Agriculture is the New Prized Asset
The conspiracy of the "end times". We are all familiar with its colorful images: riots, catastrophic weather conditions, and food shortages. Do any of these have validity?
Well, according to the reticent actions of various wealthy nations such as China and the UAE (United Arab Emirates), there is a race for agricultural assets. In other words, vast territories of land are quietly being acquired by opulent conglomerates to protect their food supplies. What's even more mysterious is that most of the food being produced is outsourced. While some of the wealthy Americans are spending time donating to questionable charities and buying super cars, the elite of other nations are purchasing land in foreign countries to produce quality food in abundance.
The all-out land grab began with the 2008 commodity price boom that caused a global food shock. Yet, for the past decade countries such as China, Egypt, Saudi Arabia, Kuwait, South Korea, and the UAE have spent billions of dollars buying and leasing voluptuous tracts of agricultural land throughout the world. Interestingly enough these tracts are in nations such as Brazil, Argentina, Uganda and Tanzinia. All places with the most fertile soil, equipped with silt and all.
To give an idea of what's going on, lets go over some news that wasn't plastered as entertainment news to the front of the Wall Street Journal. In the 1980s, Japan bought a half a million acres of land in California, Colorado, Florida, and Montana to raise grass-fed cattle (not grain fed). In 2008, the Chinese government was found to have contributed $21 million to develop around 200,000 acres of farmland in Russia to grow soybeans, rice, and other vegetables. Later that same year, the Saudi bin Laden Group announced that it was spending $4.3 billion to create a farm in the dense forest land of New Guinea, the catch? The farm is roughly the size of Conneticut. Moving ahead to 2009, Saudi investors paid $100 million for a wheat and barley farm in Ethiopia. These stories are almost like a trend, there are endless amounts of them. Carl Atkins of Bidwells Agribusiness stated that, "Agriculture is becoming a major strategic asset".
Why are these countries doing this? Of course one motivation is insulation against a potential future food shock. The other? Wealth. These agricultural expenditures are looked at as investments. They are being put into portfolios by investment groups (did you know there are agricultural hedge funds?) with the expectation of returns exceeding 400% in ten years. I think it's time American investors diversify into quality and long term assets before there is a substantial wealth transference.
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