By John Wasik
CHICAGO, July 30 (Reuters) - I have a pretty good idea of what drought looks like after recently traveling more than 1,400 miles from Chicago to Utah: Vast patches of brown where there should be green. Cornstalks that look like desiccated scarecrows. Wilted soybeans. Forested Colorado canyons devastated by wildfires and pine beetles.
Whether this is the brutal impact of climate change or a short-term cycle, I can’t say. Regardless of your scientific or political persuasion, though, what is certain is that water is going to be an increasingly valuable commodity and a worthwhile long-term investment.
The short-term nightmare is that the United States is experiencing its hottest year on record. States from Ohio to California -- 53 percent of the contiguous United States -- are in drought, according to the National Weather Service. Many breadbasket states that have traditionally been blessed with summer rains in the Midwest are parched.
As a result, 45 percent of the corn crop and 35 percent of soybeans are rated “poor to very poor,” according to the U.S. Department of Agriculture. The produce manager at my local supermarket heard that farmers are close to plowing under their fields and seeking crop-insurance payments as drought is expected to intensify across America’s heartland. More than 1,200 counties have been declared disaster areas. Futures prices on corn have already hit a record high.
As a result, look for higher prices on everything from bread to steaks.
Globally, the long-term picture is worse. Rising water demand due to population increases, industrialization and higher standards of living in developing countries is exceeding supply.
According to the United Nations (UNESCO), not only is water being wasted around the world, the infrastructure for producing and recycling it lags the demand. Nearly 1 billion people do not have access to clean water while another 3 billion are expected to join the world’s population in the next 40 years. China alone is planning to add some 500 new cities, each housing 100,000 or more people. Also consider the big industries that are major water consumers: electric power, metals, petroleum and food production. Some 70 percent of all fresh water is used by agriculture.
Where will the water come from to quench the thirst and feed some 10 billion souls? The ocean is one answer, since it covers most of the planet as freshwater sources are being rapidly depleted. Yet that calls for quantum leaps in technology since desalination requires tremendous amounts of energy to take the salt out of seawater. Currently there are more than 7,500 desalination plants in use globally -- a number that is expected to double by 2025, estimates the United Nations.
Conservation and treatment technologies are also a partial answer, which means better filtration, conservation and water-treatment systems -- infrastructure that costs trillions. If growing countries are committed to supporting their burgeoning populations, they will need to make these investments.
A handful of global conglomerates already have these concerns in their sights. General Electric Co, for example, has a water and process technologies unit. Dow Chemical Co, Siemens AG and DuPont also have water-treatment units.
If you are looking for more specialized leaders in the water industry, consider Modern Water Plc, which has pioneered a new “forward osmosis” desalination technology, or the Korean company Doosan Heavy Industries, which makes water treatment and desalination systems. The French company Veolia Environnement VE SA provides drinking and wastewater services.
More diversified baskets of water-related companies can be found in exchange-traded funds (ETFs), which are the preferred approach for most investors. PowerShares Water Resources ETF invests in an index of water companies as does the Guggenheim S&P Global Water Index.
Water has often been called the new gold or oil. That is not an appropriate comparison, though, because our bodies are mostly water and we cannot live without it. Still, water demand will create new business and technological challenges to produce, store and recycle it. Conservation will become even more important to protect run-off and topsoil. Agricultural productivity will also need to improve. We will probably see even more “vertical farms” that employ skyscrapers and solar power to grow food in cities.
What is needed is something akin to the “green revolution” that took place in the mid-20th century that vastly boosted agricultural productivity. A new “blue” revolution will employ more efficient use of water resources and re-use water so that billions may thrive. It will take a universal global commitment that will reshape everything from soft-drink manufacturing to taking a shower. It is long overdue and an essential technology investment. After all, you can’t drink a smartphone or flat-screen TV.