The City’s fascination with farming

Everyone’s an expert on agriculture these days. Talk to anyone in the City: when they’re not boring you with how much copper wire it takes to build a satellite city outside Shanghai and what that means for mining shares, they’re telling you about soy bean yields in Brazil and the rising price of powdered milk. Fascination with food has been brought on by a sudden realisation in financial markets that there’s money to be made in farming. After several decades of stagnation, the prices of pretty much everything edible has started to soar. In Britain the price of wheat is up 90 per cent on last year and the price of barley up 100 per cent, while anyone who bothers to look at their supermarket receipts will have noted that milk, beef and sugar are ticking up in price too. The reasons behind this are now well known; the world’s population is growing steadily while the big Asian economies are producing a massive middle class with the disposable income to chuck a chicken in the pot pretty much whenever they fancy it. The result? A global rise in demand for protein, which has in turn (as Martin Vander Weyer observed here a couple of weeks ago) driven up demand for grain, on which most cows and chickens are fed.

This wouldn’t be such a big deal had it not coincided with the biofuel boom. In the US, George Bush has been humouring the Corn Belt by introducing silly targets for biofuel use and equally silly subsidies for biofuel producers. The fact that the targets are all but impossible to meet and that corn is a famously inefficient source of fuel (sugar is much better) are by the by: most green policies in the US are political rather than rational — just as they are in the UK, where the target is for 5 per cent of fuel sold at the pump in 2010 to be biofuel.