Top investor warns on food crisis reprise

07/10/2010 | Phil Thornton

The world is on the brink of a serious food crisis, according to the well-known financial speculator and commodity bull Jim Rogers

The world is on the brink of a serious food crisis, according to the well-known financial speculator and commodity bull Jim Rogers.

Decades of failure by governments to invest in farming during an era of low prices had led the world with insufficient capacity to deal with a likely surge in demand for commodities from both households and investors, Rogers said.

“I’m worried about the world’s agricultural situation,” he told Emerging Markets. “The world is on a knife-edge. We could have gigantic food problems worldwide.”

Commodity prices will rise whatever happens to the global economy, Rogers believes. If the recovery kicks in, then demand for basic foods will rise. On the other hand, if the economy fails to recover and governments ratchet up quantitative easing, the extra liquidity will end up in real assets such as commodities.

“There are shortages of farmers developing, because farming has been such a horrible business for 30 years. If things are going to get worse, then prices are going to go higher,” he said. “The main reason [for that] is a shortage of investment for 30 years.”

Rogers is an outspoken advocate of agriculture investments and founded his own index, the Rogers International Commodity Index. He is involved in two farmland investment trusts.

His comments come in the wake of mounting concern that a surge in food prices could lead to shortages in the developing world.

Meat prices are at 20-year highs while lamb has hit a 37-year peak. The price of wheat – one of the most essential foodstuffs – is hovering at a two-year high while sugar and coffee have also posted long-term records.

Seven people were killed and almost 300 people injured violence in Maputo last month after the Mozambique government raised bread prices by 30%. The United Nations Food and Agriculture organization (FAO) last month warned that unexpected price hikes were a “major threat to food security” and recommended further work to address their root causes, although it played down fears of an impending world food crisis.

Rogers’s comments come as the World Bank plans to use this week’s meeting to highlight its concerns over rising food prices. Last month it said that volatility in food prices has been a key factor behind a rising tide of large-scale farmland purchases in the developing world.

It said many other governments had been caught unprepared by the increase in demand and made deals with outside investors without first clearly recognising existing rights.

Rogers, author of the investment book Gift to My Children, said politicians who blamed speculative investors for making money out of higher commodity prices would simply deter much-needed investment.

“Agricultural prices are going to go up a great deal because of terrible fundamentals over the past 30 years. We even have a shortage of farmers.

“Politicians will blame the evil speculators, but they had better kiss investors’ feet. Without someone investing and driving up prices, we will soon have no food at any price.”

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