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The World?¢‚Ǩ‚Ñ¢s Biggest Farmland Investment

Conscious that the world's population is creeping up minute by minute while available farmland is diminishing minute by minute, the G8 summit recently addressed the world hunger problem. The result is the biggest investment in farmland ever - the world's richest economies have committed funds to the tune of US$20 billion in a bid to solve the world's food shortages.

However, rather than provide food in the form of direct aid, the funds are intended to revolutionise agriculture in developing countries. The emphasis is on helping poorer countries improve their agricultural methods (and by extensive, their production levels); a step that should help these countries feed themselves. Some countries are even expected to become exporters of food in the medium to long term.

The agricultural proposal, known as the L'Aquila Food Security Initiative, has arisen on the back of the huge surge in global food prices last year when crops reached record price highs. Prices look set to escalate this year too because of worrying weather conditions in several key crop-producing areas. Argentina, the world's 3rd largest grain supplier, finds itself in the midst of the worst drought for over 50 years and as a result, production is expected to fall 19% this year. Things in the US, also a major crop supplier, are not much better with severe flooding jeopardizing a significant proportion of crops.

Agriculture is one of the few sectors of the world economy that have more or less weathered the current economic storm intact. Constant and growing demand for food means that soft commodities, particularly grain, are now one of the strongest sectors. The increase in the price of grain and soybean last year meant crop prices reached their highest levels ever. As a result, land investment is also strong with governments (e.g. Saudi Arabia) and institutional funds (e.g. Morgan Stanley) investing huge sums of money in the purchase of farmland in key countries such as Ukraine and Sudan.

But, although these investments may be big, none of the sums invested to date matches the US$20 billion pledged by the G8 in the bid to solve the omnipresent problem of food security. Unsurprisingly, Africa, the world's hungriest continent, is set to receive the bulk of the funds for long-term farming investment.

However, improving Africa's agriculture is not an easy task. Investment areas must be chosen with care to ensure agriculture is sustainable, livelihoods are protected and that the environment is preserved. Recent massive land investment in some African countries has been highly controversial and some projects have offered little tangible benefit to locals.

Like property investment, the key to successful land investment lies in careful choice of location, not easy since few places in the world offer cheap land and high-yield potential as well as guaranteeing a green investment. Ukraine and Russia are among the few countries offering this essential trio.

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