What's the background?

In many countries around the world, the people and governments have almost given up on agriculture - just at a time when the future has never looked rosier. There are many drivers of change that mean agriculture is likely to make a big resurgence in the near future - and for many years to come.

What backs that up?

Look at some recent headlines:

• ‘Toll of climate change on world food supply could be worse than thought’, Physorg, 12/07
• ‘Experts make grim predictions for global food supply’, ABC, 01/08
• ‘Forget oil, the new global crisis is food’, Financial Post, 01/08
• ‘Why ethanol production will drive world food prices even higher in 2008’, Earth Policy Institute, 01/08.

The toll of climate change

A recent paper says that, whilst a warming of the planet may enable agricultural production to expand in some temperate areas, over 135 million hectares of farmland may be lost to agriculture in the developing countries, many of which are in the tropical and sub-tropical zones of the world. Climatic extremes have caused serious crop losses in Australia (30%+ for grain crops last year) and the USA (around 70% of the non-irrigated crops in several mid-west states were lost to drought last summer).

Demand pressures

Australian experts say that the world’s food supply is coming under increasing pressure because of a rising demand for biofuel and rapidly increasing demands from China and India - who have 40% of the world’s population. China has 20% of the world’s population but only 5% of the world’s arable land. As incomes rise so do people’s demands for more and better quality food. China is entering into contracts to secure millions of hectares of land in neighbouring Asian countries such as Indonesia and the Philippines to grow crops for food and biofuel. The hope in this way they can keep up with the growing demand and provide some degree of future food and fuel security

The global food crisis

One analyst believes it will be ‘the most crippling crisis the world has ever seen’. Raw food prices rose by 22% in 2007. Wheat prices rose by 92% in the same year. The price of corn has risen by 44% over the past 15 months. World food reserves are the lowest they have ever been. Unless things change, a third of the US corn crop will be used to make ethanol in 3 years time - exacerbating the problem. World staple food prices could easily double or treble over the next 3 - 5 years.

What does this mean for the sector?

Agriculture is likely to become a national priority sector in many countries. Relying on food imports is going to be a high risk strategy as the current food producing capability in the world is already stretched. Countries with highly developed modern agricultural sectors are likely to enjoy a boom in prices - similar to the oil and gas and mining sectors. How long it lasts will depend upon on how quickly the science and technology sector comes up with a new range of solutions that enable food production on a more intensive and probably quite radically different future basis.

Useful links:Global food crisis Grim predictions

Key question: Is this likely to be a long-term boom opportunity for the global agricultural sector?