Global Farmland Disappearing
An investment tip from Mark Twain: "Buy land. They're not making it anymore."
Farmland is disappearing across the world at an alarming rate. Hundreds of thousands of acres across the globe are disappearing due to climate change, erosion, and urban development. The American Farmland Trust estimates that farmland is disappearing at a rate of 2 acres per minute.
The National Soil Tilth Laboratory in Ames, Iowa, highlighted, "Each human on earth lives off the farming equivalent of about a third of a football field today. Population growth and urbanization will shrink that available land base in half by 2050."
African farmland disappearing
Africa could lose 247 million acres of farmland by 2050 due to climate change according to Environment Science and Policy. This potential loss of farmland is substantial as the U.S. has approximately 246 million acres that support the top eight producing crops.
Much of Africa’s farmland is hot and dry to begin with, and now with changing climates, a substantial amount of farmland is being lost because the crops cannot handle an increase in temperature. Small changes in temperature can cause a significant reduction in production. The National Academy of Sciences estimates that for every one degree Celsius (1.8 degrees Fahrenheit) increase, wheat, rice, and corn yields decline by 10%.
In the African regions, the 90 day grow-cycle needed for many crops is what’s at risk. The growing season is shortening. The farmland will no longer be fertile and be able to produce crops. Environment Science and Policy found that in dry farming areas, one out of six crop seasons are affected by dry climate, and that number is bound to increase.
The study claims that if proper action is taken this far in advance, small farm communities can still be saved. Philip Thornton, co-author of the paper, noted "Though unsuitable for crops, the land could still sustain livestock, which are more tolerant to heat and drought."
Although the African farmland can still be used as pasture, the farmland will no longer be fertile and be able to produce crops. This will significantly reduce the global production of grains and throw a curveball for the supply and demand of farmland globally.
U.S. farmland disappearing
Farmland has also been disappearing in the U.S. due to urban development. Farmland has been used to create new highways, industrial parks, and housing developments. . The American Farmland Trust estimates that between 1992-1997, more than six million acres of agricultural land, an area the size of Maryland, was used for urban development.
There has been a 5% decrease in farmland in the tri-state area of Alabama, Tennessee, and Georgia from 1987 to 2007. Wisconsin's farmland has decreased by 19% from 1978 to 2008. Virginia lost 521,000 acres of farmland from 2002 to 2007.
The decline in farmland has lead to the U.S.'s food supply being grown in smaller areas with a higher concentration. The high concentration of crops is dangerous because of the risk of: drought, floods, insects, disease among crops, and depleting quality of soils. The U.S. food supply could be at risk as any unexpected interruption in the food chain such as flood, disease, or drought, could wipe out a significant portion of food production.
The global land grab
Developing nations have begun to reconsider their future "food security." By 2050, the world will have to feed 3 billion more humans with significantly less farmland. To solve this dilemma, countries such as China, Saudi Arabia, South Korea, and United Arab Emirates have purchased farmland across the globe to ensure a consistent availability of grains. The countries have sent expatriate farmers who will harvest the crops and directly export the grain back to their home country.
Saudi Arabia has spent $100 million to lease land in Ethiopia to raise wheat, barley, and rice. In Sudan, South Korea has signed deals for 690,000 hectares, the United Arab Emirates for 400,000 hectares, and Egypt has secured a similar deal to grow wheat. Private companies are also acquiring land. Sweden's Alpcot Agro bought 128,000 hectares of Russian farmland, South Korea’s Hyundai Heavy Industries acquired 10,000 hectares of eastern Siberia, and Morgan Stanley, an American bank, bought 40,000 hectares of farmland in Ukraine.
How is farmland going to be affected by this?
With this much farmland now at risk of being taken out of production, the demand for farmland will undoubtedly be affected. Farmland is a natural resource with no substitute and cannot be replenished. No more land is being made.
Whenever supply and demand curves become distorted, an investment opportunity can arise. The growing importance of farmland and the limited supply provides farmland the potential to become one of the best investments available over the long-term.