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June 28, 2009

Water woes seen as opportunity for agricultural investors

by Carey Gillam

Water scarcity is a growing problem for rural and urban areas alike around the globe, providing an opportunity for investors, according to leading agricultural experts and investment strategists.

The costs of accessing water are on the rise with world supply under pressure from high usage, particularly in agriculture, inefficient infrastructure, environmental pollution, climate change and other factors.

With a world population estimated to surge past 9 billion by 2050, ownership and access to water to grow crops, nourish livestock and provide energy will be key in the coming years.

"In the future, water will be more scarce than ever," said Adrie Zwanenberg, a food and agribusiness specialist with Rabobank International. "We have to find solutions wherever they are."

Water shortages and potential investment opportunities were the topic of discussion in late june at an agricultural investing conference attended by about 200 financial and corporate agriculture representatives.

About 70 percent of global water used is for agriculture, and in some developing countries where populations are growing fastest that figure is as much as 90 percent. Australia's drought helped sharply boost global rice prices last year. Companies that make products that require large amount of water, such as meat and biofuels, are seen facing increasing risk as water becomes more scarce.

With this in mind, there is a need for a variety of new technologies, system modernization, irrigation improvements and more drought-tolerant crops, among other potential investment opportunities, Zwanenberg said.

Projects in Africa are particularly in need of water-related investment, said Susan Payne, CEO of Emergent Asset Management's African Agricultural Land Fund.

"Water is key," Payne said. "Water is going to be a fantastically scarce asset."


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