Food security is a concern and a soft commodities (commodities grown not mined) and rural land boom is being forecast to start in Australia. The growing risk of inflation as well as growing demand for soft commodities from Asia could fuel demand for agricultural land.
American commodities trader Jim Rogers, well-known for predicting the start of the commodities rally in 1999 and also well-known for his investment prowess, maintains:
“The shortages are going to get worse and the prices for land will go higher..
We have shortages of everything from oil to food and on top of that we have governments printing more money. Put the two together and you have some serious inflation coming down the road..
Governments will eventually put in place price controls but if you tell someone they can only make so much money he is going to stop producing. The Chinese are seeing this and that’s why they are out looking to buy assets. They are down here [in Australia] trying to buy up more..”
Jim applauds the sovereign wealth funds that have been buying farms, saying:
“We don’t have enough farmers or enough capital so if somebody doesn’t buy those farms then we are not going to have any food.”
Jim Rogers is actually here in Australia to launch a new rural land fund aiming to raise up to $350 million to buy farms in northern NSW, according to The Australian Financial Review.
Jim is advising a new ‘unlisted, closed end fund’, Laguna Bay Pastoral Fund, to test the domestic investor market first before opening the opportunity to offshore groups.
It will partner with farmers who have been earning yields that the top 10 per cent of Australia’s farmers are now earning.
The farmers will manage the properties and suggest which of the surrounding properties in which it would be wise for the fund to invest. So far there are 16 properties identified for acquisition covering 80,000 hectares.
“It’s the farmers, the producers who are going to be in the captain’s seat when the prices go through the roof,” says Jim.
At this time Australia, New Zealand and Brazil are starting to review their foreign investment rules in relation to agriculture.
Australia holds its first senate hearing into foreign investment rules into farms on Tuesday week.
Worrying uncharted waters…