Thursday, July 2, 2009

Food security fears drive fund farm investments

A topic we've looked at a few times, see links below the headline story from Reuters:
Funds are increasingly looking to invest in farmland as a rising global population and changing diets lead to growing demand for food crops.

But the emergence of the asset class is not without pitfalls with the provision of food always highly political and a tentative global economic recovery potentially threatened by the H1N1 flu pandemic, fund managers said.

Some international development organizations have expressed concerns that farmers' rights in developing nations could be compromised by what some see as a "land grab."

"The case for farmland can be summed up in two words as far as we are concerned, food security," Susan Payne, chief executive of Emergent Asset Management, said at three-day World Agri Invest Congress which concluded on Thursday.

Payne said there were great financial rewards from investing in farmland, citing factors such as a shrinking supply of arable land due to climate change, increased production of biofuels and the rapid rise in the global population.

Meat consumption in China is also on the rise, further straining available resources. It takes several pounds of grain to produce a pound of meat.

Payne said Chinese meat consumption had risen to about 40 kg per capita from about 10 kg in the 1980s.

Craig Swanger of Macquarie Agricultural Funds Management said food security also had a flip-side and any government "lock-down" could deal a severe blow to the sector.

There were food riots last year as prices rose across the world. Several governments imposed export controls in a bid to dampen local prices and ensure there were sufficient supplies.

"If the sector hasn't established credibility as an asset class by that stage (the lock-down) it could kill it before it gets started," Swanger said.


The transfer of hundreds of thousands of hectares of land in Africa, Latin America, Central Asia and Southeast Asia has raised concerns in the international community....MORE

Prior posts:

March 2009-The Last Holdout: "U.S. farmland fetches top dollar despite recession"

January 2009-The New Paranoia: Hedge-Funders Are Bullish on Gold, Guns, and Inflatable Lifeboats

February 2008-The hedge fund manager who bought a farm

Farm visits can ease mental illness

Finally a story from John Kenneth Galbraith:

This tale is said to be told by John Kenneth Galbraith on himself. As a boy he lived on a farm in Canada. On the adjoining farm, lived a girl he was fond of. One day as they sat together on the top rail of the cattle pen they watched a bull servicing a cow. Galbraith turned to the girl, with what he hoped was a suggestive look, saying, "That looks like it would be fun." She replied, "Well.... She’s your cow."