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NewswireTODAY - /newswire/ -
Northampton, Northants, United Kingdom, 2011/06/24 - The OECD and the UN Food and Agriculture Organisation (FAO) warned last week that the world should brace itself for a decade of rising food prices as demand for food will continue to outpace supply according to agricultural investment consultancy.
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Demand for food will continue to grow more rapidly than supply. In the past decade, global agricultural output grew by 2.6%, yet future growth is projected at only 1.7% a year for the next ten years.
Meanwhile, the global population is expected to keep rising from about 7bn now to about 9bn by 2050.
This misalignment of supply and demand will push up commodity prices, a situation further fuelled by the fact that new technologies are required to re-establish yield growth, all of which requires investment, which ultimately come from charging more for crops.
Economic expansion in developing economies, especially Asia, adds further pressure as meat and grain consumption look set to triple for some of the world's largest populations.
"Whilst this issue provides us with an excellent opportunity as Investors to capture growth and income, at the same time attention needs to be paid to the poorest communities where a 40% increase in food prices pushes people into starvation," said David Garner, Partner at boutique agricultural investment consultancy; DGC Asset Management.
As the report projects food prices to remain 20% to 30% higher for the next ten years, investment capital needs to directed to basic farming infrastructure in poor countries.
Rising prices are not, however, simply a result of increasing demand, the copst of inputs is also rising according to the OECD and the FAO. Energy prices play a key role, as do the cost of nitrogen based fertilisers for which the manufacturing process relies hevaily on fossil fuels. There is also further pressure on water supply and land. So it is getting more expensive to grow food, whilst thre is no extra income to fund this from rising yields, so therefore prices must be raised.
"The old adage holds true, give a man a fish and he eats for one day, give him a net and he feeds his family for life. Whilst we are in business to make a profi, t we must ensure that we do not seek that profit at the expense of desolate local communities. If we operate in these countries as Western investors, we need to provide these people with the tools and knowledge to increase yield, stop losing crops to poor infrastructure and logistics, and sure up their oen food supply before stripping out all local value. " added Mr Garner
As the likes of legendary investors Jim Rogers and George Soros have already said; Investors buying quality agricultural assets at today's prices will one day own the world.
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