About Agribusiness Investing – Part Five

About Agribusiness Investing – Part Five

Demographics and Driving Global Demand
[Part 5 of 5]
As world population continues to swell, and as that population becomes better educated with greater access to higher income and wealth, the need for an expansion of food supply is critical. The ensuing increase in purchasing power for a larger and lager amount of the world’s population will drive significant growth in global demand for agricultural production, service and support industries. It is here where investment capital can meet greater capital enhancement with lower overall volatility.

As those who currently live in dire poverty move slightly up the economic ladder, even a small nominal increase in income represents a large percentage increase in buying power. For every major region the World Bank follows, the percent living below the poverty line is dropping. In East Asia and the Pacific, the increase in personal consumption expenditure is now 46 percent greater than in 1978. The percentage of global consumption for the world’s lower and middle income cohort has risen 83 percent over the past 40 years.

For those of us who live in high-income regions (Europe and U.S. in particular), it is important for us realize that greater incomes do not drive meaningful increases in demands for foodstuffs, We already enjoy an excess of food and sadly waste so much of it. For a good long time now our lavish lifestyles find us buying non-essential wants such as travel, entertainment, and luxury items. For people living in developing or transitioning nations, however, any increase in income helps them move from subsistence on rice and grains to a diet richer in proteins such as fish, poultry, dairy and nuts. In remote parts of the world, a mere $1.90 per day increase in income would more than double the low income purchasing power.

As the world’s expanding population continues to experience greater education and access to increased incomes, the demand for agriculture and its related industries should provide compelling investment opportunities for investors.

There are many ways one can deploy capital into agriculture, and gaining the knowledge is the best place to begin this journey. Ordinarily, investors don’t invest in things they are not familiar with – this is one of the reasons they have missed agriculture (and the profits a few have enjoyed) and remained with more traditional assets. Whether you decide to invest in an agribusiness fund, an AG-REIT, a separate account, or direct participation, it is important for you to consult with your investment professional for assistance. If he or she is not familiar with agriculture, we can refer you to a Fee-Only Private Wealth Advisor that knows and understands the space and has visited our farms on several occassions.

So you want to Invest. Where should you start?

Start with gaining a better understanding, you should never invest in anything you do not understand. Feed your mind and educate yourself. Learn the underlying global demographic trends. Compare the space to other asset classes you know well and want to invest in. Don’t get “sold” by promoters with time deadlines to fill. Ultimately, after you have put in the time, and you have convinced yourself that maybe you should have already been invested in agriculture long ago, then choose the right people that you deem to be the ones best to work with.

We hope you have enjoyed these messages.

The Precious Timber Team.

Interested in joining us on one of our Agribusiness Discovery Tours?