Food: The Key to Fixing Climate Change

Fertilizer runoff from an Iowa farm. Source: U.S. Dept. of Agriculture, via Wikimedia Commons

Often when we think of pollution and climate change, we picture gas-guzzling cars or power plants spewing fumes into the atmosphere. Rarely, however, do we think of the food we eat. But according to two different sources, if we really want to get serious about climate change, food is exactly where we should start.

Differing estimates, same conclusion
In 2012, the CGIAR Research Program on Climate Change, Agriculture and Food Security released a report stating greenhouse gas emissions (GHG) from the global food system accounted for about 28% of all GHG emissions. Of that chunk, deforestation and direct emissions from farms made up the largest percentage.

Breakdown of agricultural emissions

Source: Research Program on Climate Change, Agriculture and Food Security 

More recently, the United Nations Conference on Trade and Development came out with its own estimates, which showed an even greater effect from food, accounting for roughly half of all global GHG emissions -- with deforestation and transportation creating the most pollution.

Source: United Nations Conference on Trade and Development 

Instead of focusing on the rather large differences between these two estimates, I think it's far more productive to simply acknowledge that the global-food-production system plays an enormous role in climate change -- and that it's also an important player in reversing the negative effects of climate change.

Emissions directly from farms
If we do the math, both studies estimate that pollution coming directly from agricultural production accounts for about 13% of all GHGs. The two biggest contributors to this subgroup are:

  • Nitrous oxide emanating from the soil as a result of increased usage of fertilizers.
  • Enteric fermentation resulting when livestock consume food and excrete methane gas.

 Commonly, nitrous oxide seeps into the atmosphere because of the heavy usage of ammonia in fertilizers. The top three ammonia producers worldwide account for roughly one-fifth of the global market. They are, in order of total capacity, Yara (NASDAQOTH: YARIY  ) , CF Industries (NYSE: CF  ) , and PotashCorp  (NYSE: POT  ) .

As far as meat is concerned, the Big Four American producers are, in order of market share, Tyson (NYSE: TSN  ) , Cargill, JBS USA, and National Beef Packing.

What it means for your investments
For right now, the short answer is that this means absolutely nothing for your investments. Though I think population growth is a function of increased food production -- and not the other way around -- I'm very much in the minority. Knowing that, farmers and officials are likely to continue relying on fertilizers to prop up harvests for the foreseeable future.

As far as meat consumption is concerned, the companies I mentioned may have a slightly different fate in the immediate future. While it is generally assumed consumption of meat will skyrocket as a result of the growing middle classes in Asia, the same isn't  likely the case stateside. Though meat consumption won't be dropping off a cliff, it is nearing a saturation point, and as the benefits of a diet light in meat become more well known, it may even fall.

But if you're the type of investor who likes to buy a stock and hold it for decades, the environmental degradation caused by fertilizers and livestock will eventually rear its head into the equation. There's no way to tell if this will be a result of government action or changing consumer tastes, and it's not possible to know if the change will come tomorrow or 20 years from now.

Still, the fact remains that investors need to take this into consideration before buying any shares of a company contributing so much to global GHG emissions.

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Read/Post Comments (9) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 30, 2013, at 10:10 AM, manuredoc wrote:

    So, global overpopulation is caused by the production of food? Thank you for the comic relief.

  • Report this Comment On September 30, 2013, at 10:50 AM, unclemike7 wrote:

    Now, if only the climate change terrorists could just find a way to keep those nasty cows and humans from expelling methane gas, we would no longer have to worry about the "sky is going to fall" routine.

  • Report this Comment On September 30, 2013, at 3:02 PM, TMFCheesehead wrote:

    @manuredoc-

    I'm not sure what constitutes "overpopulation". Production of food sets the limit for total population.

    Brian Stoffel

  • Report this Comment On October 01, 2013, at 5:06 PM, fishers2tall wrote:

    I find it amazing that TMF pays you to disseminate this liberal mumbo jumbo. In a moment of clarity you admit your opinion on cheap food means absolutely nothing in respect to our investments. You lost me as soon as you referenced the report from that paragon of truth and unbiased data the United Nations (extreme sarcasm). Cheap food makes it more likely that the worlds poorest people can be kept from starving. This is a positive outcome and worth pursuing regardless of some extremely tenuous link to climate change.

