2030: China's coming water crisis

December 14, 2012: 10:43 AM ET

A new report shows just how bad things could get by 2030.

By Brian Dumaine, senior editor at large

121211033046-china-economy-gallery-horizontalFORTUNE -- After each Presidential election, The National Intelligence Council (NIC), the Washington, D.C., agency that provides long-term strategic analysis to America's intelligence community, releases a report on security risks. Its newest report, issued on December 10th and called Global Trends 2030: Alternative Worlds, covers many topics from cross-border conflict to terrorism to regional economic collapse.

One theme in particular that stands out this year is the coming food and water crisis in China. According to the report, climate change coupled with China's move toward urbanization and middle class lifestyles will create huge water demand and therefore crop shortages by 2030. As the report states: "Water may become a more significant source of contention than energy or minerals out to 2030."

Globally, demand for food is estimated to increase by more than 35% by 2030 and that means the world will need more water. After all, agriculture and livestock account for 70% of our water use. According to a major international study, global water requirements—mostly to sustain agriculture and livestock—will rise to 40% above our current sustainable water supplies.

China is particularly vulnerable to this trend. The report points out, for example, that cereal production in China faces significant challenges from environmental stresses relating to water scarcity—the melting Himalayan glaciers aren't helping—soil depletion, and pressures on land availability from urbanization. China is a major wheat producer and the second-largest producer and consumer of corn after the US.

By 2030, though, China may no longer be self-sufficient in these crops and might be forced to increase its imports potentially triggering, the NIC concludes, "a significant price run-up on international markets."
None of this needs to happen if China—as well as other developing nations—pursue new methods to increase crop yields and preserve water. The NIC suggests three new technologies that need to be developed: GMO crops, precision agriculture, and high-tech irrigation.

• The NIC believes that breakthroughs in plant genetics—enabled by molecular biology—hold great promise for achieving food security in the next 15-20 years. Insect and drought resistant crops that require small amounts of fertilizer can be designed through molecular plant breeding. Nations like China will have to overcome consumer and international regulatory resistance.

• Robotics might be able to help farmers reduce the amount of water, fertilizer and seed they need. The NIC says that with in the next five to 10 years, "autonomous tractors"—think of them as highly automated manufacturing facilities on wheels—can use computer technology to farm more efficiently. The NIC also reports that "vertical" farming in high-rise structures could help raise yields and reduce water consumption.

• Irrigation systems on farms waste roughly 60% of the water used. Micro-irrigation systems that use IT to gauge exactly how much water needs to be dripped on plants could boost yields dramatically. The cost of today's micro-irrigation systems, however, is still high.

As with any set of predictions it difficult to say how fast or even whether any of these new technologies will gain traction. At the very least, they do present some intriguing ideas for investors looking for a way to profit on the 21st century economy.

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