Nick McDonald

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Nick McDonald: Will farmers soon be driving Lamborghinis?

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The Lamborghini Aventador - soon to be the car of choice for farmers?
The Lamborghini Aventador - soon to be the car of choice for farmers?

The most reported hot investment markets typically tend to be exciting areas such as currencies, metals (which are currently plummeting) or traditional markets such as stocks which are in a major bull market and doing well. Sometimes however the hottest markets are not always so much in the public arena.

The Dow Jones is up 32 per cent in the last 5 years and many people around the world are trading it along with the 30 stock components that make up the Dow, but has anyone considered the slightly more obscure market of Soybeans which is up a considerably higher 82 per cent in the last 3 years alone? As of today Gold is up approximately 29 per cent in the last 4 years and is one of the darlings of the investment market... how many gold traders might have missed corn trading 106 per cent higher than it was 4 years ago?

I am sure most readers have noticed the price of food at the supermarket has increased considerably and there is good reason for it. In 1950 there were approximately 2.5 billion people on planet earth, today there are nearly 7 billion.

At the current growth rates, looking ahead to 2050 there is expected to be more than 9 billion people sharing planet earth with us. There is one thing that every single one of these people will be doing... eating!

Previously underdeveloped countries with huge populations such India, Pakistan and China are becoming wealthy, very wealthy. What do people do when they become wealthy? The spend money on luxury items that they used to go without and one of the things they spend money on is food.

People who used to farm their own diet are now looking to buy food and they are buying more than they ever needed before. To keep up with the growth in food alone the UN predicts that we will need to create 70 per cent more food globally by 2050. 70 per cent more! Where will such an increase in food come from? It is a good question to which there is no great answer and for this very reason, many investment experts are predicting huge food price increases in the coming years.

Experts on Agriculture

Jim Rogers is an undisputed legend of the markets, a true market wizard and someone whom I follow very closely in terms of his opinion in the markets. In 2009 Rogers was on Bloomberg TV and he told the host "All your viewers who got MBAs made a terrible mistake; they should try to exchange them for farming degrees or mining degrees". That's potentially great news for a farming nation such as New Zealand.

He backed this statement up in 2010 when speaking at Oxford University where he urged students to alter career plans for Wall Street and the City of London and study agriculture and mining instead. He was quoted as telling them that "The power is shifting again from the financial centres to the producers of real goods. The place to be is in commodities, raw materials, natural resources". Jim Rogers insists that it will be farmers that are driving Lamborghinis to work in the future and not the investment bankers.

Another expert, Larry Fink is the CEO of Blackrock, the world's largest asset management company with over $3.5 trillion dollars under management. In The Australian on 1st February 2011 Larry Fink said "Go long agriculture and water, and go to the beach. Put those investments in the bottom drawer for 10 years. It's unlike anything else we have in the world".

What about the top dog of the markets, the legend that is George Soros? For those who don't know Soros, you may have heard of the man who broke the bank of England with his billion dollar sterling trade in the 90's, well that was him. Another living legend and in 2012 Forbes listed him as the 22nd richest human being in the world, worth an estimated $20 billion.

IIn October 2012 The Motley Fool reported that one of Soros top two stock picks globally is in Agriculture. Actions speak louder than words and Adecoagro is an agricultural company operating in South America which Soros reportedly bought a $232 million stake in recently, immediately becoming one of his biggest positions. This is one of many agriculture companies Soros is reportedly invested in.

Ways to access food and agriculture markets

More seasoned traders may consider some popular markets listed on US futures exchanges such as Coffee, Cotton, Cocoa, Sugar, Corn, Soybeans, Wheat, Oats, Rice, Hogs and cattle.

Global stock traders will be spoilt for choice and anyone interested might research some of the international, listed companies that match their investment criteria.

Closer to home on the NZX, there is an 'Agriculture and Fishing' sector which has 6 stocks listed in it. The codes for the NZ stocks in that sector are listed on the NZX website as A™, FSF, PGW, SAN, SEK and TUR.

Timing, research, knowledge and sound risk management principles are key for people investing in the markets and the markets are certainly not for everyone. I am certainly not recommending any or all these stocks or futures and the inexperienced readers would have a lot to learn before getting started if this article happens to have tweaked your interest. I am merely noting that for investors who like the sound of what three living legends of the markets - Soros, Fink and Rogers - have to say, there are local as well as international ways to potentially get exposure to the food and agriculture markets.

Nick McDonald is a New Zealander teaching everyday people how to trade the worlds markets via his company Trade With Precision.

- NZ Herald

Nick McDonald is a New Zealander teaching everyday people how to trade the worlds markets via his company Trade With Precision.

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