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Mar 14, 2011

WSJ - How to Invest in the Growing Global Demand for Food

On 14 March 2011, the Wall Street Journal published an article on how investors can make money on agriculture and the ongoing spike in world food prices in the developing world.  Central to the article is the concept that the current spike in food prices is only a "short-term manifestation of a long-term trend: That of high and rising agricultural commodity prices."

Investors are starting to "think of agriculture and food-commodity stocks in the same way they once considered energy investments." 

According to Jim Rogers, co-founder of the Quantum Fund with George Soros, "If I'm right, agriculture is going to be one of the greatest industries in the next 20 years and longer . . . [it] will become more profitable than it has ever been," he says.

The article cites the global population statistics as the foundation for the long-term demand.  "The world's population is expected to grow from 6.7 billion today to 9.1 billion by 2050. ... The supply problem is compounded yet further by an emerging middle class in China and India whose growing wealth is being reflected in changing dietary habits. Predominantly grain-based diets are being replaced by meat-based diets."

The article points out the need to study stragetic food reserves and to keep an idea on the ETFS Agriculture Fund, an exchange traded commodities product designed to track the DJ-UBS Agriculture Sub-Index.
Investors are also recommending purchasing stocks in companies that make products related to agriculture including equipment manufacturers, seed and chemical fertilizers and commodity and agricultural producers. "Investment managers tend to keep investments closely tied to the producers who will benefit directly from rising prices. "

According to Cédric Lecamp, co-manager of the agriculture fund at Swiss private bank Pictet, "higher crop prices in China will translate into higher farm incomes. This leaves farmers in a better position to buy fertilizer, farm machinery and crop protection chemicals. As a result, all those companies that service the industry will reap the benefit."

"UK-based asset management firm, Emergent Asset Management, is raising funds to secure food production from a wide range of soft commodities across sub-Saharan Africa. The firm has joined forces with South African agricultural specialist, GrainVest, to buy agricultural land and managed projects in 14 countries in Africa. The joint venture, known as EmVest, selects large chunks of land that are considered to be prime regional locations for development. It then works with national and local authorities to develop large-scale agriculture on a commercial basis."

For more see: Henshall, Angela, "Harvesting Returns," Wall Street Journal, 14 March 2011.

About Margaret


CEO and Curator (The Food Museum) | Managing Director and Chief Editor (GR2 Global LLC) | Educator (UCLA PhD) | Researching and writing on global food issues, nutrition and health, sustainability, history (preservation), conservation (natural resources), and design.
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