The reach of Russia’s war on Ukraine extends much farther, and further, than the immense loss of life and the destruction of the way of life of the Ukrainian People. Leaving aside the very real risk of the use of nuclear weapons and the damage they would do, the war has already caused food shortages well beyond Ukraine’s borders.
Ukraine is known for being immensely fertile, and as one of the world’s largest producers of wheat and sunflower oil, the country is rightfully nicknamed the “Breadbasket of Europe.” Also blessed with deep seaports, Ukraine was, at least pre-war, one of the three largest exporters of grain on Earth.
“War in Ukraine sparks concerns over worldwide food shortages,” France 24 reports, which can already be observed with food shortages in Ukraine as well as North African countries such as Egypt, Tunisia, and Algeria, and in the Middle East. There is a particular concern for countries in the Global South that cannot endure the rising price of wheat. “The UN Food and Agriculture Organization (FAO) estimates that an additional 8-13 million people worldwide face undernourishment if food exports from Ukraine and Russia are stopped permanently.”
The emerging global food crisis and shortages of wheat are aspects of this war that some have yet to consider. Another source further states, regarding FAO’s estimation of the impact of food shortages, “What they do not even mention is the shortage of fertilizer. Both [wheat and fertilizer shortages] together threaten a continental-scale famine where that number of eight to 13 million new people facing hunger is probably 10 times that.” Russia and Ukraine combined are the exporters of 28% of the world’s fertilizer, and the disruption of the war has led the price of fertilizers to skyrocket.
What might this development mean for U.S. investors? Well, just as Walter Brooke gave a young Dustin Hoffman one word of advice (“plastics”) in 1967, Financial Poise has been speaking out since its founding about the benefits of farmland as an investment.
Since the 1980s, farm real estate has increased at a steady rate, and data from 2000-2010 reveals that this asset has retained its value. New data supports the notion that the value of farmland is increasing, revealing a 5.7% increase in the value per acre from just 2020-2021, with an overall increase of 4.4% over a 20 year period.
Back in 2010, there were already predictions that we would see the need for massively more food production:
"'Demand for food is soaring. The world has consumed more food than it has produced in nine of the past 10 years,' [according to] Susan Payne, chief executive of agricultural investment firm Emergent Asset Management. Another billion mouths to feed will probably be added in the next 15 years. 'We expect to see a resource war around 2020,' says Ms. Payne."
That last sentence has, unfortunately, proven remarkably prescient.
The impact of the war has already started affecting the world on a global scale, causing a strain on resources to cultivate and export heavily demanded products. And while farmland remains relatively illiquid as compared to publicly traded securities, it is becoming far more liquid than ever before for the very reason that the asset class is growing in demand. For more on the investment thesis, read the Financial Poise article, Can You Get Wealthy Buying Farmland as an Investment?
If you have an interest in farmland you will want to consider what sort of farmland to invest in. And if you are not interested in farmland but are interested in “farm-adjacent” investing, the food and grocery market is a $12 trillion industry that may attract your attention.
Either way, consider whether environmentally friendly investing may be the way to go. Read The ESG Investor and the Food Revolution: Embracing a Plant-Based Diet to learn more about such opportunities. And if you like the notion but would prefer to invest in publicly traded companies, we direct your attention to Sustainable Funds Are Off to a Rough Start to the Year.
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