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Mar 26
Agriculture, Jim Rogers

Invest in Agriculture via Rogers International Commodities Index Agriculture

Whilst Jim Rogers and Marc Faber are setting up their next big investment move by buying up farm lands in Canada, Brazil and New Zealand, we too have taken decisive action today to set up our retirement funds. For a moment we thought of the feasibility of investing in farm lands, but soon realise that it would take too much work and capital (Besides, we would rather be surfing the web than working in the fields). That is the general mindset of todays generation - as Jim puts it: “Everyone is too busy becoming investment bankers and driving Maseratis - of all your classmates you went to school with, how many of them became farmers?”

We did a little experiment over the weekend: dividing our grocery bill to “agriculture products” and “non-agriculture”. Next time you do your grocery shopping, make a note of how much of what you bought were agriculture-based. Our last shopping bill was 45% agriculture based - and none of them were dispensable even if I tried. I am convinced of the Jim Rogers Agriculture Plan, and will await the next big crash in global equity markets before jumping in. For now, we expect a multi month rally in equities along with everything else.

We have registered for a self managed superannuation fund. For our Australian readers, esuperfund offers a FREE setup (worth $599 AUD) until 31st March 2009. By the time you read this, this offer would most likely have lapsed. The annual fee is fixed at $599 pa inclusive of GST and accounting fee. There is no minimum investment, and fees are fixed regardless of trading activity. And no, we do not have a financial interest in esuperfund. A few things to note, as outlined by ASIC, Australian Securities and Investment Commission (by the way, we are not financial advisers so please seek your financial adviser for advice):

The term ‘do-it-yourself super’ is possibly a misleading label. Managing your home is easy compared with managing your superannuation money, with its detailed taxation, trustee and other legal rules. DIY funds are often referred to as self managed superannuation funds or SMSFs or SMS for short.

Running your own fund is not a picnic, whatever anyone may tell you. If you find it hard to keep up with your current super fund, you may find it much more work with a DIY fund.

You are legally responsible for making sure your fund complies with all the rules. You may pay for professional help, but if any mistakes occur, it’s going to be your problem. You can’t complain to the Superannuation Complaints Tribunal. If your fund suffers from fraudulent conduct or theft, you won’t be eligible for compensation under superannuation law.

As you may know, superannuation funds get various tax concessions to encourage you to save for your retirement. For example, the top tax rate for the fund’s investment earnings is 15%, probably well below the top tax rate on your own income. You get that tax concession only if you operate a ‘complying fund’, that is, a fund that complies with all the rules. If you do not comply, your fund will have to pay extra tax, and possibly back taxes and penalties.

The Australian Taxation Office (ATO) administers DIY funds. Visit the ATO website for rules and instructions for:

* setting up a SMSF

* checking you’re complying with the law by using the the SMSF checklist

* keeping up to date with the latest tax issues on borrowing with your SMSF by reading this taxpayer alert.

Sound administration of a DIY fund costs money

The costs of setting up and complying with the rules generally mean that unless you have about $200,000 or more to put into your DIY fund, you may find it cheaper to use a suitable low cost fund available at your workplace or offered to the public. The ATO warns: ‘Funds with low asset values can have diminished potential to generate returns due to their operational costs.’

What next?

Rogers International Commodities Index - Agriculture by
Rogers International Commodities Index - Agriculture by

Rogers International Commodities Index - Agriculture by

Our next step is to invest in the Rogers International Commodities Index - Agriculture. Finding the right Issuer is extremely important. The one we found (and our search is ongoing) is RICI-Agriculture ELEMENTS Issued by the Swedish Export Credit Corporation (SEK). SEK was founded in 1962 and is owned by the Swedish state.

  • Exchange: American Stock Exchange
  • Ticker        : RJA
  • Intraday Indicative Value Ticker: RJAIV
  • Investment Minimum: None
  • Annual Investor Fee: 0.75%

The chart shows the total return by the Rogers International Commodities Index: which is made up of three sectors: Metals (21%), Agriculture (34%) and Energy (44%). The outstanding returns by RICI is contributed mainly by Metals and Energy, whilst Agriculture has flatlined in the last 10 years. With global consumption on the increase, the lack of credit to fund development of farm lands, and hyperinflationary forces fueled by the printing of trillions of dollars, Agriculture looks set to rise.

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3 Responses to “ Invest in Agriculture via Rogers International Commodities Index Agriculture ”
  1. Edit of previous post:
    I’m becoming a farmer! A high-tech, entrepreneurial, business building one that is. Don’t have the credentials nor the desire to be an investment banker for 16 hours a day, and not interested in working a data entry or back-end job.
    The shift is coming. Our brightest engineering students, who in the past flocked to banks, will begin creating again. Driven young people of all backgrounds will loose faith in the traditional career path and the (false) security of a job. As a result, America will once again become a land of innovation and local job creation. How bad things will get before that happens, nobody knows.
    By the way, who is John Galt?

  2. Leonard, what sort of farming will you be doing?

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