes of meat and 487 million tonnes of milk. The UnitedNations Food and Agriculture Organization (FAO) estimates that by2030 global annual consumption of meat will stand at 373 milliontonnes and 736 million tonnes of milk.

The more people there are on this planet and the more Asians, andothers, decide they want a western style diet the moregrains/oilseeds are needed to feed them. And many of those verysame grains are needed to raise the animal protein, the beef, porkand chicken they want - they are also the very same grains theworld's poorest people, the ones who can't afford to climb the protein ladder , depend on to survive. Feeding Ourselves The central issue for us over the next few decades is not climatechange or the global financial crisis - it is whether humanity canachieve and sustain the enormous harvest we need from this planetto feed ourselves. We are going to have to grow more food.

To do that we need toincrease yields on our arable land and find more fresh water forirrigation. The world's options for increasing food production arelimited by the supply of land and water. We must a) place more ofthe world's land under cultivation or b) increase yields onexisting usable land or c) both of the above. We need to grow more food on the productive land we have, thatmeans we need to invest in water infrastructure, fertilizerproduction and nuclear energy. Potash In order for a plant to grow and thrive, it needs a number ofdifferent chemical elements.

Three of these are the macronutrientsnitrogen, phosphorus and potassium (a.k.a. potash, the scarcest ofthe three). Potassium makes up one to two percent of any plant by weight and isessential to metabolism. The availability of nitrogen, phosphorusand potassium in the soil, in a readily available form, is thebiggest limiter to plant growth. Potash is a major source of potassium.

Potassium is found in everyplant cell, it helps plants: Grow strong stalks Resist stress - weeds, insects, disease and changes in temperature Improves water retention Strengthens roots and stems Assists in nutrient transfer Activates vital plant enzymes Ensures the plant uses water efficiently Helps keep the food you buy fresh A huge increase in the application of potash-rich fertilizers willhave to happen - the increased use of plant nutrients is the mosteffective way to increase crop yields in the face of: An increasing global population Water shortages Decreasing arable land Improved and diversified diets Uranium How do we source the fresh water we're going to need to supply (fordrinking, irrigation and sanitation) the world's current, andexpected to grow, population? The answer is uranium, or rather the nuclear power generated byuranium to run seawater desalinization plants. Nuclear energy works , it's safe and recognition is slowly dawning it's going to beimpossible to meet the global, growing demand for energy and cutcarbon dioxide emissions without nuclear energy. However there's more to nuclear power than just the upside fromgreener electricity. Marco Rognoni, of Saline Water Specialists, says desalination ofbrackish and sea water by reverse osmosis is expensive andinefficient. "The selection of the appropriate desalination technology betweenevaporation and reverse osmosis is grounded on several factors,including investment cost, maintenance cost, degree ofavailability, heaviness of the duty, and the required purity of thedesalinated water.

The main factor, however, is often the runningcost of the plant, and specifically the cost of the consumedenergy." Energy use accounts for between 35 and 45 percent of the total costof producing desalinated water using reverse osmosis - sea water isforced under pressure through a semi-permeable filter, the ionsthat make seawater salty are left on one side of the filter andpurified water is formed on the other side. Evaporative (evaporation is the process that describes thetransformation of a chemical compound from a liquid to a gas form)desalination could be the least expensive approach to generatingfresh water because of the free heat energy available as aby-product of electricity generation using nuclear power. When seawater is heated, the water evaporates into water vapor.Elements within the solution that are not water, in this case salt,will not change form at the same temperature as water and are leftbehind in solid form. As the water vapor cools it becomes freshwater we can use for drinking, irrigation and sanitation.

Conclusion Once in a long while we as investors are given a glimpse, a windowinto the future. How can there be any doubt that access to cleanfresh water for drinking, sanitation and crop irrigation is goingto become the one overriding concern for billions of people? Potash and uranium are going to become overriding dominantinvestment sectors. For this reason potash and uranium should be onevery persons radar screen. Are they on yours? If not, maybe they should be.

Richard (Rick) Mills is host of Aheadoftheherd.com and invests in the junior resource sector. His articles have beenpublished on over 300 websites. SUBSCRIBE to Mineweb.com's free daily newsletter now.

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