Agriculture’s new ‘golden age’

Peter Brabeck, CEO of Nestle SA, the world’s largest food company, foresees a struggle between the food and biofuel industries over arable land as fresh water supplies diminish.

“We will not find sufficient water to produce all the crops,” Brabeck said while reporting his firm’s financial results last week. “There will be a fierce fight for arable land.”
Arable-land acreage is indeed shrinking, even factoring out its conversion to production of fuel feedstock. Several million hectares of farmland disappear each year, as growing economies convert it into residential subdivisions and industrial parks. Declining fresh-water supplies further diminish the amount of land available for farming.

Farmers, for their part, have endured rising fuel, fertilizer and equipment costs. Some farmers, anxious to increase crop yields with more efficient equipment, are finding showrooms bare of certain high-demand tractors, harvesters and other equipment, for which waiting lists have lengthened. While still coming out further ahead than in previous years, farmers’ own rising costs have cut into their bonanza. And livestock producers have been hit with the same price shock as food processors, enduring steep increases in corn and other animal feed.

Most food economists are convinced that higher prices are here to stay, although probably not at the current nosebleed levels. That would be a relief to, among others, the $30 billion U.S. pizza industry, which has been hit with unprecedented hikes in flour and cheese costs. While packaged-food companies are caught in a squeeze, unable to pass along higher costs to shoppers due to recessionary trends in the U.S., some 5 per cent of China’s official inflation rate of about 6 per cent is attributed to spiralling food prices.

The Star