The Year 2020

You have two ways to increase the supply of food – find new fields to plant or invent ways to multiply what existing ones yield. The nations of the Persian Gulf are likely to see their populations increase by 50 percent by 2030, and already import 60 percent of their food. Many such countries, like Saudi Arabia understand the limitations of increasing agricultural production in desert geography. The Saudis see the same statistics as the rest of the world. Between now and 2050 the world’s population will rise by a third, but demand for agricultural goods will rise by 70 percent and demand for meat will double. Increasingly they are looking to the third world, notably Africa, snapping up land. The cold calculus is that Africa has the land, Africa has the water, but unfortunately, they don’t have the system or sometimes the financing to complete large-scale agricultural projects.

“Blood in the street” investing has come to the sleepy agricultural sector. Both increasing biofuel production and demand coupled with poor harvests in 2006 and 2007 illustrate the dangers and perils of food shortages and commodity hyperinflation – especially when the poor in the developing world spend between 50 and 80 percent of their income on food. But risk and danger always breed opportunity – investment banking firms like BlackRock and Goldman Sachs are showing increased interest in overseas agricultural development.

In the November 22, 2009 issue of The New York Times Magazine, in the article “Agro-Imperialism” – author Andrew Rice addresses what a Thomas Malthus like Year 2020 might look like:

“Beware of 2020 and beyond, because we think there could be genuine food shortages by that period,” Susan Payne, the chief executive of Emergency Asset Management, told the audience during a talk on Africa’s agricultural potential. She showed a series of slides citing chilling statistics: grain stocks are at their lowest levels in 60 years; there were food riots in 15 countries in 2008; global warming is turning arable land into desert; freshwater is dwindling and China is draining its reserves; and the really big problem that contributes to all the others – the world’s population is growing by 80 million hungry people a year. The United Nations Food and Agriculture Organization estimates that in order to feed the world’s projected population in 2050 – some nine billion people – agricultural production needs to increase by an annual average of one percent. The means adding around 23 million tons of cereals to the world’s food supply next year, a little less than the total production of Australia in 2008.

“Africa is the final frontier,” Payne told me after the conference. “It’s the one continent that remains relatively unexploited.” Emergent’s African Agricultural Land Fund, started last year, is investing several hundred million dollars into commercial farms around the continent. Africa may be known for decrepit infrastructure and corrupt governments – problems that are being steadily alleviated, Payne argues – but land and labor come so cheaply there that she calculates the risks are worthwhile.

Additional information on Emergency Asset Management - http://www.eaml.net/ and the Emergent African Agricultural Land Fund - http://www.eaml.net/