Investors frequently ignore agriculture companies, which is disappointing because the agriculture and agri-food industries offer numerous growth opportunities. Agriculture and food are, after all, huge parts of the economy.
Agricultural sector harvest and provide grain, cattle, sugar, soybeans, and other agricultural resources. Fertilizers, processed goods, and farm machinery are all produced by other firms in the industry.
Soybeans, cotton, and corn are examples of agricultural commodities that provide both risks and opportunities. People use wheat, for instance, in anything from bread to beer, so it goes beyond the crop as a raw material.
Agricultural commodities are also among the most fragile, particularly at certain periods of the year and in certain circumstances. For example, harvest seasons determine crop yields, while storms such as tornadoes and hurricanes can fully kill crops.
Supply and demand, and also the population of a particular area often affect the agriculture commodity prices. If buyers don’t want that sort of crop, its value plummets, leaving investors in a sticky situation.
Livestock, animal products, and meat
Animal byproducts, as well as livestock and meats, come under the agriculture framework. Cattle, hogs, chickens, and other animals all have a market value, but various cuts of meat have various market values.
Although people don’t consider eggs, milk, cheese, and other dairy products to be meat, they haven’t considered crops either.
Many people distinguish livestock from agriculture to indicate that livestock is living beings rather than commodities for sale. Animals often pose different threats than other agricultural commodities. The animals can cause diseases and failures or inability to reproduce may have a significant impact on the market.
The best agricultural investment:
Wheat, whether soft red winter, hard red spring, white, or durum, has global appeal as a food commodity. Also, due to worldwide upheavals, it sees a lot of movement as an investment. Its commodities are available in a variety of forms, including exchange-traded funds, agriculture industry stocks, and futures.
Wheat is the major crop. Wheat, an old grain with a long history, is really only second to rice among the world’s staple grains. Its ability to expand rapidly and survive in a variety of conditions, as well as its long shelf life, nutrient content, and amount of protein, are all advantages. Wheat, as an investment, has the characteristics required to feed populations over time, as other grains divert for other industrial purposes.
Wheat commodities, like other commodities, appeal to investors because they serve as an inflationary hedge. When there is inflation, the cost of raw materials such as wheat rises as well. As a result, while inflation may chip away at other assets, the added value in the commodity sector aims to soften the impact of losses everywhere. Wheat is a convincing inflation hedge due to its extensive use in food production.
With even more than 700 million tonnes generated yearly, rice is the staple food of more than half of the global population (equivalent to 470 million tonnes of milled rice). While most rice is eaten in the countries where it is grown, the world rice trade is fueled by rising demand in some places.
Including Pakistan in the west to Japan in the east, Asia widely consumes the majority of rice. Roughly 90% of world rice production is produced in ‘rice-producing Asia,’ which is known as Asia except for Mongolia and Central Asia. However, since it is a major exporter of rice, its actual share of global rice consumption is marginally lower (87 percent ).
Corn, a highly adaptable crop, is only one example of the many applications for commodity crops in daily goods.
As per MarketWatch, corn has been heading the grain commodity rally, growing more than 30% in 2021. The grain hit its maximum price in eight long years, exceeding other agricultural crops such as wheat and soybeans.
In today’s world, soybeans, soybean oil, and soybean meal are almost all valuable commodities.
Soy, the “king of beans,” is in high demand all over the world. Soy is an internationally traded crop that is grown in temperate and tropical climates and is an important source of protein and vegetable oils. International soybean growth has risen 15 times since the 1950s. Around 80% of the world’s soy production is by the United States, Brazil, and Argentina combined. China imports the most soy and projects to increase its imports dramatically in the future.
Soy is inescapable in our lives. Soybeans are there in a variety of food items, including tofu, soy sauce, and meat substitutes, as well as soybean oil and soybean meal. Since people use soybean meal commonly as livestock feed, we humans consume a huge amount of it indirectly through our meat and dairy products. People use soybeans to make oil, which accounts for around 27% of global vegetable oil production. Soy is increasingly being used for biodiesel production, despite being the most popular oil-based type.
Is agricultural investment good?
Prior to actually deciding to invest, you should analyze your priorities and weigh the benefits and drawbacks of various investment options. Agriculture is one of the reasons to invest in agriculture. Here are a few suggestions to think about.
Agriculture is always needed.
In other words, people will still need food. Livestock and crops both add to the world’s food supply. In turn, scientists have created new methods for producing fuel through plants and other uses for vegetables. If the world’s population grows, so does the need for sustainable farming. Agriculture is a commodity, and given the ongoing demand for food, this is mostly recession-proof.
Due to global growth projections and the constant reduction of farmland, agriculture represents immense potential and is becoming increasingly interesting for investors worldwide. Many investors who are interested in agriculture recognize that it is a highly specialized industry that necessitates specialized expertise and, above all, a great deal of hands-on experience.
Given the global challenge of feeding more populations on less land, as well as the large increases in land value over the years, investing in farming may appear to be a good strategic step and a fascinating opportunity to hedge one’s investment strategy against inflation.
PL global Impex PVT Ltd has extensive experience in the trade of agricultural commodities and manages a large number of them.