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Why is George Soros selling gold and buying farmland?

Food prices are skyrocketing all across the globe, and there's no end in sight. The United Nations says food inflation is currently at 30% a year, and the fast-eroding value of the dollar is causing food prices to appear even higher (in contrast to a weakening currency). As the dollar drops in value due to runaway money printing at the Federal Reserve, the cost to import foods from other nations looks to double in just the next two years -- and possibly every two years thereafter.

That's probably why investors around the globe are flocking to farmland as the new growth industry. "Investors are pouring into farmland in the U.S. and parts of Europe, Latin America and Africa as global food prices soar," reports Bloomberg magazine. "A fund controlled by George Soros, the billionaire hedge-fund manager, owns 23.4 percent of South American farmland venture Adecoagro SA."

Jim Rogers is also quoted in the same story, saying, "I have frequently told people that one of the best investments in the world will be farmland."

That's because demand for food is accelerating even as radical climate changes, a loss of fossil water supplies, and the failure of genetically engineered crops is actually reducing food yields around the globe. Ceres Partners, which invests in farmland, has produced astonishing 16 percent annual returns since its launch in 2008. And this is during a depressed economy when most other industries are showing losses.

The Real Cost Of Food Inflation In America

Take a look at the chart we’ve constructed from the Bureau of Labor and Statistics 2009 Consumer Expenditure Survey. It conveys a sense of how Egypt’s poverty combined with the sharp rise in food prices sparked the political revolt against the Mubarek government.

The chart illustrates how the lower income groups in the U.S. really get squeezed when food and gas prices rise. In the U.S. the average annual income for the consumer units (households) measured is $62,857, where food expenditures consume a little over 10 percent of income.

But averages distort the true picture of what is really going on as only 15 percent of consumer units fit into this income group. Many have drowned in pools of water where the average depth is only 11 inches deep. Almost one third of the households in the U.S. spend close to or more than 20 percent of their annual income on food.