Water shortage creates new opportunity for farmland ownership

waterThis summer, as always drought in some parts of the world, is affecting agricultural crops in the news. But we feel there is something new about water that warrants looking at it from an investment perspective. Water has always been critical for life but it is becoming an essential determinant in the desertification of arable lands in a new way.

There are two issues of concern about potable water: its quality and its quantity. In developed countries water quality is a technological issue in a well-established industry. A bigger concern is how climate change is affecting our current food production.

In 2006, there was 1.15 acres of arable land per person, world-wide (i.e. 7.68 billion acres / 6.68 billion people).  By 2039, there may be only 0.59 acres of arable land per person, worldwide (i.e. 7.68 billion acres / 13 billion people). Food shortage equals conflict.

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Let’s conduct a simple experiment: imagine what would happen if you watered your house plants only once a month. If your houseplants are adapted to arid environments like cacti, you might get away with it. But if your houseplants are orchids with little tolerance to moisture stress, then they will wilt and die between watering events. You should contemplate trading your clay pots for a fish tank.

This simplest of experiments has been tested on a forage field and shows that agricultural ecosystems are at risk when rainfall regimes are affected, a likely scenario under climate change–note that I’m avoiding the term global warming to avoid an unnecessary debate.

In 1998-2001, long before climate change became newsworthy and the object of political spitting matches, my colleagues and I studied the impact of rainfall patterns on how agricultural ecosystems would react to climate change—this was a team effort of 6 scientists and technicians (source). Our premises were very simple: under climate change we expect to see more extreme weather events but more or less the same amount of monthly precipitation. For example, the best working hypothesis of climate change would be that the entire monthly rainfall, which normally comes as 5 or 6 rainfall events would come done as a single rainfall event. Remember the cactus vs. orchid example?

With my colleagues we created canopies over patches of fields and subjected them to different rainfall regimes: 30-year normal rainfall, one rainfall event a month, 2 rainfall events a months, 4, 8 and 16. For each of these canopies we manually watered specific amounts of water to match the different climate change scenarios.  We then measured growth and microbial factors to assess long-term ecosystem sustainability. Our results showed that modifying the rainfall regime changed ecosystem characteristics. In short, if it rains less often but still with the same amount of rainfall, plant growth will suffer and soil fertility will decline.  What we couldn’t address in our research is the speed at which these changes will take place but it is guarantied that productivity losses are quick. In short desertification will take place.

In turn, this will reduce the amount of arable lands on earth and increase the cost of food.

Arable land is being lost at the alarming rate of over 38,610 square miles (24.7 million acres) per year. Therefore, by 2039, there may be only 0.53 acres of arable land per person, worldwide (i.e. 6.865 billion acres / 13 billion people). At the current rate of loss of 38,610 square miles per year of arable land, and even if the population didn’t grow any larger, ALL arable land could be lost in only 310 years (12 million square miles / 38,610 square miles per year, source)!

For those who invest in the long term investing in agricultural lands seems an excellent opportunity.


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Dr. Luc Duchesne

About Dr. Luc Duchesne

Dr. Luc C. Duchesne is a Speaker and Author with a PhD in Biochemistry. With three decades of scientific and business experience, he has published 85 scientific papers, and has recently published his first novel, "The Moose Motel: A Tale of Golden Revenge". The Founder and CEO for GSN DreamWorks Inc. based in Ottawa, Luc is a regular columnist for InvestorIntel.
  1. Dr Luc,

    Ag land indeed! …. :)

    In a famous 1798 essay, Thomas Malthus argued that since
    population increases exponentially,unrestrained population growth
    will eventually overtake food production,resulting in famine.

    This theory assumed food is the limiting factor for human survival.
    However,other factors,such as availability of arable land,water and
    energy also play a role.

    Calculating the carrying capacity of the planet is not easy. Estimates
    over the last 100 years ranged from less than one billion to more than
    one trillion.

    ‘How many people can earth support’..is an exhaustively researched
    book written by Joel Cohen,and states that the human population of
    earth now travels in the zone,where a substantial number of scholars
    have estimated– ‘upper limits on population size’.

    The Chinese have tried since the 1950′s to calculate their carrying
    capacity.Two influential Professors in Beijing conclude that China’s
    ‘long term strategic goal’ should be at a figure below one billion,or
    ideally below 700 million. [ currently 1.3 billion]

    To add to their dilemma,China’s best farmland is in the arid north,
    where irrigation projects have tripled crop yields. But because of
    massive over pumping from rivers,demand for water is now critical.

    With salinity now affecting over one quarter of Chinese irrigated land,
    the unprecedented demand for Agricultural farmland in Australia and
    other nations-can only expand….rapidly!

    [China's beer consumption alone has already exceeded Germany's.
    It would take 370,000 tons [U.S.]. of grain just to give each Chinese
    ‘one bottle of beer.’ ]

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