Ben Yearsley: Get a taste for investing in food production

The Analyst

What are the really important long-term trends in the markets? The rise in power and influence of emerging markets such as China and India is the obvious one, but is there a different way of playing this story?

A possible answer is the agricultural sector. If you include equipment, processing, retail and inputs such as fertiliser, the whole "field to fork" chain accounts for over 10 per cent of global GDP. I think you would struggle to find another sector that counted for so much. Furthermore, demand is set to remain strong as the global population expands. The world headcount is due to hit seven billion people by the beginning of 2012, up from five billion in 1990 and three billion in 1960. This in itself is putting huge pressure on agricultural resources as only a very limited amount of land is being added to production each year.

Added to this is the important influence of diet change. As emerging markets continue to develop, their populations are becoming wealthier and appetites for different foods emerge. Part of this is down to affordability and part practicality. In the UK the number of households with a fridge is close to 100 per cent, whereas in China it is 61.9 per cent and in India it is only 18.5 per cent. In Africa it is far lower still. Those with refrigeration on hand are likely to eat more meat and dairy produce, so this is the next step on the road to higher consumption.

Quite simply a westernised diet is agriculturally far more intensive. Staple grains that formerly fed people have to stretch further to feed animals, and in recent years another important area of demand has materialised. It will soon be law in the United States for 15 per cent of every litre of petrol to be ethanol from biofuels, and an increasing amount of agricultural land is being given over to their production.

Given these multi-year (or perhaps even multi-decade) trends, the need for greater agricultural efficiency is a pressing one. There is only so much useful land available and better fertilisers, crop protection, equipment and irrigation are all important to increase productivity. So rather than buying a farm or speculating with soft commodity-based ETFs, a practical, long-term way to benefit is through an agriculture fund such as Sarasin AgriSar managed by Henry Boucher. Unlike some funds that focus on specific parts of the agriculture chain, Mr Boucher can invest in companies operating all along it, literally from "field to fork", or, in other words, from producer to consumer.

According to Mr Boucher, at different points of the economic cycle different parts of the chain will be the most interesting and attractive. For example, he currently thinks biofuels are a potential risk to some areas. This might sound strange when you consider the corn price has doubled over the last 12 months and is experiencing low stock levels and high demand. However, a lot of the recent price movements have been driven by increased need for biofuel and Mr Boucher's worry is that substitutes can be used and the recent price surge is overdone.

Presently, a significant focus of the fund is on food consumption trends in emerging markets. This is leading to a number of stock ideas in food manufacturers and retailers, ranging from Want Want, a Chinese food business dominant in rice crackers and flavoured milk, to Tat Konserve, a processor of tomatoes and peppers based in Turkey. The company exports to 73 countries supplying fast food chains such as Pizza Hut, McDonald's and Burger King.

Clearly this is an exciting long-term trend as population growth and diet change in the developing world clearly have much further to run. For instance, in the very long-term Mr Boucher believes Africa offers significant potential, though there are currently few ways of playing this market. Although it can be a volatile area I believe this fund stands out as an excellent opportunity to add a key long-term growth theme to your portfolio.



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 www.h-l.co.uk/independent

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

    £24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

    Ashdown Group: Business Analyst - Financial Services - City, London

    £50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

    SThree: Trainee Recruitment Consultant

    £18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

    Day In a Page

    Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

    Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

    How a costume drama became a Sunday night staple
    Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

    Miliband promises no stamp duty for first-time buyers

    Labour leader pushes Tories on housing
    Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

    Aviation history is littered with grand failures

    But what went wrong with the SuperJumbo?
    Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

    Fortress Europe?

    Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
    Never mind what you're wearing, it's what you're reclining on

    Never mind what you're wearing

    It's what you're reclining on that matters
    General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

    Chuka Umunna: A virus of racism runs through Ukip

    The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
    Yemen crisis: This exotic war will soon become Europe's problem

    Yemen's exotic war will soon affect Europe

    Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
    Marginal Streets project aims to document voters in the run-up to the General Election

    Marginal Streets project documents voters

    Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
    Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

    The real-life kingdom of Westeros

    Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
    How to survive a social-media mauling, by the tough women of Twitter

    How to survive a Twitter mauling

    Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
    Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

    At dawn, the young remember the young

    A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

    Follow the money as never before

    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
    Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

    Samuel West interview

    The actor and director on austerity, unionisation, and not mentioning his famous parents
    General Election 2015: Imagine if the leading political parties were fashion labels

    Imagine if the leading political parties were fashion labels

    Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence