Climate change causing storms --  Higher food prices

June 23, 2008

In the past few months, the world has been buffeted by an increase in extreme weather:

• Guangdong province in southern China has experienced the highest rainfall in history. Resultant flooding has killed 57 people, displaced 1.5 million, and ruined crops on 860,000 hectares of cropland. Heavy rainfall is expected to continue throughout the summer.
• A typhoon in the Philippines has capsized a ship carrying 845 passengers and displacing 360,000 inland.
• Cyclone Nargis in Burma has displaced 2.4 million, with 134,000 either dead or missing, and large parts of the delta completely torn up.
• Heavy rainfall in the U.S. Midwest caused flooding which has resulted in destruction of 12% of crops. Corn and soybean prices are expected to rise as flooding spreads to the Mississippi and its banks.

(Source: VOA, Floods Kill at Least 57 in China , June 16, 2008; Over 700 Missing as Typhoon Fengshen Capsizes Ferry in Philippines, June 22, 2008;  Six Weeks After Cyclone, Burma Devastation Remains Uncertain, June 11, 2008; IHT, Along the Mississippi, wary eyes on rising water, June 18, 2008; More than 800 missing after Philippine ferry capsized amid deadly typhoon, June 22, 2008)

According to John P. Holdren, Director, Woods Hole Research Center and other experts, global climate disruption will be an ongoing result of global warming. The impact will be varied across the planet, not a uniform, predictable change. (See Climate change, the global economy -- And your finances)

What the climate change extreme weather means:
Ruined farmlands will caused food prices, already inflated by high oil prices, to go even higher. Displaced people will result in misery, starvation, disease and lower productivity, resulting in lower GDP growth. 

As extreme weather increase, so will demands for something to be done about global warming. The International Energy Administration (IEA) has called for expenditures of over $45 trillion in the next 50 years to global warming from slowing economic growth. The measures include building 32nuclear power plants per year, and a reducing greenhouse gases by 50% by 2050. The world needs to spend $100-$200 billion each year for the next 10 years, rising to $1-$2 trillion after that. (IHT, Nations urged to spend $45 trillion to battle emissions, June 6, 2008)

Action steps:
Expect food prices to go even further up before they return to a lower level.To save money on your food bill, consider high-protein vegetable alternatives to meat, such as soy-based products or lentils.

However, there may be a dip in the next year, as current high prices are a result of a commodities bubble. Talk to your financial planner about the best time to add commodities to your diversified portfolio. (See Oil price forecasts at $150 per barrel - Another bubble?)

To learn more about the causes of high oil prices, read the WorldMoneyWatch Special Report Oil's Hidden Threat.

See Extreme Weather Related Articles in:

Economic Effects of Global Warming

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