Agriculture to revisit the golden age of the 1950s and 60s? 27/06/2008 10:24:00 AM
If you missed agriculture's golden years of profitability during the 1950s and 1960s then stick around because they are about to return, says farm commodity analyst and former rural academic, John Chudleigh.
Emeritus Professor Chudleigh is bullish to the point of snorting and pawing the ground that a new era of higher global farm prices, particularly for grain, has dawned and won't end until the next major grain surplus.
"And I can't see that happening for five or 10 years," he told last week's AgriFocus 2025 conference in Sydney. It would take a decade of higher prices to drive the level of investment and research needed for the world to ensure its future food needs, he said.
But not all rural commodities will be winners from this forecast sustained burst in stagflation with the bullish professor ironically predicting beef prices were unlikely to stampede upwards because of their lack of competiveness with cheaper and more feed-efficient pork and chicken.
Dubbed "Professor Gloom and Doom" by his students at Orange Agricultural College, NSW, 20 years ago, Professor Chudleigh said world grain production and demand were now so tightly matched and stretched that a big natural disaster like a drought in a major production country could "set something alight that we have never seen before".
"Never in the history of the planet has its (farm) resources been so challenged to meet the demand of the market," he said.
World grain production was tipped to hit new planting and yield records in 2008-09 but that would do little to put a dent in rising demand being driven by the booming economies of China and India and the diversion of grains into biofuels, particularly in the US and the EU.
Coarse grains would run short next year as the world continued to lift pork and poultry production to meet protein demand, he said, which would force livestock feeders to turn to wheat.
In the coming 12 months China would import an estimated 38 million tonnes of soybeans from North and South America for its intensive livestock industries.
Professor Chudleigh said in the past six years farmers around the globe had lifted annual field crop plantings by 40 million hectares to 890m ha yet the world was still struggling with grain shortages that had sent prices for key cereal staples like rice and corn skyrocketing and triggered food riots in some countries.
"Even if we found an extra five to 10m ha of crop a year (by mixed farmers switching more land into cropping) we still won't meet demand," he said.
"Maybe I am getting carried away but I have never seen this before."
Professor Chudleigh retired as principal of Orange Agricultural College (now the Faculty of Rural Management, University of Sydney) in early 2000 but has also spent much of his working life monitoring world food and fibre markets and now publishes a rural commodity newsletter called Analysing Agriculture from Orange where he also has a beef farm.
He said the world food squeeze would also trigger a rise in protectionism and restrictions to trade as governments moved to combat higher prices.
"The World Trade Organisation and the Doha Round are dead," he said.
And while Mr Chudleigh said the fundamentals were in place to create a lengthy period of rural prosperity - most notably an underlying robust world economy, continued boom times in China, annual world population growth of 77m a year and the likelihood of economic recovery in the US - there were also some big negatives facing farmers.
The price of key inputs such as oil and fertilisers were rising almost weekly while higher interest rates were unlikely to put a lid on inflationary pressures as workers pressed strongly for wages growth to cover higher prices.
And there was the risk the world could be plunged into economic depression or wars because of higher food and resource prices and financial and political uncertainty.
And the biggest negative facing Australian farmers, as always, was the ongoing lack of water.
