“Living in the foothills of the Drakensberg one is surrounded by a great wealth of animals and plants and it is an amazement that in spite of all these gifts there are still people hungry in this area.”
The reason for this is clearly the absence of the correct structures, education and training e.g. the value of the communal cattle in the Drakensberg could be increased by billions of Rands if modern medicines and practices were applied to the herd. Many of the cows are not pregnant and are plagued by various parasites. What is the point of having sickly cows grazing valuable grass for months and months if not years?
Agriculture is in a state of crisis and it is no wonder that food price inflation is running at 9%. Farmers are an endangered species. They get no support. Their children want to live in the cities. There is no sustainability – no long term plan and the average age of farmers is approaching 60 years of age – not just in South Africa but world-wide. In South Africa farm crime statistics and farm murders have been the subject of heated debate for years and years.
Agricultural commodity supplies, in spite of the global financial crisis, are already very tight. On top of this the Indian and Chinese Governments are managing to lift hundreds of millions of their citizens above the poverty line. This will result in a huge increase in demand. Also significant and increasing amounts of grain are now committed to ethanol and beef production. This puts further strain on supplies.
The world is not only suffering from the reduced numbers of farmers but we are also losing agricultural land and topsoil at an alarming rate. It takes over 100 years for the earth to naturally develop 1 inch of topsoil. For every bushel of grain produced at least 2 bushels of topsoil are lost and some experts estimate that we are losing top soil at least 10 times as fast as it is produced and more extreme scientists claim that topsoil is being lost 100 times faster than it can be produced. And global warming – well we won’t even go there!
The point of all this is how rising agricultural prices will be tempered by the markets. More capital and skills will flow into these areas as demand increases and prices continue to rise to reduce demand. As this happens the value of fertile land will increase dramatically.
For the above reasons at some point a prudent investment in agriculture will look like a stroke of genius. There are a myriad number of entry points for investment in agriculture. You can invest in agriculture commodities, buy futures, invest in fertilizer companies, seed companies, genetic engineering companies and tractor companies to name just a few.
And it would not be wise to restrict yourself to one country. Canada, Australia, New Zealand and Brazil have very strong agricultural sectors. If you invest in these countries you gain the advantage of currency diversification and possibly currency gains. These currencies have also been phenomenal investments.
Let’s face it, farming is a real activity and a real business. It is not like being an options trader on the New York Stock Exchange. Farmers need support and encouragement from everybody.
If South Africans don’t get the right political structures in place and provide true security of land tenure then we must all prepare ourselves for a massive increase in unemployment and food prices. This is an absolute and harsh reality.
Still, the best investments are fast growing small companies with honest and involved managers. These companies are often growing faster than most people realise and if they are involved in the right area of agriculture this could be a welcome profit kicker!