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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
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.
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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