- Retail sales volume in the Euro area fell 0.5% in November.
- The National Association of Realtors' index of pending home sales dropped from 89.9 to 87.6 in November, better than expected.
- The Supreme Court imposed a six-year statute of limitations for suing the federal government in property disputes.
- Gold futures rose to an all-time high above $875. However, inflation adjusted, gold remains well below its all-time high
- Saudi Arabia announcement they intend to gradually stop producing wheat and that they will import all of their needs by 2016 in order to conserve water. Currently, Saudi Arabia uses about 2.5 million tons per year.
- Goldman Sachs has made a deal to buy a 20 percent stake of China shipbuilder Yangfan Group, and the Wall Street bank will help the Chinese shipbuilder to go public as early as 2008
- NYK president Koji Miyahara said his 740 ships must cut speed by 10% to save fuel. Fuel prices have risen from $164 a ton five years ago to $500 today. "If a single containership daily consumes 200 tons of fuel costing $500 per ton, its fuel cost will reach as high as $100,000 in just a day," he said.
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From Dust to Dust
Under the headline, “Saudi scraps wheat growing to save water” Reuters, quoting officials from the agriculture and finance ministries, reported on January 8, 2008 that starting this year purchases of wheat from local farmers will be reduced by 12.5%, with the aim of relying entirely on imports by 2016. This U-turn effectively ends three decades of Saudi desert irrigation. The story is sobering, with important lessons to learn.
Over the centuries, agriculture in the Arabian Desert had been almost nonexistent. Severe, arid conditions constrained food production and population growth. Then, suddenly in the early 1980s, the Saudi government embarked on a scheme to turn parts of its forbidding desert green.
Having almost no expertise in settled farming, Saudi investors were induced by huge government subsidies to import the technology and the equipment, seeds, fertilizers, engineers, and farm workers. Between 1980 and 1993, a twenty-fold jump in cereal production, to five million tons, made Saudi Arabia for a few years the world’s sixth-largest wheat exporting country.
Between 1994 and 2000, however, a dramatic 60% retrenchment in wheat production took place, abandoning 500,000 hectares; or, almost a half of the newly irrigated lands. Under pressures from low oil prices and from the heavy cost of the 1991 Gulf War, plus persistent budget deficits since the early 1980s, the government had to scale down its wheat-growing subsidy program. By 2008, the program had to be abandoned altogether; this time, most of the aquifers have run out of water.
The spectacular rise and the equally spectacular fall of Saudi Arabia’s wheat production venture reflect haphazard economic planning. The foray proved merely that throwing money to import the expertise and the machinery to extract groundwater could make even a desert bloom, until either the money or the water runs out.
Although, no accounting has ever detailed the full cost in terms of money or water, the Saudi government and its propagandists have constantly hailed this folly as an amazing achievement.
For the sixteen years between 1984 and 2000, it may be estimated that the cost of Saudi agriculture exceeded US$85 billions and the average cost of wheat was more than US$500 per tonne. When the waste resulting from the abandoned 500,000 hectares of the newly irrigated lands plus a number of un-quantified government subsidies (for lack of data) are added the numbers might more than double. During the same period, the international market price for wheat averaged about US$120 per tonne.
If the money has become of no concern in Saudi Arabia since the quadrupling of oil prices in 1973, water ought to have been. In the searing desert sun, the water needed to irrigate a hectare of land averages about three times the volume of water needed under temperate conditions. Between 1980 and 1999, a gargantuan volume of water—300 billion cubic meters, the equivalent to six years flow of the Nile River into Egypt—was wasted. Two-thirds, possibly more, of the water was from nonrenewable aquifers.
At this rate, it does not take a genius to predict that the nonrenewable aquifers will sooner or later be depleted completely if the heavy extraction does not stop. Estimates varied regarding the day of reckoning. In a published book on the subject in 2006, I predicted that Saudi nonrenewable aquifers could be depleted after as little as 6-7 years.
Why was desert agriculture pursued?
Ostensibly, the project was in search of achieving food self-sufficiency. Is Saudi food self-sufficiency feasible? The answer is no. Saudi population growth is among the highest in the world and its renewable water resources are insufficient. Even at the peak of its water extraction years, and depending on which Saudi ministry data one uses, Saudi Arabia lifted between 49% and 78% of the required water for food self-sufficiency, with the rest of the food being imported.
