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The smartest investment of the decade

Investing in agriculture

Here’s something crazy to think about: Roughly 200,000 people were born today. That’s net world population growth, births minus deaths.

Each one of them constitutes a new mouth to feed. And when they come of age, those 200,000 people will consume, conservatively, about 1,250 Calories per day. Collectively, that’s 91.25 billion Calories per year for the entire 200,000 people that were born today.

Where will they get that food from?

Consider that a cup of rice contains about 300 Calories. An average annual rice harvest yields about 150 bushels per acre, or about 6.7 million Calories per acre of rice grown each year.

In very simple terms, it will take 13,600 acres of cultivated, producing rice land to generate the necessary Calories to feed the 200,000 people that were born today. That’s roughly the size of Manhattan.

Tomorrow, another 13,600 acres will be required to feed the people born tomorrow. And the next day. And the day after that.

This is a conservative estimate. Obviously people eat other things besides rice. Corn has an even lower caloric yield per acre. And as people move up the food chain into dairies and meats, the amount of Calories per acre takes a huge nosedive.

Across Asia in particular, hundreds of millions of people are now being lifted out of abject poverty and into the middle class. As I’ve traveled around the world to more than 100 countries, I’ve seen this with my own eyes– people having disposable income for the first time ever.

As people’s individual wealth levels increase, their dietary habits tend to change as well. Suddenly they start consuming more expensive foods… ‘luxury’ foods like beef. And by comparison, beef yields only about 1.1 million Calories per acre.

Simultaneous to the rapid increase in demand for food, the world is also experiencing a declining trend in supply. Water shortages, loss of topsoil, weather disasters, land development, and insane government policy are all contributing to tightening food supplies.

Perhaps most importantly, though, is the effect of monetary policy. Central bankers around the world continue to print more money. That’s all they know how to do, as if the path to prosperity is paved with paper currency conjured out of thin air.

All of those trillions of dollars, euros, yen, and renminbi end up somewhere… and such monetary inflation has been a huge force in driving up food prices. In fact, just over the last few years, we’ve seen record prices from corn to wheat to sugar to ground beef to milk.

Increasing demand. Tightening supply. Destructive policy. All of these point to a long-term trend in food. And the trend is enormous. The best case scenario is steep food prices. The worst case scenario is severe shortages.

This makes agriculture probably THE place to be over the next ten years, perhaps seconded only by shorting major currencies like the dollar, euro, and yen.

There are a number of ways to invest in agriculture… ETFs, futures, food production companies, agriculture equipment companies, food technology companies, etc. But in my view, there is no better way to make a long-term agricultural investment than owning high quality, productive land.

Like owning physical gold, farmland gives you not only the financial upside of rising agricultural prices, but also the personal assurance of a guaranteed food supply.

Later this week, I’d like to discuss different places in the world where it makes sense to own farmland. Some of my recommendations may surprise you.

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About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

Comments on this entry are closed.

  • http://profile.yahoo.com/Q5UTQVUVHDEOSCDLTBLOXL7S3Q N765

    Incredibly interesting. I have considered investing in farmland. Now looking even more so into it.

  • disqus_DhtenrlYWe

    Who’s to say governments won’t just rip that land from you when things go south???

  • anon

    This is a good article…but, what about the “national defense authorization act”? There is a possibility that the federal gov’t will simply take your land. Is their any reason to trust this paradigm? NO!

    • markjames240@hotmail.com

      I think the idea is to invest outside of the US…

  • Derrick

    By far, the best place to invest in farmland is Saskatchewan, Canada. I wonder if you will address this in the coming article?

  • John Henderson

    Ok, 200,000 people were born today. And how many people died? I agree Simon. Population growth is a reality. But at least try and come across as balanced instead of the same Agora Publishing sensationalism.

  • Tommy Gun

    Read the message-200K is the net new people to feed each day. Farmers are the new kings!!

  • Mersaul4

    Did anyone wonder whether there is a catch to this article — a hidden assumption, which is completely indispensable to the sensational conclusion reached? I mean, will land prices *really* go to the moon?

    This article relies on the (mistaken) assumption that there will be no improvement in yield per acre. Sure, if there is no improvement there, we will need lots of additional land do feed a growing population.

    However, assuming a lack of improvement in yield per acre is incorrect. Most Third World countries have large agricultural production, but rely on old technology. There is immense room for improvement in productivity and yield per acre. There is room for improvement even in the US, which has advanced technology.

    As a result, agricultural output will grow substantially in the coming years even without the use of any additional land.

    In fact, the idea in this blog is more than 200 year old dating back to 1798. An economist called Thomas Malthus predicted wars, famine and death, because the pace of population growth had outpaced agricultural production. The prediction was wrong, of course. Massive improvements in productivity followed. So much so that the US is now a net exporter of agricultural products.

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  • http://www.wolfgangsomary.com Wolfgang Somary

    Have you considered droughts and floods, price controls, penal taxation on exports and the legal advantage of the tenant farmer over the absentee landlord?

  • Blink117

    They’ll flood the deserts and law bodies and organic waste to nutrient rich the soil.

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