Marc Schober is the editor of Farmland Forecast an educational blog devoted to investments in agriculture and farmland.
The fight for “food security”
Oct 22, 2009
Farmland is becoming a smart investment, but some may ask why. One reason is growing demand for grains, especially from developing countries. China has begun to reconsider their future “food security” by acquiring foreign farmland.
A recent article from the Financial Times explains how China is considering sending expatriate farmers to foreign countries where they will purchase farmland. China hopes this will be an answer to their food security issues.
The main reasons for China’s food supply concerns revolve around the population’s changing dietary habits and growing population. The Chinese are now establishing a “middle class” and are moving away from staple items such as rice to more protein such as meat. One might think that this would hurt farmland and help cattle farms, but it actually beneficial to both. To produce a pound of meat it takes roughly ten pounds of grain, which could increase grain demand tenfold. The growing demand for grain/meat should increase the value of row crop farmland, along with cattle pasture land.
According to Biofuels Digest, China’s meat intake per person went from 25kg (55lbs) per year in 1995 up to 50kg (110lbs) in 2000 and is now at roughly 53kg (117lbs) today. Biofuels Digest also noted, “China is consuming four times as much additional grain, since 1995, as the US ethanol industry, and demand is increasing by 615 million bushels each year.”
The growing demand for grains overseas will provide strong pressure on the value of farmland. Countries who need grains will either drive up farmland prices by wanting to buy the land, and grow it themselves, or by increasing imported grains from countries such as the U.S.
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