23 January 2008, 17:32 PM
  • A strong demand from the developing world, the increasing production of biofuels and the growing scarcity of water are among factors which will cause food prices to climb for at least several years, according to a new report by consultants, Bidwells Agribusiness.

The study, which shows soft – or agricultural – commodities have become prime performers in the investment market last year, describes world stocks as being at a 30-year low. Supply constraints will mean prices for food will continue to follow the upward trend started in 2007.

Commenting on a soaring world population, which sees 211,090 new lives on this earth everyday, the report states, “What is critical is that agricultural productivity is failing to keep pace. In 1950, grain production was 250 kg/person/year. In 1984, its historical peak was 339 kg/person/year. Today, it stands at less than 308kg/person/year. After nearly tripling from 1950 to 1996, the grain harvest has stayed reasonably flat for about a decade, and in the last years production has fallen well short of consumption, leading to a critical erosion of world stocks.”

There are doubts as to how long the period of growth will last and the report separates two schools of thoughts. The first ones hold that soft commodity prices will rise until 2009. This period would be followed by a fall from 2011. Others consider we are only in the foothills of the upturn. Historical graphs tend to show that, with agricultural commodities, prices increase for a decade before falling for two.

However long this upturn will be, this goes to show that the changes in food prices are not just a fad. However, this could open new horizons for the industry. The report claims that “There are opportunities for investment in a number of areas such as farm land and farming.”