South American agriculture´s role in a global food crisis scenario
The world is facing a crisis in food prices and many analysts say that volatile figures may be here to stay. Global food prices reached record highs, exceeding those achieved during the food crisis of 2007-08. In fact, since July 2010 prices of almost all crops have increased dramatically. Recent events — floods in Australia, drought in Russia, poor crops in China — sounded an alarm about world food supply and pushed prices to the highest levels measured since the U.N. Food and Agricultural Organization began calculating its index in 1990.
By 2050, the U.N. Food and Agricultural Organization projects that world food production will have to jump by 70%. Much of that reflects growth in the world’s population, which is expected to increase to 9 billion people. But food production will need to grow even faster to keep up with the expanding share of the world’s harvest used to feed animals — as more people add animal protein to their diets — and to make fuel.
With record agricultural commodity prices, buying farmland is seen as a more direct way to cash in on valuable crops and to take advantage of long-term appreciation of farm property. As a result, investors from around the world are pouring a lot of funds into agriculture this year to boost yields across the top producer nations. According to late surveys, private capital investment in farming in expected to more than double to around $5-$7 billion in the next couple of years from an estimated $2.5-$3.0 billion invested in the last couple of years.
South America is expected to lead the global expansion in agriculture with surplus land and existence of large-scale farm operations in the region as the current global setting is simulative for those economies with greater real linkages to the more dynamic emerging economies. With more untilled arable land than any other country on earth, South America may be the world’s best hope to boost global supplies to contain rising food prices
Most commodity-exporting countries of South America are facing highly favorable conditions—particularly those with stronger fundamentals, who have easiest access to external financing and stand to benefit the most from low global interest rates. Foreign direct investment in the eleven economies of the region increased almost 20% during the first half of 2010 compared to the same period a year ago.
The region’s economy expanded 6% in 2010 and according to ECLAC´s latest report; South America will grow 5.1% in 2011. In terms of countries, the fastest growing this year will be Argentina (8.3%), Peru (7.1%). Uruguay (6.8%), Ecuador (6.4%), Chile (6.3%), Paraguay (5.7%) followed by Colombia (5.3%), Venezuela (4.5%) and Brazil (4%).
For its soils and weather conditions, abundance of natural resources, good infrastructure and the unique possibility of acquiring large extension of productive farmland; South America is indeed worldwide considered a top place to buy, lease and manage agricultural lands for profit. The region accounts for 59% of global exports of oilseeds, 11% of grains and 37% of meat; with Argentina, Brazil, Chile and Uruguay being among the top 10 food exporters.
Contact the Gateway to South America team to learn about the best investment opportunities in the region. The company is a benchmark for foreign investors wishing to invest in Argentina, Brazil, Uruguay and Chile, providing expert advice on property acquisition and investment tours.
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