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Merryn's Blog

Organic food - not only a con, but dangerous too

Sales of premium-priced organic food have slumped this year, with demand for organic vegetables down more than a third, and for fertiliser-free fruit falling nearly 16%. But while that's bad news for the sellers of vegetable box schemes, not to mention Tesco (who sell over £1bn worth of organic food) it might just be good news for humanity. Not only are there no demonstrable health benefits from organic food, it is also incapable of feeding the world.

Sales of premium-priced organic food have slumped this year, with demand for organic vegetables down more than a third, and for fertiliser-free fruit falling nearly 16%. But while that's bad news for the sellers of vegetable box schemes, not to mention Tesco (who sell over £1bn worth of organic food) it might just be good news for humanity. Not only are there no demonstrable health benefits from organic food, it is also incapable of feeding the world.

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Organic food yields less per acre, which means you have to plough up more land to produce just as much food. Indeed, "A total abolition of pesticide use would result in an average drop in farming yields of between 10% and 25%", according to a 1999 study by the Danish Environmental Protection Agency. On farms with specialist crops such as sugar beet and potatoes, it comes closer to 50%.

More importantly, even if you used all the organic food material to hand, from animal manures to plant residues and pumped them back in the soil, you couldn't feed more than 4bn people, said Norman Borlaug, who died last week, almost a decade ago.

Borlaugh knew a thing or two about food production. He was the man who developed high yielding varieties of wheat, and became known as the father of the 'green revolution'. And it was thanks to synthetic fertilisers, he pointed out, that global cereal production could triple between 1950 and 2000 but the amount of land used increase by only 10%.

So the next time you buy organic food consider this: the more intensively you farm, the more room you are leaving for the rainforest.

Agriculture-focused companies such as Syngenta, which produces fertiliser, have risen considerably in the current rally and show little short-term promise for investors. On a forward p/e of 18 and yielding 1.34%, GM food developer Monsanto (NYSE: MON), for example, is hardly a catch for investors. So wait for the dips.

If you are a little bit more impatient, then check out Mosaic Co (NYSE: MOS). It produces and distributes crop nutrients in the U.S. and other countries and trades on a forward p/e of 15. And with an Altman Z score of 5.96, is unlikely to go bankrupt any time soon.

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