“Increased awareness of the math underlying the planet’s current population growth rate and how that’s going to impact our ability to feed the world” is one of the reasons he sees for a potential agri-tech boom this year.
Food commodity pricessoared in 2011, despite the muddling-along economy.
At year-end in 2010, Blackstone vice-chairman Byron Wien predicted “rising standards of living in the developing world seriously increase the demand for agricultural commodities,” adding that “commodities become a component of more institutional portfolios.”
He saw corn rising to $8.00/ton, wheat to $10.00/ton and soybeans to $16.00/ton.
While Wien did get corn right by New Year’s Day 2012, he missed on soybeans and wheat – but according to the UN’s Food and Agriculture Organization, FAO, their index of 55 food commodities grew for sixth straight months through December 2011, hitting 214.7 points.
That topped its previous peak in June 2008 by a point.
This drove big agricultural firms like Monsanto to beat street estimates all year on the growing demand.
While those firms are often criticized for burdening farmers, especially in the developing world, with high-cost seed and fertilizers, many analysts see them as part of the solution, providing a potential upside for agricultural equities.
Green Alpha’s Jabusch says that he has no problem with genetically modified seeds, for example, but that other agricultural inputs, like water, as also becoming a limiting factor.
Ironically, one aspect of climate change – the search for non-fossil fuels – could be causing part of the problem.
Food crop-derived biofuels, like corn-based ethanol, have effectively added every car on the road to the agricultural checkout line.
Kachan and Co.’s Dallas Kachan says corn-based ethanolwas “at least partly to blame” for these spiking commodity prices.
Even the “Arab Spring” uprisings across northern Africa and the Middle East might be more of a symptom of food supply issues than a political uprising, says Green Alpha’s Jabusch.
Jabusch says that while the uprising “did have some positive outcomes, like the removal of unjust dictators,” if it is food-driven, it will likely only get worse and more widespread.