Agriculture Investment

How agriculture funds are managed

Agriculture Investment funds will invest in companies which have direct access to food production, distribution, processing and sales. Most agricultural investment funds in this sector have large exposure to fertiliser companies, which are set to benefit from rising prices in the future. Another key theme is efficiency, including companies that provide innovative solutions to agricultural problems, as farms look to produce more from their limited supplies of land.

Investor approach to investing in agricultural funds

Agriculture has been the one to invest in throughout the last three years. In this period agricultural investment funds have outperformed the equity markets substantially with the rise in food prices and future expected rise in demand from emerging markets. However investors need to be careful. Market valuations in the agricultural sector and particularly with commodity prices are heavily linked to harvests. People’s memories are short and market sentiment moves wildly.

Droughts and floods in key productive areas of the world, from one season to the next, impact directly on world commodity prices. The agricultural investment theme is most directly impacted by the weather and changes in climate, with the result that scarcity can turn into glut and vice versa very quickly, with a direct impact on investment returns in this area. However, if you are a believer in climate change it is this change in weather patterns – precipitation and temperature, which hits productivity which is likely to impact harvests into the future.