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On today's episode of Monetary Matters, we're doing something a little different. We're going to talk about farmland and food security and why I think this is one of the more underappreciated real asset stories in markets right now. Everyone on monetary matters is used to talking about inflation, interest rates, the Federal Reserve, but there's a slower moving, more structural story sitting underneath all of that, which is that the world's arable land base is shrinking at the same time that the world's appetite for for food and specifically protein is going up. That tension is about to get a l
Thank you, Jack. Excited to be here.
I'm excited too, John. Today, we're going to be talking about food and food security, which really is the most important topic in in the world. And obviously, it touches on macro a lot. Interest rates impact farming. You know, food prices are a key input into inflation and obviously the most important element in in in in human life. So you're currently running a fund, but you've been thinking about this issue for a lot longer than that. Tell us about when you were an agricultural economist at the World Bank, your thinking on this issue.
My time at the World Bank was great. After grad school, I went there and worked and studied food supply. And really, bank was interested in the question, we have so many people moving to the middle class in East Asia, about 200,000,000 a year at that time. And then moving to the middle class in East Asia at the time in late 90s, turn of the century, meant that you were moving from one meal a day with protein to two meals a day with protein, Not going out like we think in The US and buying TVs at Best Buy, but you were moving up the protein scale. And what has happened throughout time, and if y
So to set the stage, demand is growing, not just because there are more people, but their consumption of protein goes up. Me eating wheat takes a lot less wheat than me eating a chicken that eats wheat or corn or something And like then the amount of land is going down. And why did... Then you said stockpiles used to be at one hundred and ten days and now they're at roughly seventy days. Why is that?
There's a lot of factors, shrinking tighter global supplies with shrinking amounts of land that is used. Water has been a big impact on that. You're correct in saying it takes three parts, three to five parts grain to make one part protein. So you eating corn is different than you eating a chicken that needs corn as part of their diet. May take three parts corn to make that chicken edible for you. Three times
as much. Yeah.
Three times as much. Yeah. So so therein lies a constraint. We need more and more row crops as animal feed or are growing protein consumption, not only in The US, but globally. So you go back to the point of like, why is that? Why are supply so tight? I can give you one example of how water and climate impacts the equation. California, for the last five decades, has been the largest rice growing state up until this decade. They had the water, they had everything you need. They grew roughly 500,000 acres of rice every year, leading The US by a landslide. Now they do closer this decade, it's clo
Everything we've talked about so far has been on the negative side, rising demand and falling supply. The one positive, and it has been a massive positive, is rising agricultural productivity. That's why people like Thomas Malthus or other people who said, Oh my God, there's not going to be enough food in the world. It can't sustain a billion people, let alone 7,000,000,000 people. They've
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