Email of the day (1)
Comment of the Day

February 25 2013

Commentary by Eoin Treacy

Email of the day (1)

on investing in agriculture
“Attached an interesting report on Agribusiness and its world projection from UBS Wealth Management Research. Maybe can you gift us with a related watchlist to follow up?”

Eoin Treacy's view Thank you for this short report. We do not have permission from the authors to reproduce the full report but here is a section:

We think the demand for more and better-quality foods calls for the ingenuity of mankind to overcome the risks of bottlenecks in a very basic need. Companies involved in the increased productivity of the Agribusiness value chain cover a need that should allow for profitable growth over the long term. This should allow them to outperform the MSCI World index.

There are a number of factors at play as demand for agricultural products increases. The growth and increasing affluence of the globe's population centres, increasing demand for biofuels and the removal of subsidies from US and European food production have all played a part in the tight overall environment that currently prevails in a number of agricultural commodity markets.

As we address the issue of which sectors might benefit from this situation there are a number of subsectors worth considering.

Fertilisers, seeds, irrigation, pesticides and farm machinery all represent costs to farmers that help to increase yields. Demand for these products will therefore be influenced by the ability of farmers to pay for them. Meat, processed food producers and ingredients manufacturers have generally exhibited more consistent trends over the last few years because they have been better able to pass on higher costs to consumers either by reducing portions or raising prices.

In order to create a potential watch list of related companies I conflated a number of sections from my Favourites and ranked them by Performance using the Chart Library's filter.

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