The silent tsunami has arrived.
The silent tsunami has arrived. The global food crisis is sending prices of everyday items such as rice and cheese soaring and economists predict that the world is entering a new era of steadily rising prices.
But while many families are facing further pain at supermarket checkouts, hedge funds have increasingly been placing speculative investments and are pouring billions of dollars into commodities such as grain for relief from sliding equity markets and the credit crunch.
Rising agricultural prices, growing consumerism in emerging markets and the growing demand for biofuels are prompting hedge funds not just to invest directly in the physical commodities market but also to buy agricultural land.
Reports suggest that hedge funds and investment banks are betting on rising food prices by buying farms. This new breed of investors in farmland believes the world is entering an era of high food prices where farming will once again become profitable.
Their timing is right. Experts have warned of price increases of up to 50 per cent on food staples before the end of 2008. Take for example wheat prices, which has risen 130 per cent over the past year to new all-time high last week.
History does repeat itself. This large-scale shift clearly illustrates how even pure financial players are transferring investment from paper-based markets into real assets.
