An article published in the may 16, 2012 of The Financial Times1 indicates that the Chicago and Kansas City Federal Reserve Banks are recording a significant escalation in farmland values.
In the Great Plains––the broad expanse of land that lies at the heart of the U.S. and east of the Rockies––farmland prices rose by 20 percent in two years, the first of such increase since the late 1970s. Prices for arable irrigated land increased by 32 percent, the largest advance registered from one year to the next. And the situation is identical in the Midwestern Corn Belt, the region bordering the Great Lakes.
How can we justify such farmland price increases?
In an environment of population growth and rising living standards, the demand for food products is currently supporting relatively high agricultural prices, and most experts feel that prices should remain bullish in the upcoming years. Various American observers note that such rising prices are turning farmland into particularly attractive investments for farmers looking to expand, and most of all for investors and financial executives.
Such farmland price upsurge in the United States is reminiscent of worldwide farmland acquisitions, a trend not solely triggered by nations intending to safeguard their food supply. In the past few years in fact, investment funds have initiated acquisitions of farmland, which is considered a genuine strategic asset in a context of high prices. Some experts are indicating that a total of 560 million acres of farmland were bought or leased worldwide since the early 2000s, that is to say four times the size of France2.
Confronted with mounting food and non-food requirements, global output needs to be increased. With this in mind, investing to convert currently not cultivated land into farmed land and increase existing crop yields, represents a crucial imperative, under certain conditions.
It is indeed important to ensure that the investment virtuous circle––“investment, rising agricultural output, improvement of global food security––is not reversed to lead to an investment vicious circle, marked by a purely short-term vision that will bring about rising unfettered speculation and agricultural price volatility, and thus higher food insecurity.
Establishing a world agricultural governance system is therefore required, as currently advocated by an increasing number of experts and decision-makers3, so that these investments effectively and lastingly support the worldwide development of production capabilities and the improvement of global food security.
2 Oxfam September 2011 report, http://farmlandgrab.org/post/view/19762
3 See momagri May 7, 2012 article “Global land purchases: Toward global governance? http://www.momagri.org/UK/a-look-at-the-news/Global-land-purchases-towards-global-governance-_1095.html