One of the top global trends is growing needs for food, nutrition, and investment in agriculture. The process is already under way as consumers demand more meat and higher quality food as incomes rise. Add world population growth and you have ever increasing demand for good nutrition and quality food for decades to come.
Global Trends Analysis and Need for Investment
Population growth, increases in income, and access to technology are changing the distribution, quality, and demand for food. Over the last century total crop productions has increased 6 fold and crop yields have increased 4 fold. Over the last several decades we have made great progress in per capita supply of food despite large increases in world populations.
Even with these advances we still have hundreds of millions of undernourished people in the world. The uneven distribution of food is attributable to uneven application of technologies that have improved production. On the positive side, agriculture production for export is a leading force in the development of emerging markets. Rising income in the developed world is increasing demand for quality food. Consumers are demanding food produced with environmentally sustainable technologies, particularly organically grown agriculture.
Investment in Food and Agriculture
The large and diverse needs of global agribusiness provide ample opportunities for investment. Crop production and farming, livestock operations, alternative fuels, biotechnology, agriculture chemicals, supplies, and equipment are all areas of growth and opportunities for investing.
Agribusiness has a large diversity of promising categories that should cause investors to consider investing in a broad selection of large, mid-cap and small-cap stocks in all the above categories. Because the needs and demands to deliver are large, but also widespread and diverse, risk can be reduced by investing in many companies spread across the entire spectrum of agribusiness.
This gives an advantage to Exchange Traded Funds (ETFs) when considering investment in Food and Agriculture. There are many choices, but here are two options to consider when valuations are at levels an investor considers worthy of long term investment allocations.
Agriculture ETFs
Large & Mid-Cap Stocks:
Market Vectors Agribusiness ETF (MOO)
Small Cap Stocks:
IQ Global Agribusiness Small Cap ETF (CROP)
These two investments together provide a global portfolio of large, mid, and small-cap stocks diversified among all the above sectors. As with all investments, investors should consider valuations before making any investment.
Disclosure: The Arbor Asset Allocation Model Portfolio (AAAMP) has a long position in CROP and has no position in MOO.
| AAAMP Blog by Ken Faulkenberry | |
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Ken Faulkenberry earned an MBA from the University of Southern California (USC) Marshall School of Business with an emphasis in investments. Ken has 25 years of investment experience and is dedicated to helping people with self-directed investment management through the Arbor Investment Planner. His asset allocation strategies have an outstanding performance record. |
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