The best bet for long-term profits is grain, argues Mark McLornan, founding member of Agro Terra – a global farming company.
“When incomes rise, so does meat consumption – growth in beef and chicken consumption in China is running at 20% a year. It takes nine kilograms of grain to produce one of beef. Already, 67% of global grains are used as animal feed, so this surge in demand will have a huge impact on the grains market. Demand for biofuels is making matters worse. Corn used in fuel production in America is set to rise from 6.4% of U.S. corn production in 2001 to 30% by 2007/2008.”
McLornan says that stocks of corn and wheat, the main global grains, are at record low levels. And as demand rises, it is getting harder and harder to expand supplies. Fertilizers have added to output greatly in the last 50 years, but additional inputs of fertilizers now produce diminishing returns. Nor is it easy to put new land into production. While land is available, water is scarce. And as populations and human development increases, agriculture has to compete for water with other uses.
“I believe the fundamentals make grains a once-in-a-decade opportunity,” says McLornan.
Markets and Money