Why you should invest in agriculture

Written by Stephanie Price, Journalist

With 9 million people to feed by 2050 demand for food is rapidly rising and agricultural land is a commodity that is very limited.

Wayne Jones, Division Head of Agri-food Trade & Markets at OECD, tells us the reasons to invest in farmland at today’s Agricultural Investment Summit in London.

“People will always eat, it’s first thing people spend their money on,” Mr Jones said.

It is going to cost $80 billion a year to develop the infrastructure required to feed the world, this money will come from the private sector not the public sector, Wayne Jones said.

Increasing demand

An increase in agricultural demand will result from the 680 million more people on the planet in just the next 10 years, this is a large increase in the number of mouths to feed.

However, increase in demand is much higher than increasing populations because of high per capita incomes. Growing incomes are resulting in changing diets with people demanding more meat in their diets.

Another reason to invest, sooner rather than later, is the growing popularity of biofuel production, which is set to double. Aquaculture has also been growing faster than any other sector, growing by 33% over 10 years.

Market Outlook

In recession, food consumption tends not to dip in and out and it can withstand a number of economic downturns. We are entering a supply responsive stage of the cycle in agriculture, which will result in the planting of more crops.

There are strong return potentials in investing in farmland. “There is a much higher real price plateau for the next 10 years, this is pretty encouraging for investors,” Wayne Jones said.

A growth in exports is also encouraging, with Latin America dominating export growth at 34% and Asia and the Pacific following with 25%.

It is a good idea to buy land and then hold on to it, Detlef Schoen advised, Managing Partner of Farm Investments at Aquila Capital Green Assets GmbH.

“Agricultural investment is still done in a very opportunistic basis.

“Farming is more dangerous than private equity, it’s all about picking the right location and the right manager.”

“The bottom line is there is still a lot of risk out there and this is why investors should use risk management companies,” Wayne Jones concluded.

For more information visit www.agri-outlook.org