Food as an investment

Even expensive fuel is cheaper than cooking oil today. This is another argument for people who believe that food has become a strategic commodity. Strategic commodities deserve special attention as production capacities are limited, especially compared to the size of demand. Experts detected the first signs of change in 2002. Since then, food products have been following the price rises produced by oil, industrial metals and gold. There is no question about the trend being a long-term one. Food prices are rising at different rates in different regions, but the rise itself seems to be unstoppable. There are different explanations for this phenomenon. More protein is consumed in many developing countries and as a result, more maize and corn is used as fodder. High fuel prices have made bio-fuel competitive, which also translates to increased demand for grain. Subsidies are available in the EU for producing bio-fuel. On the supply side, the size of arable land is limited and the weather is becoming increasingly unfavourable for agricultural production world-wide, which means the grain supply is shrinking. In Hungary, banks have rediscovered the agricultural sector, as growing demand reduces the risks of financing. As a result of growing prices and EU subsidies, agricultural businesses have been producing growing revenues for the last two years. The agricultural sector has also become one of the favourite targets of private investors. Investment opportunities linked to the agricultural sector have also appeared in Hungary. According to the director of the investment division of a leading bank, food is the commodity which offers the most promising returns on investment at the moment. Price rises which are expected to continue at least in the medium term, also offer a promising investment opportunity for private individuals. Agriculture has turned into a priority target for investment in the last two years.