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Top 5 Reasons To Invest in Agricultural Funds

3 Comments April 17, 2009 – 9:17 am |   | Permalink |  Print This Post |

With the world economy seemingly in an endless downward spiral, job losses are being reported almost daily and the stock market is at record-low levels, investors around the globe are hesitant to hand their hard earned money to any company that promises profits and riches. Gone are those days where investors blindly turn in their hard earned cash to simply any certified financial consultant. With the world economy shrinking at record pace, smart investors are taking their own investment decisions into their own hands.

For the past year and a half, if not more, all we’ve heard in the news is the high rate of unemployment, bankruptcies, and high pay-out packages. It’s no wonder we’ve lost our trust in the whole ‘American’ way of life.

But perhaps there is one last investment vehicle we can profit from: Agricultural investments.

Here are 5 Reasons to Invest in Agricultural Funds:

1)    The U.N. predicts that by 2050 the population will be more than 9 billion, from 6 billion today. The increase in population is likely to be exponential after that, bringing about pressure on the world’s food production capabilities.

2)    The population is becoming younger. Young people eat more than their older counter-parts. Overall, there is an increasing demand for food across the globe.

3)    More and more people are moving to the city and leaving their farms. Developers are buying up this farm land and building homes and condos. Farm lands are diminishing all over the world as nations find it more lucrative to industrialize the lands.

4)    According to the U.N., approximately 12 million hectares of land become desert every year due to global weather changes.  This land becomes unproductive and useless to farming.

5)    Meat consumption is at an all time high in developing countries. It is almost double that of developed countries. Increase in animal stock also causes more land to go bare due to the constant grazing of farm animals. Land made bare will eventually harden and dry up, making it useless to farm on.

If you are not convinced, listen to Jim Rogers latest interview with CNBC on his views on investing in Agriculture:

There are several different agricultural funds you can invest in: soy, wheat, coffee, sugar, corn, just to name a few.

You can invest in a couple of different ways: ETF (exchange traded funds) or future contracts. ETF’s are similar to mutual funds, in that there are a ‘basket’ of commodities bunched together and traded as a fund. A typical ETF can have corn, wheat, soy, and sugar, all equally distributed; meaning you are buying an equal share in all four grains.
Buying futures contract means buying grains by the bushel – each individually; thus, you cannot ‘spread’ your risk among several grains. If you are fairly new to investing, you might want to consider a discount brokerage like TradeKing.

Keep in mind that, with any investment, there are inherent risks. Take the time to educate yourself and know your risk level. Futures and commodities are not for the faint of heart! ETF’s can lower your risk, but not eliminate it. Whatever you decide, know exactly where your money is going and what your potential profits are.

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