Eclectica hedge fund manager Hugh Hendry says the world faces further commodity price rises and a potential food shortage if Asian economic growth continues unchecked, CityWire reports.
“Asia is putting on fantastic economic growth and if China or Asia does not have a great recession, we will have pressure on the food supply,” Hendry told the BBC, noting that years of underinvestment in agriculture and rapid population growth must inevitably take their toll.
“For 30 years, the price of agriculture has collapsed,” Hendry says, falling by 90 percent in real terms, which is why he hasn’t invested in the sector.
Hendry's global macro strategy macro hedge fund Eclectica Asset Management has come out number one in Bloomberg's year to date rankings of macro strategy funds.
“As a world society, we are now acutely vulnerable in the business of feeding ourselves because we have not spent enough and organized the production of agriculture in a manner that is appropriate.”
Another red flag, Hendry says, is China’s desire to pay less than going rates for the potash it needs to make fertilizer.
The price of potash, which is closely controlled by a small number of producing countries, including Russia, Canada and Belarus, has soared fourfold over the past decade.
Chinese authorities “are aggrieved and stop consuming and risk an absolute collapse in their yields,” Hendry says.
“China does have vulnerability in feeding itself,” he notes, observing that this may lead the Asian country to continue buying tracts of land and resources in Africa.
Reuters reports that Anglo-Australian miner BHP Billiton wants to buy Canada's Potash Corp for $38.6 billion, but the offer was rejected, leading analysts to speculate that a hostile takeover battle may be looming as well as the possibility of competing bids.
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