Will farmers be driving Ferraris in ten years? That’s what Jim Rogers, the legendary billionaire investor who founded the Quantum fund, thinks. We’ll have to wait and see if that turns out to be true, but his sentiment is based upon a few key factors that continue to put upward pressure on the prices of agricultural goods.

3 Factors That Could Affect Prices

1.) Emerging Market Demand

Emerging-market economies like China and India are growing by leaps and bounds, enriching the citizens of those countries and creating more demand for higher-end food products. But due to a combination of surging demand and massive populations, these countries lack the infrastructure and production capacities to satisfy that ‘hunger’. China, for example, is home to 22% of the world’s population but just 7% of its arable land. So in order to fill the gap, these countries will need to expand their imports, which stand to be a boon for long-term gains in the agriculture industry.

2.) Inflation Hedge

With the Dollar collapsing at a breakneck pace, investors continue to flock to companies that trade in ‘hard assets’, and the agricultural complex definitely qualifies. Although corn, beans and wheat are down sharply from last year, prices have recently begun to rebound and move higher. Hard assets are currency neutral and will continue to be a great investment destination for anyone concerned about the debasement of paper currencies.

3.) Global Weather Volatility

Farmers live in a precarious world. One season, they spend months praying for rain to nourish their crop; then in the next season, the crop gets wiped out because of too much rain. Just this summer, sugar prices soared to a new 28-year high after a drought killed production in India. Ag producers need just the right balance of rain, sunshine and nutrients to produce the desired yield, something that consistently effects production and, in turn, prices.

Now that we have a basic understanding of the underlying fundamentals affecting prices and consumption in agriculture, let’s go ahead and take a look at some companies hat appear to be well positioned to benefit from the trend. Read more.

Agribusiness Investment

Australia is known as “The Lucky Country” due to its vast resources, relatively small population, and enviable (sometimes) isolation. Few countries rival it in production of gold or uranium for instance, too very precious resources indeed. Its population is educated and increasingly a center of culture. There is more to Australia than kangaroos, didgeridoos, and emus. Wise investors see the opportunities inherent down under. This article will show you how to invest in Australia easily.

The first way to invest in Australia is through mutual funds that specifically target the country. There are many to choose from. There are actually Australian mutual fund companies that know the territory better than anyone else. Three examples are The Australian Foundation Investment Co., Greenchip Funds Management, and Vanguard Australia.

Mutual funds do have hefty loads (commissions) however, and they have internal fees that can also sap your overall returns. I am not a huge fan of mutual funds generally, but there are some that are quite good. There are some great ones that focus on Australia.

One can also invest in Australian companies directly. There are thousands to choose from. Companies such as Qantas Airlines, Energex, and Australian Agricultural Company, provide good exposure to the smallest continent. Read more.

Agribusiness Investment

In recent years many customers have been asking for alternative investments in addition to its portfolio of investments – investments that offer the opportunity to perform well, while behaving very differently from other types of investments. One of the planned investment is export-driven agro-industrial sector, an attractive investment alternative, particularly for people with high incomes.

Although relatively new asset class in Australia, (the opportunity to invest in agro-industry has developed in Australia over the last thirty or forty years) the sector of agribusiness managed investment is well recognized and established in the United States. In the U.S., and over $ 2 billion was invested in this sector each year by individuals through mutual and pension funds.

Unfortunately Agri-investments are often overlooked because of perceptions of high risk and low profitability. Australia Agribusiness Studies Research Group show that the reality is otherwise. In fact, there is the first 25% of agriculture income investments can produce almost as good as the All Ordinaries performance with lower volatility.

In addition to agriculture investments are often negatively correlated with other asset classes and therefore, as part of a diversified portfolio can increase performance and reduce overall risk.

Last year the MIS industry attracted in excess of $ 650 million investment, with 80% of funding for forestry projects. This year, industry sources suggest that $ 1 billion will be invested and therefore the projects receiving the highest ratings from independent research groups are more likely to sell before June 30.

Agribusiness Investment.

IT HAS been a challenging 12 months for all industries, but agriculture has ridden the storm of global financial uncertainty and emerged as a career and investment of choice, AgForce president John Cotter told the organisation’s 10th anniversary State Conference this week.

Speaking after his first year as president, Mr Cotter said all participants at the conference should be proud to be involved in agribusiness.

“Queensland’s primary industries sector plays an important role in our nation’s economic health as it has remained resilient despite seasonal and economic challenges,” Mr Cotter said.

“A recent ABARE report revealed that on a comparative scale for Australian industries over the last 30 years, the agriculture, fishing and forestry sector has outperformed all other sectors, with an average 2.4 percent annual growth – nearly one percent higher than its closest competitor, the manufacturing sector.

