The sums on China's strategy of becoming self sufficient in grain "don't add up", Societe Generale has warned in a report highlighting a "compelling case" for a bull market in farm commodities and shares.

If China follows the same path as South Korea, whose economy grew at an average rate of 6% between 1965 and 1989, its grain consumption would more than double to 812m tonnes in 25 years' time.

"China's per capita grain demand is likely to explode in the coming years," Dylan Grice, the Societe Generale analyst, said.

Yet the country has been growing yields at only 0.9%, is losing an accelerating area of farm land to desert, and faces an "intensifying" water shortage.

'Stark anecdotes'

"The economics of Chinese grain self-sufficiency don't add up," Mr Grice said.

"We've all heard the stark anecdotes: the precious topsoil weakened by over farming, the dust clouds darkening the daylight Asian skies, the parched land becoming desert and the rivers running dry.

"Here is firm evidence we can see in the numbers."

With grain supplies at amongst their weakest levels since World War II, leaving prices "prone to the slightest disruption", the case for an agriculture bull market is "compelling", he said. terming the sector the "last asset class still in the bargain basement".

'Buy cheap' 

Investors reluctant to put money into commodities themselves, through indices or exchange traded funds, can ride the trend by buying shares in agribusinesses.

"If we buy companies whose business is to boost agricultural productivity, and buy them on the cheap, we'll probably make decent returns regardless of what happens to grain prices," Mr Grice said.

Shares in Australia's Incitec Pivot and Canada's Agrium – both fertilizer groups – looked among the cheapest, as measured by the ratio of return on equity versus book value.

He said: "Don't just buy the universe of agricultural stocks. Like all index investments, you risk ending up holding a load of trash. Buy only the cheap ones.