The seeds of wealth
Global grain price set to soar
MARC MCLORNAN, founding member of agricultural investment company Agro Terra, says rising global incomes are going to result in surging meat demand – and prices – over the next decade, with direct implications for grain prices.
“It takes nine kilograms of grain to produce one kilogram of beef,” says McLornan. “And given that over the past six years the demand for corn – the dominant global feed grain – has outstripped supply, we should see a surge in grain prices over the next 10 years.”
Consider the 20%/year growth in Chinese beef and chicken consumption, along with the fact that 67% of global grain supplies are used as animal feed, and McLornan’s theory quickly enters the realm of plausibility. He says the demand for maize by the US biofuels industry – projected to rise to 30% of US maize production by 2007/2008 from an estimated 6,4% in 2001 – will put further upward pressure on prices.
While consumers might find those price increases hard to swallow, investors could make a packet on the futures markets.
“Anytime the price of grain drops you should buy, because those demand and supply fundamentals are going to drive grain prices higher over the next five to 10 years, which presents a once-in-a-decade opportunity to make money.”