Food Prices to Remain 30% Higher for Ten Years According to UN and OECD
The UN Food and Agriculture Organisation expects food prices to remain 30% higher for the next ten years.
- (1888PressRelease) June 24, 2011 - A recent report from the OECD and UN Food and Agriculture Organisation (FAO), warns of sustained increases in food prices in anticipation of the G20 summit of agriculture ministers in Paris this week.
The report, aimed at encouraging affirmative action amongst agriculture ministers in the world's most powerful nations, suggests that although a bumper global harvest could temporarily supress prices from their recent highs of £200/tonne for wheat, at the same time cereal prices are likely to average 20 percent higher than the previous decade, and meat prices could average up to 30 percent higher.
Although crop prices are expected to remain high, the report indicates that price levels would remain below the recent peaks experienced in 2007 and 2008.
"Although not great news for the man on the street, investors holding prime agricultural assets such as productive farmland are likely to reap the benefits", said David Garner, partner at boutique agricultural investment consultancy; DGC Asset Management.
The report, entitled The OECD-FAO Agricultural Outlook 2011-2020, recommends boosting agricultural productivity in developing economies, whilst working toward a reduction in red-tape and legislative barriers to investment.
"We are seeing excellent income returns from farmland investments, and long-term price appreciation in commodities is reflected in the value of the underlying assets, which means we can use farmland investment to hedge inflation and generate income at the same time," added Mr Garner.
French president Nicolas Sarkozy intends to use G20 the summit as a platform to call for tighter controls on commodity speculators, and provide more transparent markets through the implementation of a shared central global database of food prices.
Demand for food is increasing at an alarming rate, with around 3 billion more mouths to feed by 2050, and crop yields are increasing at a much slower pace than ever before and we lose quality farmland every year to urbanisation and climate change.
Mr Garner added, "It is worth noting that increasing food rpices have an extreme impact onm the world's poorest communities, with many simply having to eat less as prices continure to spiral. It's essential that when we invest in agriuclture, we do so responsible and take firm account of the consequences of our profit making endeavours".
The general consensus is that any long-term solution to any impending food crisis involves increasing agricultural production, which requires investment capital to investigate new technologies and bring more land under cultivation. With large pension funds and other instituional investors choosing to invest in farmland and forests for long-term returns, many samller investors are now keen to take a stake in what will arguable become the world's most valueable asset class - food.
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