  • Report this Comment On October 01, 2013, at 5:09 PM, sf063 wrote:

    "Don't have a cow, man!" Literally, it's beef that accounts for all that methane. Save the planet and have a tofu-burger instead...

  • Report this Comment On October 01, 2013, at 7:19 PM, TMFCheesehead wrote:

    @golfingfantastic-

    << Cheap food makes it more likely that the worlds poorest people can be kept from starving. >>

    Here are the facts:

    -70% of the world's undernourished are poor rural farmers in developing countries.

    -The reason they are poor is because the rich, urban dwellers in their countries use ultra-cheap imports from first-world countries.

    -This cheap food is (at least partly) due to subsidies farmers get in first-world countries for this overproduction.

    Your argument makes sense if it was another profession that was going hungry, but since it's farmers, those cheap prices are exactly what's keeping food from getting to those who need it.

    Brian Stoffel

  • Report this Comment On October 02, 2013, at 12:10 AM, fishers2tall wrote:

    Ok Brian first of all I made a mistake in my original post and that was that you did not reference the cost of food at any point. Also I don't know for a fact that you are a liberal but people who attribute climate change to our advanced farming practices tend to fall into that category. Needless to say I completely disagree with that and am supported in this by the recent report by NASA which basically said man made global warming was a fraud and that any climate change on earth is mainly due to changes in sun activity. This is further supported by the fact that the UN climatologists which so zealously promoted man made global warming on data they knew to be false are now seeking immunity from prosecution for their fraudulent reports.

    Now as to your recent points:

    <<70% of the world's undernourished are poor rural farmers in developing countries.>>

    I will agree with you on this although the 70% figure really only applies to Southeast Asia and Sub-Sahara Africa. Other developing nations have lower numbers.

    <<The reason they are poor is because the rich, urban dwellers in their countries use ultra-cheap imports from first-world countries.>>

    This one is a stretch. I would put forth that they are poor not because the very small percentage of the population that are rich eat imported food but because they have low rates of literacy, political instability (in some countries), almost no access to electricity, limited access to safe water, poor sanitation, no access to any type of modern farming machinery and farm mostly by hand or animal power.

    <<This cheap food is (at least partly) due to subsidies farmers get in first-world countries for this overproduction.>>

    I would agree that subsidies play a part in the price of food but the main reason food prices are low is due to modern farming practices including the use of fertilizer and pesticides. As for the subsidies I am all for ending every single one of them.

  • Report this Comment On October 02, 2013, at 8:24 AM, wvowell wrote:

    Brian, this global warming, climate change is nothing but pure straight lies!!!

    You and your ilk are so full of you know what it's sad you are allowed to spew this garbage on an investment site.

    In the 60's your climate change heros were trying to convince us that a 2nd ice age is coming. When this proved to be junk science you changed to global warming.

    Countries that are poor and hungry are the direct result of dis-informed or lack of knowledge, and especially governments that are not for the people.

    What gives you the right to determine overpopulation?

    You and your crowd are cowardly terrorists punks. Please spew your trash somewhere else.

  • Report this Comment On October 02, 2013, at 9:20 AM, TMFBoomer wrote:

    Great article, Brian. I had never really thought about your take on population growth following growth in food production. Although I need to read on this more, it makes sense. Take this quote from Morgan Housel on Japan's population stagnation:

    <<Yet post-war devastation [in Japan] couldn't be ignored. Its major cities largely reduced to rubble, Japan didn't have the infrastructure necessary to support its existing population, let alone growth -- a problem amplified by the country's relative lack of natural resources. Tokyo-based journalist Eamonn Fingleton explains what happened next:

    [In] the terrible winter of 1945-6 ... newly bereft of their empire, the Japanese nearly starved to death. With overseas expansion no longer an option, Japanese leaders determined as a top priority to cut the birthrate. Thereafter a culture of small families set in that has continued to the present day.>>

    (http://www.fool.com/investing/general/2012/06/22/the-most-im...

    Isaac

    TMFBoomer

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