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1. Global Trade in Virtual Water
economic, financial and marketing analysis

2. 2
SUMMARY
Virtual or embedded water is an economic concept that attempts to measure the
amount of water used in the production of an agricultural or industrial product.
INTRODUCTION
The water footprint of an individual is defined as the total amount of freshwater
that is used to produce the goods and services that the individual consumes. It
is a useful indicator of diet and consumption patterns. By way of example the
virtual water of some common items is set out below:
– 1 cup of coffee needs 140 liters of water
– 1 glass of wine needs 120 liters of water
– 1 liter of milk needs 800 liters of water
– 1 kg of wheat needs 1100 liters of water
– 1 kg of tomatoes needs 180 liters of water
– 1 kg of refined sugar needs 1,500 liters of water
– 1 kg of rice needs 2,300 liters of water
– 1 kg maize needs 900 liters of water
– 1 kg of beef requires 22,000 liters of water.
GLOBAL VIRTUAL WATER TRADE
The global average water footprint = 1,243 m3
/capita/yr and the global virtual-
water trade is estimated at around a thousand km3
/year or 20 River Niles. The
Middle East and North Africa region was the first area in history to run out of
water in the 1970s. Drinking water takes up 1 m3
/capita/year in the MENA
region, which represents the majority of the available supply. An additional
1,000 m3
/capita of low quality water is needed to produce food. Because of this
challenging math, the MENA region has been importing 40 million tons of cereals
and flour annually since the 1980s and Saudia Arabia is phasing out domestic
crop production all together to avoid depletion of its fossil aquifer.
Surprisingly given the amount of rainfall and fresh water available in many of
these countries, the developed nations of the world are large net water importers
- depending heavily on importing large amounts of virtual water in the form of
manufactured goods from the developing world.

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COUNTRY VIRTUAL WATER FOOTPRINTS
The following table contains the per capita water footprint and the net water
import position of some key water consuming nations.
India: – Average water footprint = 980 m3
/capita/yr
– Part of footprint falling outside of the country = 2%
China: – Average water footprint = 702 m3
/capita/yr
– Part of footprint falling outside of the country = 7%
Brazil: – Average water footprint = 1,381 m3
/capita/yr
– Part of footprint falling outside of the country = 8%
Russian Federation: – Average water footprint = 1,858 m3
/capita/yr
– Part of footprint falling outside of the country = 16%
Indonesia: – Average water footprint = 1,317 m3/capita/yr
– Part of footprint falling outside of the country = 10%
US: – Average water footprint = 2,483 m3
/capita/yr
– Part of footprint falling outside of the country = 19%
Canada: – Average water footprint = 2,049 m3
/capita/yr
– Part of footprint falling outside of the country = 20 %
UK: – Average water footprint = 1,245 m3
/capita/yr
– Part of footprint falling outside of the country = 70%
CHINA IN DETAIL
As people in the emerging economies of India and China make the transition
to western standards of living absolute and virtual water consumption will rise
dramatically, exacerbating an already precarious domestic supply situation – from
the table above you can see that in absolute terms China and India consume
about 40% - 50% per capita of the virtual water consumed in the west.
– China has only 8 percent of the world’s fresh water to meet the needs of 22
percent of the world’s people.

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– In India, urban water demand is expected to double—and industrial demand
to triple—by 2025.
Seventy percent of the grain produced in China comes from irrigated land, but
the country is seeing its irrigation supply depleted on three fronts: the diversion of
water from rivers and reservoirs to cities; the depletion of underground supplies in
aquifers; and the increasing pollution caused by rapid industrialization.
Economically, farms can’t currently compete with factories for water. A thousand
tons of water produces one ton of wheat, which has a typical market value of
around $300, whereas the same amount of water used in industry yields an
estimated $14,000 of output - 70 times as much.
The challenge facing China is how to meet the virtual water needs of its swelling
urban and industrial sectors without undermining both its own agricultural
productivity.
China
India
Japan
Pakistan
Indonesia
Brazil
Mexico
Russia
Nigeria
Thailand
Italy
USA
Waterfootprint(m3
/cap/yr)
3000
2500
2000
1500
1000
500
0
Domestic water consumption Industrial goods Agricultural goods

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Clearly, with its booming economy and huge trade surpluses, China is trying to
solve its water issues in part by importing more of its food – it has moved from
effective self-sufficiency in grain to importing around 15% - 20% of it domestic
requirements and growing. We believe this extra demand on the world markets
is in the process of creating a new , higher equilibrium price level in the grain
markets – as can be seen in the volatility of the agricultural commodity markets
over the last 3 years.

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economic, financial and marketing analysis