The sustained increase in prices of commodities has caused the price of key crops such as rice to increase by more than 75% over the last 10 years (IMF figures). Productive agricultural land has also increased significantly in price and this is set to be boosted by expanding populations and a general shortage of good land. As land continues to be put to other development uses, rather than agriculture, pressure grows on the remaining producers to keep up with demand from an increasing world population.
This pressure is already at intense levels and demand for staple foods such as rice is extremely strong. Global rice and wheat production is now so tight that poor weather in any of the key rice and wheat producing regions can lead to severely escalating prices.
According to the Financial Times rice farmers in India may be affected by the delayed monsoon, and some commentators believe the monsoon crop could fall as much as 20 – 25%. India is one of the world’s largest rice producers and it is expected that global demand will outstrip supply significantly. Thus, there is little sign of the pressure on food producers abating. One way to benefit from rising commodity prices with a growing world population is to invest in agricultural land. This is a tangible asset that should see capital appreciation, annual income plus provide asset appreciation.