“Agriculture really does remain the ‘shining light’, injecting $13 billion per annum into Queensland’s economy and directly generating employment for 100,000 people – not to mention the 4:1 downstream multiplier affect through the food and fibre supply chain.” Read more..

Agribusiness Investment

Agricultural businesses are varied and cover much more than a large farm or ranch. A person looking to start a business or buy an existing business in this area will need financing as well as specialized knowledge. The availability of land to start a new agricultural business is a limiting factor these days as there just is not that much land still not being cultivated. This means that a new owner will usually have to find an agricultural business that is for sale. There are always family businesses for sale, but they do not become available at low prices these days. The land is valuable and the existing equipment if in good repair is also not cheap. New equipment is priced like new cars are these days. The prices are higher and higher and out of sight. Most new owners of ranches or farms were born into the family business and are just taking over the running of a family or corporate enterprise. There are other related agricultural businesses that can be started from scratch or purchased from an existing owner. These include farm supplies, farm equipment, nurseries, small special crop farms, pest control, a niche winery, crop dusting companies and horse or cattle ranches. All of these businesses can usually be found on the market. The problem, as with any other purchase of a business, is this. Can the buyer come up with enough money to interest the current owner and will the current owner carry back some of the paper. There are many very solid reasons that a new owner should consider buying an existing operation rather than starting a new company. The cost will be higher usually with a running business, but the existing business will have customers or a history of production.

Many of the related agricultural businesses will not take the capital to get started or to buy that is needed for the purchase of a large ranch or farm Farming these days is a capital intensive business and this is one of the reasons that family units are always coming on the market. This opens the door for opportunity for the person looking to buy, but it also means that the buyer must have the capital or credit to make the purchase. A suggestion for a potential buyer is contact brokers who specialized in these businesses and see what is being offered and the terms of the offers. This will quickly inform the buyer what they are going to need to make a sale happen.

Getting started in related businesses

If you are interested in owning an agricultural business that supports the farming community, then your capital outlay may be significantly lower and may show a higher percentage return on investment. Farming has a low return on invested capital since the price of land and equipment has sky rocketed in this current market. Some of the other specialized businesses can be purchased or started with less capital and the percentage return is considerably higher. These are factors that should be considered by a potential new owner. One of the reasons that the family units come to market is just this fact. The old owners die or wish to retire and their children do not with to continue the business. So they put it up for sale, knowing they can get a better return on their money without the work or the risk of farming. Brokers usually know why a property is being offered and this knowledge can help the buyer make a better deal with the old owner. Maybe just as a matter of principal, they want to see their farm remain a family farm and not part of a large agricultural corporation. Read more..

For more information visit Agricultural Investments.

Promoting Innovation Approach.

The agriculture sector continues to evolve based on shifting demand patterns, improved technology, integrating trade, and the market. Learning from the industrial sector, the Bank is exploring innovation systems approach to address the demands and forces that impact agriculture. The agriculture portfolio targets integrated programs that address science, private sector investment, the financial system, the policy and regulatory environment, and stakeholder participation. Commitments to agricultural research, extension, training and education components (AKIS) have increased from $230 million in FY04 to $282 million in FY05 to $499 million in FY06. 48 percent of this lending was towards agricultural research.

Re-engaging in water for agriculture.

Agriculture accounts for nearly 80 percent of global water use. To gain “more crop per drop,” the Bank is proactively re-engaging in investments that target the policy, technical, and governance aspects of agricultural water. The Africa Action Plan identified managing water for agriculture as a priority. Investments that empower local user groups and promote public private partnerships are critical to improving performance in this subsector.

Emerging zoonoses – a global threat.

Animal-based diseases, such as avian flu and ‘mad cow’, continue to keep livestock management and animal health at the top of the development agenda. Twenty seven countries have received financing under the Bank’s $500 Million Global Program for Avian Influenza (GPAI) through January 2007, with 16 of these country projects being approved since July 2006. Effective compensation schemes to induce early reporting and culling are key to avian influenza control strategies. The Bank, FAO, and OIE released guidelines for such schemes to be managed by client countries and partner agencies in December 2006.

Go to Agribusiness Investment for more detail.

Source: Ezinearticles

Agriculture is essential to reducing poverty, with a 34 percent share of GDP in low income countries. Three out of every four poor people in developing countries live in rural areas and 2.1 billion survive on less than $2 a day. Over 80 percent of the rural poor depend directly or indirectly on agriculture for their livelihoods.

