Cotton is a good way to buy oil.

21 07 2009

Provocative title, isn’t it?  But I didn’t say it, the statement comes from Jim Rogers, one of the world’s most successful investors and co-founder of the Quantum Fund (with George Soros) from which he retired in 1980.  Since then he has been a college professor, world traveler, author, economic commentator and creator of the Rogers International Commodities Index.  And now, Jim Rogers says he’s investing in agriculture.

Jim Rogers is looking at cotton as a commodity (and an investment strategy), based on the fact that almost everything has some dependence on energy prices, based on  the embodied energy of the product.  He bases his decision on the fact that so many textiles today are made from synthetics – which come from oil.  Since the price of oil is going up (and will likely continue to go up) the price of synthetics is also going up.  So textile makers are reverting to natural fibers.  Cotton is the most popular natural fiber in the world, and the cotton – oil connection is both direct (through the use of synthetic fertilizers and pesticides), and indirect  (land formerly used to grow cotton can be shifted to other production to feed ethanol demand).  As Jim Rogers says,  “I hadn’t thought of this cotton-oil connection before, and it’s drawing these connections before others do that makes a great investor.”

If we are going to “reduce our dependence on foreign oil” (as the government likes to put it), shouldn’t we be looking at agriculture?  Dr. Albert Bartlett, Professor Emeritus in Nuclear Physics at Colorado University, Boulder, has said that the definition of “modern agriculture is the use of land to convert petroleum into food”.

I checked the web – and agriculture is really an energy hog.  According to the website Food and Water Watch:

  • 20% of the fossil fuel used in the US goes toward food production.
  • This inefficient system spends 10,551 quadrillion joules of energy each year – about the same as used by all of France.
  • The US EPA reported that US agriculture is responsible for the same amount of CO2 emissions per year as 141,000,000 cars.  Emissions DOUBLE when electricity usage is included.

Kenneth Watt, on the very first Earth Day in 1970, said that our very existence is dependent on the massive import of energy into industrial agriculture from petroleum, natural gas and coal – and this massive energy use creates a “fossil fuel subsidy”:  that means the use of petroleum has enabled fewer farmers to produce much more food on less land, so the population can grow.

Petroleum-based agriculture has reduced the proportion of the US population engaged in agriculture from about 50% about 75 years ago to less than 2% today.  In other words, the average American farmer feeds lots of people, as well as having enough left over to ship abroad. Petroleum also lets Floridians eat salmon from Alaska, and Alaskans enjoy orange juice from Florida. Between 1950 and 1970, the last 11 million horses were taken out of American agriculture and replaced by tractors powered by crude oil. Since it takes very roughly four times the acreage to support one horse as a person, this means we have been able to add 44 million people to the American population [in those twenty years] for that one cause alone, because of a fossil fuel subsidy.

According to Kenneth Watt, “mankind is embarked on an absolutely immense gamble. We are letting the population build up and up and up, by increasing the carrying capacity of the Earth for people, using a crude-oil energy subsidy, on the assumption that there’s no inherent danger in this because when the need arises we’ll be able to get ultimate sources of energy.”

But what happens if we don’t have alternate sources of energy,  when the oil crunch appears?  As oil production declines, prices will rise – especially commodities – and most especially food.

So how can organic agriculture help us with this dire picture.  You’ll be surprised!  Check in next week.


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