Ben Yearsley: Get a taste for investing in food production
Saturday 07 May 2011
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; request a free guide on NISAs from Hargreaves Lansdown
Money alert: Cutting the cost of motor cover
Problem gambling: Amid heavy advertising and a surge in remote sports betting, more and more 16 to 24-year-olds are now seen as 'at risk'
Interest-free credit helps local people battle loan sharks
How to start your own internet business
Be warned of the dirty tricks the bailiffs pull
- 1 What if 35 Palestinians had died, and 800 Israelis?
- 2 Disney heiress Abigail disowns her share of family profits in West Bank company
- 3 The secret report that helps Israel hide facts
- 4 'Women should not laugh in public,' says Turkey's Deputy Prime Minister in morality speech
- 5 Israel's propaganda machine is finally starting to misfire
The secret report that helps Israel hide facts
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
A day in the life of Vladimir Putin: The dictator in his labyrinth
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Richard Dawkins tweets: 'Date rape is bad, stranger rape is worse'
Boozy, ignorant, intolerant, but very polite – Britain as others see us
- < Previous
- Next >
iJobs Money & Business
£450 - £650 per day + competitive: Orgtel: My client, a leading bank, is curre...
£350 - £400 per day + competitive: Orgtel: Senior Analyst, ALM Data, Halifax, ...
£500 - £600 per day: Orgtel: Java developer - Banking - London - Up to £600/d...
£400 per day + competitive: Orgtel: Liquidity Reporting - Basel III - LCR - Ba...
Day In a Page
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000