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Monday 21 Aug 2017 | 13:10 | SYDNEY
Monday 21 Aug 2017 | 13:10 | SYDNEY

Equity food?

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COMMENTS

22 July 2008 18:27

The world economy really is working in interesting ways at the moment.

The push by rising economic powers like China and India to secure ownership of foreign oil assets – sometimes described as the search for equity oil – has received a lot of attention. Despite the scepticism of many economists regarding the efficacy of this strategy, the proposition that ownership is an effective solution to energy insecurity continues to have its supporters.

Now there are signs that the same approach may be applied to food insecurity. According to this WSJ story, ‘Saudi Arabia and other Gulf nations are scouring the globe for agricultural investments to lock in supply of key crops like wheat, corn and rice, much as countries like China have invested billions to secure a steady stream of oil’. Chinese investors are reportedly interested in similar deals. 

According to the article, the Saudis are responding to a food import bill that has grown by an average 19% p.a. over the past four years. High food prices have certainly created renewed concerns about food security.  And the decision of some major exporting economies to impose export restrictions has created an additional source of anxiety.

There also seems to be an interesting bit of circularity here: high oil prices have been one of the major drivers of high food prices, both by pushing up the costs of key inputs such as transport and fertiliser, and by driving a demand for biofuels, which has squeezed out land from food production. At the same time, booming oil revenues are turning the Saudis and other Gulf players into even bigger global investors at a time when many conventional financial investments are looking pretty unattractive.

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