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Investing in agriculture to feed the world

11 Sep

As food prices soar in response to growing demand and crop failures in the US after the worst drought since the 1930s, investing in agriculture, or agribusinesses if you want to diversify along the value chain, is becoming more and more popular. There is plenty of scope for the money to be usefully invested. According to the UN’s Food and Agriculture Organisation, “it is estimated that net investments of $83bn a year must be made in the agriculture sector of developing countries if there is to be enough food to feed the world population of 9.1bn in 2050”.

Although investing in farming may be necessary to help feed the world, there are many critics of the practice, concerned the industrialization of farming will lead to environmental and social damage as intensive, fertilizer-dependent practices will degrade soil and push small farmers into poverty.

Farmland prices all around the world have soared in recent years. Here are just a  few of the recent headlines

From 2001 to 2011, the price of farmland in the UK has tripled due to the demand for agricultural commodities. In Canada, since 2006, farmland prices have risen by an average of eight percent per year.

Is it a bubble ?  Maybe, but when you hear a well respected scientist say that “in the next 50 years we will need to produce as much food as has been consumed over our entire human history.” Where else can the demand / supply imbalance lead ?

It is hard for me to comprehend that in the next 50 years we will need toproduce as much food as has been consumed over our entire human history. Dr Megan Clark, Chief Executive CSIRO

The UN Food and Agriculture Organisation says there is an urgent need for significant and long-term investment in farming technology and the infrastructure to support reliable food supplies. Sustainable agriculture funds are there to supply that need.

Anric Blatt, co-portfolio manager of the AquaTerra Fund, a multi manager fund, focused on imperative must-outcomes likes food, water and scarce resources feels that combining water and food investment themes allows for diversification, reduction in volatility and provides a deeper scope for his portfolios.

The currently approved and already earmarked spending by government and private sector institutions into food and water sectors alone will make these investments one of the most attractive sectors going forward. Anric Blatt, Chairman, Global Fund Exchange

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