The seeds of wealth

Global grain price set to soar

Finweek English Edition - - Economic trends & analysis in the spotlight - GARTH THE­UNIS­SEN

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.”

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