Agriculture Investments – Why an Agricultural Investment Outperformance

There are a number of key trends that drive the profitability of agricultural investments when assessed in its simplest form-cropland investment.

The current economic climate is defined by low interest rates give little return on money, volatile capital markets adding disproportionate amounts of risk and the possibility of a sustained period of above average inflation for the destruction of Returns and eat in the capital. Under such circumstances, investors are looking to acquire assets that show a certain set of characteristics in the hope of decoupling of an investment portfolio of traditional assets and general market forces, hoping to generate a return not correlated, replace “no risk” lost income and protect capital. Investment in agriculture, especially farmland investments, shows all these characteristics and therefore institutional and private investors are trying to add value to their portfolios through exposure to the major agricultural investment assets such as land of cultivation.

Investment in agricultural land allows the savvy investor to capture the long-term food price inflation in the capital value of the underlying agricultural land, as the value of crop increases with time, the land that produces turn the property becomes more valuable. We must seek then the most basic fundamentals of supply and demand to project future demand and weighing the likely demand against the capacity of overall performance, taking into account the total amount of farmland and peak performance reachable.

On the one hand, the expansion of the volumes of agricultural land is not possible on a scale useful as most of the good land has already been used, the development of new farmland through investment in agriculture has decreased significantly since the 1960′s usable land with little water left to develop and put under agricultural cultivation. In fact, the per capita stock of agricultural land has decreased from 0.42 global hectares per person in 1961, compared to 0.21 hectares per person in 2005 and has since fallen.

The increase in yield per hectare is also an unlikely solution with current technology, as it increases the performance of the green revolution (the introduction of fertilizers) has been greatly reduced, creating the increased yield of less than 1%. Unless new technologies are developed to increase agricultural production through active investments, global food production is likely to remain at current levels before starting to leave as less land available for food production.

At the same time, world population is growing at the fastest pace in human history, as the introduction of hydrocarbons in the early 1800′s saw the rise of the population of around 800 million to the current numbers of up to $ 7 million , and toward 9 billion between 2030 and 2050. Every day the world population increases by more than 200,000 people requiring food. This growth of the population is getting richer, demanding a high protein diet and the meat they eat more. The per capita meat consumption in China has risen from 20 kg per year in 1985, 50 kg per year today and is expected to peak at 85 kg per person per year in 2030, and as each kg of protein-based of meat requires the participation of 7 kg of grain and lots of water, this change in the dynamics of wealth, especially in emerging and developing economies, are responsible for most of the demand for food in the future.

In conclusion, the demand for food, feed and fuel is rising in line with demographic trends basis, ensuring that agricultural investment returns are driven in the long term if not correlated with financial markets, and those who decide to agricultural investment as a store of wealth are best positioned to benefit from these long-term trends.

Tags: agricultural investments, farmland investments, investment assets, savvy investor, traditional assets

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Agriculture Investments – A Warning To Investors

 

As portfolios continue to show volatility, many investors are beginning to investigate investment alternatives, with an area of ??particular interest to agricultural investments, or investments specifically agricultural land.

I think now is particularly relevant to mention that appears so often used and seldom heard investment advice, “Past performance is no guarantee of future performance and investors should of course be prudent in the use of historical data to make investment decisions. “

Now the reasons for investing in real assets that produce basic necessities for life are solid. Population growth and increasing demand for the income unit, while urbanization, water scarcity, climate change and a number of other factors to suppress the offer, and these two major trends are converging to push up prices and with them food, farm income and capital value of the assets of farmland.

These, in my opinion, are the reasons to invest in agriculture, and although the retrospective history and can demonstrate how these assets and the markets have done under certain conditions, the smart investor should perhaps look to the future, not in the past to determine the likely performance of their holdings.

As seen recently in the stock markets around the world, the time frame used to provide data for predicting future events is crucial. Instead of simply using the largest data set available, one is better able perhaps to use data from periods where economic conditions are more likely to be characteristic of future conditions.

A good example that has relevance to investment in agriculture is depressed commodity prices during the 1980′s, when a decline in food demand in developing countries resulted in the accumulation of large stocks of grain . If you believe in the future, the demand for developing countries is likely to fall, then the data from this period would be most appropriate for the use of projecting future prices of commodities such as you feel the same set of conditions that prevail. In this set of circumstances and to take this set of data, projects that the prices of raw materials and agricultural prices would fall.

If you believe that demand for commodities such as food will grow, as it did in the 1970′s, then one would expect that prices of raw materials and agricultural prices rising as they did then, based on the assumption that the same set of circumstances in terms of supply and demand will ultimately prevail. Use of this piece of historical data only lead him to believe that agriculture is a strong buy, and farmland assets investment will grow in value.

Again, when making its own decision on if you feel the farmland values ??rise or fall (probably will both over time), you should base your answer on if you feel that the demand is likely to increase and if we have the capacity to increase supply accordingly.

Tags: agricultural investments, real assets, retrospective history, smart investor, water scarcity