First he called the Internet bubble; then he predicted the housing bubble; and now he says disaster is near because the world is running out of food. As the Wall Street Journal  puts it: “If it were anyone else, Wall Street would probably laugh him off. But because it’s Jeremy Grantham, they just might listen.”
Grantham, GMO chief investment strategist, believes the sky is falling and pulled no punches when interviewed by WSJ  about investment implications: “…oil, the metals and particularly the fertilizers, I would own — and the most important of all is food. The pressures on food are worse than anything else, and therefore, what is the solution? Very good farming, which can be done. The emphasis from an investor's point of view is on very good farmland. It's had a big run. You can never afford to ignore price and value, but from time to time you can get good investments in farmland, and if you're prepared to go abroad, you can do it today. I wouldn't be too risky. I would stay with distinctly stable countries — Australia, New Zealand, Uruguay, Brazil, Canada, of course, and the U.S.”
In a September report, Land Values Peaking Out — But Not Down, Rabobank predicts a value drop in U.S. farmland associated with grains and oilseeds. California, for example, with the widest spectrum of crop diversity in the U.S., shouldn’t take the land-value hit that might be coming for the corn-heavy Midwest. Against the backdrop of a record corn crop predicted for the U.S., corn has fallen 37 percent in 2013, the "biggest drop among 24 raw materials in the Standard & Poor's GSCI Spot Index." According to Bloomberg , "Demand for the U.S. grain (corn) fell the most since 1975 in the past year."
Rabobank tags looming interest rate increases as the greatest medium-term risk. From senior analyst Sterling Liddell: “We are entering an era where planning how you’re going to pay for your land is likely to become as important as planning for marketing your crop.”
Tilt warnings and risk
If agriculture commodity stocks continue to grow, will a price decline be significant? Grantham sounds a commodity warning: “They came down for a hundred years by an average of 70 percent, and then starting around 2002, they shot up and basically everything tripled — and I mean, everything … They've given back a hundred years of price decline and they gave it back between '02 and '08, in six years. The game has changed. I suspect the game changed because of the ridiculous growth rates in China — such a large country, with 1.3 billion people using 45 percent of the coal used in the world, 50 percent of all the cement and 40 percent of all the copper. I mean these are numbers that you can't keep on rolling along without expecting something to go tilt.”
One thing is certain: Cassandras and Pollyannas abound when making predictions about agriculture. The trick is deciding who is right.
Risk. Risk. Risk.
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