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Impending Global Food Crises?

UN identifies requirement for six million hectares of farmland investment every year for the next 30 years

by Elvina

To service growing global food demand, the UN’s Food and Agriculture Organization estimates an additional six million hectares of farmland investment will be needed every year for the next 30 years, highlighting the opportunity for farmland investors.

Benefitting from this, Latin America is expected to become the agricultural epicentre of the world, as more and more dollars of foreign investment will find their way into the region.

The continent houses 42% of the world’s potential for agricultural expansion, estimates Victor Villalobos of the Inter-American Institute for Cooperation on Agriculture (IICA), meaning the region could prove to be one of the most under-explored agricultural regions in the world.

The last decade has seen a steady rise in food prices. In addition to population growth and an agricultural sector that’s trying desperately to keep up with demand. One of the safest ways for investors to guard themselves against this is through real assets that rise in value along with inflation. One of the strongest of these real assets is farmland.

The increased demand for farmed products, along with the drought across the Americas during the 2012 harvest meant that food prices reached record highs. Though rising food values are bad for the world’s poorest, these price hikes are actually encouraging farmers and food processors around the world to raise their levels of production.

Record prices attracting more farmers

The IICA says “the rise in food prices will create opportunities for exporting countries,” as illustrated by the fact Latin America provides a third of China’s agricultural imports. China’s booming population drives its appetite for agricultural products, and shows no signs of slowing down.

The IICA claim that in the past not enough has been invested in agricultural research and development in Latin America, but that is changing as due to high prices and demand, as well as a political environment which is attractive and friendly to foreign investors.

Latin America’s unique climate gives it its edge

Latin America also has an array of different climates. It’s a mix of jungle, coastal regions, mountains and flatlands, and this diversity is good for farmers because it means that practically anything can be grown there. The continent also holds the largest fresh water reserves in the world, with around a third of global holdings – of which half is in Brazil.

Areas on the west coast benefit from the warm waters of the Pacific and have strong fisheries. Chile and Peru are both in the world’s top ten fish producers. The Andes slopes provide Chile and Argentina excellent conditions for wine production, while more temperate climate in the east of the continent have plentiful land for Brazil and Argentina rearing cattle and growing grains (the two countries are amongst the world’s ‘big six’ grain growers, and main livestock producers). Farmers in Equador, Columbia, Venezuela and Northern Brazil are even able to produce two harvests each year, as they are both closer to the equator. In Central America and Brazil, sugar cane, coffee and tobacco are harvested as the tropical climate provides the perfect environment for its growth.

Food prices are not set to decline any time soon and Latin America is positioned as one of the most attractive locations for farmland investment. Currently the US, Eastern Europe, and Australia are all major food exporters that help supply more densely populated areas, namely Asia. The reason Latin America stands out is its potential to ramp up production.

*This post was published according to the "Contributed Article Terms and Conditions"

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