Rural-urban income disparities are widening in rapidly growing countries – in East Asia the ratio of rural to urban poverty increased from about 2 to more than 3.5 between 1993 and 2002.

Livestock is one of the fastest growing subsectors of agriculture in developing countries. Production of meat has doubled over the last 15 years, led by a 7 percent annual increase in poultry. Vegetable production has grown by 7 percent annually over the past 15 years.

Aquaculture is the fastest growing agriculture sector. Global production has increased 9 percent per year since 1970 and the growth rate is as high as 25 percent annually in Brazil over the last 5 years.

Demand for food is expected to double by the year 2030, in addition to feed and bioenergy demand. Agriculture must increase its efficiency to meet that demand on less land and with less water. Furthermore, to reduce the stress on the environment, environmental services and innovative measures must be considered for long term sustainability.

Agriculture Investments Stabilize at around $2 billion, but a Significant Increase in Africa

World Bank investments in agriculture are stable at around $2 billion for FY06. This year marked a notable lending increase in the Africa region, with investments rising from $295 million in FY05 to $685 million in FY06. The increase represents the highest level of lending in agriculture since FY90 for Sub-Saharan Africa.

Visit Agribusiness Investment for more information.

Source: Ezinearticles

FOREIGN investors have poured billions of dollars into Australian rural property in the past two years, reversing their exodus in the middle of the decade.

In Queensland alone, offshore buyers spent $1.7billion on rural property in 2007-08, up from $933million two years earlier, according to the Queensland Department of Natural Resources and Water.

The increased international interest in Australian rural property was part of the globalisation of agriculture, according to agent Philip Jarvis, who sources rural property for foreign buyers.

Terra Firma, the London-based private equity firm that has bought a $425million, 90 per cent stake in the Packer family’s Consolidated Pastoral Co, has significant European property holdings but no other Australian interests.

Mr Jarvis, whose business Philip Jarvis&Associates at Armidale in NSW, said many of the deals never came to public attention, because vendors sought to have their properties marketed quietly, and buyers sought privacy.

One has been tracking the rise in foreign interest in Australian agriculture, and says there have been a string of sizeable transactions where British and European parties invested in Australian rural land recently.

“US investors tend to buy into cropping, and the European investors tend more to buy into livestock,” Mr Jarvis said.

Buyers ranged from individual family farming enterprises to huge funds representing wealthy investors.

A prized cotton property near Moree, Milo, sold last year for $22million to the US-based Westchester Group, and a big US pension fund investor, Hancock, has been making its presence felt as a would-be buyer of big rural interests in Australia recently.

Last year, grazing property Warrane, west of Armidale, sold for $22million to a European private investment fund, understood to be acting on behalf of Michael Hintze, the Australian-born head of London hedge fund CQS Management.

The 7700ha blue-chip Warrane, the district’s biggest single holding, was owned by J.M. Stephen Pty Ltd for 30 years and was leased back to the Stephen Group of companies.

Analysts agree growing food-security issues and the increasing demand for protein in Asia are helping to drive renewed investment in agriculture globally.

A valuer with Herron Todd White in Darwin, Frank Peacocke, said yesterday the Terra Firma deal was likely to be the tip of the iceberg of foreign investment yet to reach Australia. In the past fortnight, two Asian groups had consulted HTW, seeking advice on properties to buy.

“A few pastoralists have said to me, it’s a bit like buying gold bullion,” Mr Peacocke said. “(Cattle stations) are in limited supply and it’s difficult to make more of them and they’re expensive. I guess in uncertain times there’s a flight to security.”

But in recent years, it seemed the flow of foreign money was all the other way.

The Texas-based Tejas Land&Cattle Co sold its three stations in the Northern Territory’s Victoria River district to Australian Agricultural Co for $80million in 2004, and two years later, the Sultan of Brunei sold three of the five NT cattle stations he had owned for two decades to a Queensland buyer for about $17million.

In 2005, Greek shipping magnate Gregory Hadjieleftheriadis sold off his Alice Springs Pastoral Co (confusingly named, because all the properties were around Rockhampton on the Queensland coast) for about $105million.

At the time, in an exclusive interview with The Australian, Mr Hadjieleftheriadis was keen to draw a line between himself and other foreign investors who had departed the Australian rural scene in previous decades.

“We are not selling like Vesteys or King Ranch, we are not selling like Bankers Trust and all the other names that have come and gone,” he said.

The UK’s aristocratic Vestey family held significant and vast rural interests in Australia for more than a century until its final sell-off in the early 1990s.

The huge Texas-based King Ranch operation bought Queensland and NT properties in the 1950s — including the NT’s famous Brunette Downs, now owned by AACo — but the Texans had departed by the 1980s.

