By Joshua K Cohn
Many investment professionals, including the legendary Jim Rogers, believe agriculture commodities are only in the early-to-middle innings of a major "super cycle" of increasing prices.
The argument for this is fairly simple. The number of people in the world is increasing, and projected to reach nearly 9.1 billion by 2050 according to the United Nations. Meanwhile, the amount of arable farmland has been decreasing.
In addition, as with many major trends in the world today, a large reason behind the rapid run-up in food prices is China's development. As investors we always want to be on the correct side of global macro trends, and whatever China needs or is buying lots of, we want to own as investments.
The question is what are the best ways for making money from the agricultural sector? One way is to invest directly into agriculture stocks such as farm equipment maker John Deere (DE), global seed giant Monsanto (MON) or fertilizer company Potash Corp of Saskatchewan (POT).
Another method is to invest in agricultural futures through Exchange Traded Funds (ETFs) such as AIGA on the London Stock Exchange or DBC in the US which tracks an entire basket of agricultural commodities including corn, soybeans, wheat, cotton, sugar, coffee, cattle and pigs. These commodities ETFs try to track the spot price of the various commodities they include.
The advantage of these stocks or ETFs is that they are easily trade-able by anyone who has an online brokerage account. The disadvantage, however, is that they are still financial instruments, and as such can fluctuate widely in price.
One option most individual investors tend to overlook is direct investment in farmland. In many ways, a farmland investment is more secure, stable and tangible then putting money into stocks.
Farmland allows investors to still benefit from the global trends in agriculture we have discussed, whilst providing much greater stability then agriculture stocks or commodities which can fluctuate wildly.
After reading this article, people also read:
Yes i am totally agree with you because as the global population is increasing, the demand for food grain production is increasing. Farmland investment allows governments to promote investment in the sector of agriculture and regulate food grain production to prevent food crisis.
ReplyDeleteFarmland Investment