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Agriculture sector will give strong returns PDF Print E-mail
News - Alternative Investments
Friday, 26 October 2012 16:07

Increasing demand for food, fuel and feed in developed and developing markets will continue to drive strong returns for equity investors in the global agricultural sector, according to Baring Asset Management .

This year has seen robust performance from the sector, with the Baring Global Agriculture Fund returning 8.1% year-to-date versus 6.3% for its benchmark.

James Govan, co-manager of the Baring Global Agricultural Fund, said: “Global population growth and key development trends of increasing meat and fish consumption should provide a robust soft commodity backdrop and hence strong demand for agricultural products and services over the long term. We believe that agricultural equity valuations are compelling, particularly in upstream sectors such as fertilisers, farm machinery, plantations, seeds and crop protection.”

Crop prices have soared in the summer as the drought and heat wave hit the key growing region of the US Mid West and reduced harvest estimates after a promising start. However, despite reduced volumes US farming economics are excellent and the US Department of Agriculture has forecast another record year of profitability for the US farmer.

James Govan continued, “The reduced US harvest estimates have resulted in grain and soybean inventories remaining low compared to consumption from an historical perspective, giving us confidence that grain and soybean prices are likely to remain strong. The focus of the market will now switch to South America where planting is already underway.
“Farmers have every incentive to maximise production in this buoyant crop price environment, which Barings believes should result in strong demand for fertiliser, crop protection and seeds. High farmer profitability could also result in robust demand for agricultural machinery as has been evident in recent industry sales in the US.”

 

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