Emergent launches fund to buy farmland
LONDON (Reuters) - Emergent Asset Management is planning to launch a fund soon to buy farmland in sub-Saharan Africa for investors looking for exposure to agriculture.
David Murrin, chief investment officer at Emergent told Reuters on Monday that the money would go into the company's new African Land Fund (ALF), to be managed in a joint venture with South Africa-based Grainvest.
"Investors see that food security has become more important than energy security," he said, adding there was a lot of interest in farmland as an alternative to investing in grain futures, where prices have already surged.
"We believe agricultural land is important and the demand for protein and the focus on biofuels will mean much higher prices for maize, wheat and other grains.
Food prices have surged on shortages, partly created by the use of wheat and corn in biofuels.
Rising demand to feed livestock to meet growing appetites for meat, particularly from the rising affluence in emerging market countries, is another important factor.
Analysts estimate about 1.2 lbs of corn is needed to produce 1 lb of chicken and 3.6 lbs of corn to produce 1 lb of pork and about 6 lbs of corn to produce 1 lb of beef.
"Urbanisation in China and India will feed agricultural prices ... Biofuels impinge on human consumption," Murrin said.
Benchmark European wheat prices hit a record high of 295 euros a tonne in February. Prices have since slipped to below 190 euros a tonne, but they are still nearly double the levels they were at in January 2006.
"Prices of farmland have gone up globally. The average cost of farmland in sub-Saharan Africa is about $1,000 a hectare, one-seventh the price of land in Argentina," Murrin said.
"There is a huge gap between land prices in Africa and the rest of the world."
He admits there are political risks in Africa.
"But we can protect ourselves by diversifying, investing in different countries."
The fund's aim is initially to invest in 12 countries including South Africa, Namibia, Mozambique, Botswana, Zimbabwe, Angola, Tanzania, Zambia and Kenya and grow a variety of crops including wheat and maize.
"Climate change means some places in Africa will be drier and others will be wetter, we'll be looking to take advantage of that," Murrin said.
"Land/agriculture has been neglected for the last 30 years ... It will take time to change farming infrastructure policies ... There are new technologies and new management techniques we will be using to maximise yields."
The partnership with Grainvest will enable Emergent to create a new joint venture company called EmVest to manage efficiently large tracts of land across Africa, Murrin said.
"Grainvest is a prime player in African agricultural markets, they have a lot of people of Afrikaan descent, people who were brought up on the land, very capable farmers, very tough, full of initiative."
(Reporting by Pratima Desai; editing by Christopher Johnson)
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