Peak Food

In this weeks Farmers Weekly, Mark McAndrew says that rising land prices are due to several factors.

Last year the EU had a buffer stock of 14m tonnes of grain. This year we are down to a tiny 2.5m tonnes. There has been a boom in biofuels around the world and the drought in Australia has severely dented supplies.

He also mentions the figures from the worldwatch institute in Washington which suggests that about 5-8 billion hectares of land go fallow every year due to their deteriorating quality.

Because investors believe this is not just a blip but a long term shift in the supply/demand balance, they are in the market not just for farmland but are also in to food commodities and shares in companies that supply farm equipment, fertilisers etc.

Of course, we have been pointing this out from well before the current price rises in grain began. In late spring wheat was trading at £90/tonne. Now it is about £160/tonne. Hopefully the 2008 northern hemisphere harvest will be a good one because with allmost no carry over stock, a bad harvest would be a real disaster.