Food security fears drive fund farm investments

By Nigel Hunt and Veronica Brown

LONDON (Reuters) - Funds are increasingly looking to invest in farmland as a rising global population and changing diets lead to growing demand for food crops.

But the emergence of the asset class is not without pitfalls with the provision of food always highly political and a tentative global economic recovery potentially threatened by the H1N1 flu pandemic, fund managers said.

Some international development organisations have expressed concerns that farmers' rights in developing nations could be compromised by what some see as a "land grab".

"The case for farmland can be summed up in two words as far as we are concerned, food security," Susan Payne, chief executive of Emergent Asset Management, said at three-day World Agri Invest Congress which concluded on Thursday.

Payne said there were great financial rewards from investing in farmland, citing factors such as a shrinking supply of arable land due to climate change, increased production of biofuels and the rapid rise in the global population.

Meat consumption in China is also on the rise, further straining available resources. It takes several pounds of grain to produce a pound of meat.

Payne said Chinese meat consumption had risen to about 40 kg per capita from about 10 kg in the 1980s.

Craig Swanger of Macquarie Agricultural Funds Management said food security also had a flip-side and any government "lock-down" could deal a severe blow to the sector.