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Are the ETF’s The Answer For Agricultural Investments?

Post a Comment April 17, 2009 – 9:12 am |   | Permalink |  Print This Post |

ETFs or Exchange Traded Funds, could be your agriculture investing vehicle, in a world that is going hungry.

The demand for food is growing, as our population increases. The United Nations estimates that the world’s population will grow from
6.6 billion to 9 billion by 2050. That is like adding three more countries the size of China!

Another point to consider is that the world’s population is becoming younger. These youngsters will be consuming more food than their older counterparts. Meat consumption is at an all time high in the developing world and growing faster than in developed countries.

There is also an increasing demand for food, and the land that is available to produce that food is vanishing. People are moving into the cities and abandoning the farms. Developers buy up farm land so they can build condos and housing.

That’s not all. Changing weather across the globe is causing desertification. An estimate from the U.N. reveals that every year, 12 million hectares of land become desert and therefore agriculturally unproductive.

Earthquakes, floods and drought all contribute food production loss.

So what does all this bad news mean to investors? It spells opportunity and lots of it. Start looking world wide for companies involved with land, fertilizers, coffee, wheat, soy, transportation, farm equipment, irrigation and veterinarian pharmaceuticals.

Buying just a single agriculture investment via commodity or futures trading, which can be extremely risky, why not buy a myriad of agricultural investments in the form of an ETF.

Here are some examples – these are on the London stock exchange and you can buy them via a discount broker, like E-trade:

ETFS Agriculture ETF (AIGA-LSE)
ETFS Coffee ETF (COFF-LSE)
ETFS Corn ETF (CORN-LSE)
ETFS Cotton ETF (COTN-LSE)
ETFS Grains ETF (AIGG-LSE)
ETFS Lean Hogs ETF (HOGS-LSE)
ETFS Live Cattle ETF (CATL-LSE)
ETFS Livestock ETF (AIGL-LSE)
ETFS Softs ETF (AIGS-LSE)
ETFS Soybean Oil ETF (SOYO-LSE)
ETFS Soybeans ETF (SOYB-LSE)
ETFS Sugar ETF (SUGA-LSE)
ETFS Wheat ETF (WEAT-LSE)

This fund consists of futures contracts: soy beans, wheat, sugar and corn, with 25% allocated equally among each.

Experts agree that investing in agriculture tends to be more recession proof than any other investment. Even in a global recession, people have to eat and agricultural commodity prices will move higher. Also it is crucial to note that agriculture forms the economic base of most nations.

It’s important to understand that ETFs hold a variety of stocks, much like a mutual fund. This greatly reduces your risk of losing out on one commodity on its own, like buying one futures contract. If nothing else, these investments can be your personal hedge against rising grocery prices.

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