Crop rotation in Campo Aberto: Corn/maize and cotton

Why farmland?

Powerful forces have been driving up the world price of grains in recent years and increasing the demand for productive farmland. The demand pressures include:

  • Rising world population;
  • Rising incomes in China, India and other developing countries (leading to increased demand for protein and meat diets);
  • Low levels of world grain stocks;
  • Government-sponsored policies to promote the use of biofuels to meet energy needs;
  • The effects of climate change on weather patterns;
  • Shrinking land base available for agriculture;
  • Slowing down in the productivity gains of the Green Revolution in the 1970s.

For all these reasons, after many years of falling real prices, countries around the world are faced with food price inflation and a growing imbalance between supply and demand for grain. Increasing food production has therefore become a global necessity.

This demand can only be met by an increase in the amount of land devoted to agriculture and/or by higher yields on that already under cultivation. Investment in new farmland capacity is however hindered by supply constraints. Many countries, for example, face a shortage of water and land that is capable of use as arable land. Others have introduced policies, such as price controls, that hinder the development of new capacity.

There is an important role for private sector capital to help develop new sources of supply for the world market.

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