Agflation Watch

Financial Times (4/24) has an interesting article titled commodities boom drives up land values. In the UK, farmland prices have risen 40% over the past year. There is at least one UK investment fund dedicated to the purchase of farmland, and the operation of farms, on behalf of investors. In the Ukraine, prices for the best farmland are expected to double over the next year. And in Serbia, there’s an increase from of more than 40% over the past year. Farmland prices have been going up significantly in the US, too, although the FT article doesn’t mention any numbers.

On the same page, FT has another article: EU warned over cut in number of pesticides. Excerpt:

European Union plans to restrict chemical use by farmers in Europe could reduce harvests at a time of global food shortages, farmers, academics, regulators and pesticide makers warned on Wednesday.

Crops such as apples and hops could no longer be grown on the continent if EU draft plans are not amended, they said. Wheat and potato yields could drop by almost a third, according to industry-sponsored research.


Research commissioned from Italian consultancy Nomisma forecast drops in yields of about 30 per cent by 2012. The EU would lose its self-sufficiency in wheat, potatoes, wine and cereals.

(Here’s a letter to the editor from someone who strongly disagrees with the thesis that these pesticide controls will be devastating to European agriculture.)

Via the interesting site Gongol, here’s an article about the growing shortage of fertilizer, with comments by Norman Borlaug.

As a counterpoint, both John Hussman and Anatole Kaletsky argue that the current commodities situation has some attributes of a bubble.

3 thoughts on “Agflation Watch”

  1. Well, yes, the commodities boom is of course having an effect on the price of Ag Land.

    However, within hte EU there’s another matter. The subsidy regime is changing from one based on historical production levels to one purely upon acreage. You own registered Ag Land, you get a check. Depends on the quality of land, of course, but for good arable in England, say €150-€200 a acre per year.

    As anyone who has read their Ricardo will know, this acts simply as an increase in the rent from said land and will inevitably push up land prices.

  2. Very minor requirements to manage it in an “environmentally sound ” manner. You can also sell your subsidy stream should you so wish, but as the buyer of such you have to also have so called “naked land ” (ie, land which doesn’t receive subsidy) which you can allocate it to.

    Scotland has a great deal of naked land. England almost none (subsidies are not transferable between the two countries). The cost of renting naked acres against which to put your purchased subsidy stream is some £5 an acre in Scotland, £50 an acre in England.

    Buying a subsidy stream in Scotland costs, as a capital sum, some 3 times the annual subsidy. The same stream in England costs some 1.2 times the annual subsidy.

    Very Ricardian, no?

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