Greater adoption of farm protectionism and genetically modified crops look inevitable as the world fights to avoid running out of grain, with stocks potentially on course to run dry within 10 years, a leading London broker has said.

On current trends world grain inventories "could be exhausted by 2025", sapped by demand rising at 2.5-3.0% a year while supplies increase by, at best, 2.0% annually, Icap said.

"Under a set of reasonable assumptions, global grain stocks could be depleted within the next decade," the broker added in an 80-page report heralding the return of "high and rising" food price inflation.

Keeping a lid on the cost of food, which looks set to begin taking an increasing take of household budgets for the first time since the 1960s, may prompt a "higher degree" of government protectionism and subsidies.

"Ultimately, the taxpayer will have to pay," the note said.

GM 'inevitable'

But resolving the shortfall will require accelerating rates of production, for which raising yields looks the best bet of raising harvests, given the potential political interference, infrastructure shortages and property rights hurdles inherent in getting untapped land into production

This will mean a growing dependent of genetically-modified crops, in areas including Europe, which has remained largely opposed to the technology.

"We see GM seeds as a key, if not the, primary solution to the looming agri-supply shortfall," Icap said.

Share buys

Companies poised to profit from the trend include Syngenta, the Swiss-based seeds and chemicals group, which is "mid-way through playing catch up" with US rival Monsanto.

New products could help Syngenta raise revenues at twice the rate of rivals over the next six years, Icap said, placing a "buy" rating on the company's shares.

It also placed a "buy" on shares in Yara International, the Norwegian fertilizer giant.

"The long term fundamentals for growth in the global fertilizer market remain sound, supported by the requirement for bumper crops to secure the world's food supply," Icap said.