Ben Yearsley: Fund with an appetite for food and agriculture

The Analyst

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The Independent Online

Food, glorious food!
Hot sausage and mustard!
While we're in the mood...
Cold jelly and custard!

No, I'm not auditioning for the next Andrew Lloyd Webber musical, but you would be justified in asking why I am starting an article on investment in this way. Quite simply, I'd like to focus on food and agriculture this week as I believe that it is an excellent, long-term investment theme.

Globalisation, urbanisation and rising wealth in emerging markets is resulting in rapidly changing diets across the globe. The consumption of meat, processed foods and packaged foods is rising and subsistence foods are decreasing.

This has enormous consequences for the world economy. Not only is meat and processed food more resource-intensive to produce, but the global population is increasing. By 2050 it is predicted that there will be 9 billion mouths to feed, up from 7 billion today.

This is creating challenges, but also opportunities.

Henry Boucher, manager of the Sarasin AgriSar fund, looks for investment opportunities "from field to fork". In other words, he studies companies across the agricultural spectrum including those that own land; those providing inputs such as feed and fertiliser; machinery suppliers; transport and storage businesses; food processors; retailers; and the "lips and hips" businesses – those marketing products for tackling health issues.

He recently returned from a fact-finding trip to the Far East, and in his view the dynamics of the agriculture theme haven't changed. The demographic story is intact, and inhabitants of the developing world are leading increasingly Western lifestyles. They want more than just basic foodstuffs, and markets in China now supply cherry and vine tomatoes as well as more traditional beef tomatoes, for example.

Mr Boucher does not invest directly in agricultural commodities, such as corn and wheat, or take a bet on commodity prices.

He believes the theme is best played through food producers or supermarkets. Key holdings include Thai food producer Charoen Pokphand Foods and China Green, a Chinese vegetable supplier.

Shoprite in Africa is also catering to more sophisticated palates with its supermarkets targeting both high and low-end consumers.

There are few large companies in this space which can be a problem, but he is happy to put in the extra effort and discover attractive, smaller companies.

To grow increasing amounts of food, more fertiliser is required. This is big business and usage remains strong, especially in China.

With only a few fertiliser producers in the world, it is easier to increase sales and margins. One of the biggest is Potash Corp of Canada, and Mr Boucher views recent share price falls as a buying opportunity. He also owns a 2.5 per cent stake in Uralkali, a Russian potash producer.

Indonesia is another country he believes is full of opportunity. It is home to 240 million people and somewhat unbelievably 100 million of them have yet to taste a can of Coke! Indonesia is difficult to penetrate, partly because there are only 1,000 kilometres of tarmacked road, making distribution difficult.

One company he thinks is succeeding is Coca-Cola Amatil, an Australian business that bottles Coca-Cola and other beverages. It is experiencing steady growth of 4 per cent to 6 per cent per year, but in Indonesia growth is 25 per cent per year. He continues to watch the company, looking for an opportune time to invest.

It is fair to say this fund is a big play on emerging markets. There is approximately 30 per cent direct exposure to emerging markets in Asia and a further 20 per cent through companies quoted in developed markets but generating a large proportion of their sales in emerging markets. I don't see this as an issue, as over the long term this is where growth in world markets is likely to come from.

There will be ups and downs, but you have to accept some volatility in exchange for potentially higher long-term rewards. I believe Mr Boucher and the Sarasin team provide an excellent way of accessing this long-term theme.

Please sir, can I have some more?

Ben Yearsley is investment manager at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more details about the funds included in this column, visit

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