While independence in foodstuffs is a politically attractive slogan in Saudi Arabia, it is a flawed notion for two main reasons:
1) Wheat—indeed all foodstuffs—is not critical for national security. The inability to import desalination equipment and spare parts, for example, by a country like Saudi Arabia that supplies more than 80% of its ten largest urban centers with desalinated water, would have much greater repercussions than a wheat boycott.
2) Saudi cereal production was not limited to producing the quantities needed for domestic consumption, as would be expected had the purpose been to cover the local needs. Between 1985 and 1993, Saudi cereal production was more than twice the level required domestically.
Furthermore, Saudi foodstuffs were even exported to neighboring states in the Gulf. Foodstuffs are an encapsulation of water. Foodstuffs are virtual water, teaches University of London Professor Tony Allan. Between 1997 and 2001, the average annual volume of water used to produce the exported produce was equivalent to the annual requirements of the entire Saudi Arabian population for drinking and household purposes. That Saudi Arabia exports such volumes of its finite groundwater endowment is breathtaking.
Why was Saudi desert agriculture pursued?
It may be argued that desert agriculture was pursued as a means to enrich the Saudi business elites. The promise of high financial returns from government subsidies for wheat growing enticed some of the country’s wealthiest and most successful traders, especially in the Riyadh and Qaseem regions, to underwrite the risk of the new venture. The early investors needed business acumen, substantial landholdings, and deep pockets to import the wide-ranging resources necessary. The early investors were not professional farmers. They were absentee farmers, which is understandable, given that farming is alien to the desert habitat.
Saudi Arabia, an absolute monarchy, has non-representative and non-participatory governance. Foreign suppliers, in this case, of agribusiness, closely associate themselves with the powerful elites. Schemes such as food self-sufficiency in the desert, which are unsound both economically and environmentally, are attractively packaged with nationalistic slogans. In the absence of political parties, a free press, environmental groups, or any other concerned groups, such as egalitarian nongovernmental organizations, it is impossible to introduce a balancing economic or environmental perspective into water policy. Consequently, there has been no effective dissent against desert agriculture and its seriously negative economic and environmental policies.
The oil economy and the nature of the Saudi political system provided the decision-making context. The narrowness of the Saudi decision-makers’ coalition enabled the unsustainable water policies of the 1980s and 1990s. The Saudi experience is an extreme case of a politically determined ecological policy with the negative tendencies of a poorly informed elite enjoying rentier economic circumstances.
In allocating Saudi Arabia’s scarce water resources between agriculture and householders, agriculture won. Although most Saudi cities have sufficient groundwater reserves to meet their drinking and household water needs, these cities are supplied with desalinated water from plants hundreds of kilometers away. The volume of water used in irrigation in the Riyadh region in 2000, for example, was nine times greater than the volume needed for drinking and household purposes in that region. Also, in the Qassim region, the water used in irrigation was 37 times greater than the volume needed by the Qassim householders.
Saudi Arabia’s agricultural policy has been hugely beneficial to the Saudi entrepreneurs and also to the foreign suppliers and their local Saudi sponsors who import the pumps, pipelines, earth-moving equipment, harvesters, fertilizers, chemicals, and services directly and indirectly required to support a multi-billion-dollar agricultural undertaking in the desert along with its giant desalination plants.
Marc Reisner wrote in Cadillac Desert: “Water flows uphill towards money.”
A final thought
As the fable of Saudi desert agriculture rapidly reaches its logical end, a footnote in Saudi Arabia’s history will remain. Alongside the tale of the Saudi ruling group that has accumulated enormous riches and engaged in some of the most profligate indulgences, there is the story of the one generation that squandered tens of billions of dollars on the fruitless quest to make parts of the desert bloom and, in so doing, wasted the nation’s finite water inheritance without regard to their grandchildren.
Elie Elhadj, Author: Experiments in Achieving Water and Food Self-Sufficiency in The Middle East
http://www.dissertation.com/book.php?method=ISBN&book=1581122985
*Blog: http://journals.aol.com/eeh100/daring-opinion/
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