In the mid-1990s, Swiss investor Urs Schwartzenback paid $19million for Windy Station near Quirindi in NSW, and at the same time Korean corporate giant Samsung bought a nearby property, Warrah, which it later sold to Mr Schwartzenback.

Terra Firma spokesmen declined to comment on whether any of the properties would be sold off — or as some analysts have hinted, on whether Terra Firma has further expansion plans in Australia.

Under the deal, Ken Warriner, who ran the Packers’ pastoral empire since it was established in 1983, will continue to hold his 10 per cent stake in the company and will manage the portfolio for Terra Firma.

“I am pleased to welcome Terra Firma on board,” Mr Warriner said. “They have an excellent track record of investing in businesses for the long term and are committed to the continued success of CPC.”

Consolidated Pastoral is Australia’s second-largest beef producer, after AACo, with 300,000 cattle and more than 5 million hectares under its control, in the Northern Territory, Western Australia and Queensland.

In a statement, the parties said, “all regulatory approvals have been granted”. This is understood to include the required Ministerial approval on lease transfers in WA, and Foreign Investment Review Board approval.

Sources close to the deal said Guy Hands, Terra Firma’s chief executive, had known the Packer family socially for several years, but had not done any business deals with them previously.

It is understood the deal resulted from an unsolicited offer from Terra Firma.

“The long-term demand for beef and the competitiveness of CPC makes this an exciting investment opportunity for Terra Firma,” Mr Hands said in a statement.

Terra Firma Capital Partners Ltd this month reported a E1.39billion ($2.73billion) loss after writedowns on two of its businesses, including British music group EMI Group.

Mr Hands, 49, started Terra Firma in 2002 after leaving Nomura Holdings.

Terra Firma has until now focused on Europe, and its investments include a property portfolio in Germany — where it is the country’s biggest landlord — and former Ministry of Defence housing and motorway service stations in Britain.

“Agricultural growth has already been highly successful in reducing poverty in neighbouring East Asia over the past 25 years. The challenge is to sustain and expand agriculture’s unique poverty reducing power …”

said Dr Byerlee, co-author of the World Development Report 2008: Agriculture for development, speaking at a seminar which was jointly sponsored by ACIAR, the Crawford Fund and the Australian Institute of Agricultural Science and Technology.

Dr Byerlee highlighted the role agriculture plays in reducing poverty in Asia and the positive impact ACIAR has in this area.

‘I wish to make special note of the impact of the work carried out by the Australian Centre for International Agricultural Research, which is held up internationally as an innovative example of support to agricultural science for development that pays high returns and benefits poor farmers and consumers in developing countries and also in Australia.’

‘For Australia, funding agricultural research is truly a win-win proposition. Benefits that Australia receives from international agricultural research include mutually beneficial agricultural policy changes; advance information on markets for Australian commodities in developing countries; reduced risk of entry of weeds and of dangerous diseases and pests; early access to new germplasm and livestock breeds; shared technologies, and safer foods.

‘International agricultural research centres supported by Australia return to us many times what we provide to them. For example the value to Australia of the wheat germplasm generated by CIMMYT (the International Maize and Wheat Improvement Centre) has been estimated to be $30 million each year.

Dr Byerlee outlined the linkages between agriculture, development and poverty, and the way these can vary substantially between countries in the Asia-Pacific region. In some, agriculture is a major source of broader economic growth, and, in others, like China, agriculture is no longer the major source of national growth.

The World Development Report 2008, the flagship publication of the World Bank, calls for greater investment in agriculture. Dr Byerlee flagged ACIAR’s partnership modality as a way to deliver the outcomes the World Development Report is seeking.

Dr Byerlee, originally from a South Australian sheep/wheat farm, has worked in development for the last 25 years, most recently as Senior Adviser and Co-Director, WDR at the World Bank. He visited Canberra in February to present WDR2008 to the Australian Government.

Mr Peter Core, CEO, Australian Centre for International Agricultural Research (ACIAR), also spoke on the role of agriculture as a driver for change, and the role of the World Bank report as a catalyst for boosting the profile of agriculture for development.

“Agriculture is one of the constants in long-term development,” Mr Core said, “placing it as an important trigger for early stage development, particularly given its place as a large sector in nearly all developing countries, and the sector where the highest levels of poverty can be found.

“This places research into agriculture in a unique position, but one that must also be carefully managed.

“In a development context, what is tremendously important is that our agricultural research investments are set within the development agenda of our partner countries and support the efforts of the national research systems of those countries. We should be developing long-term, enduring relationships with our partner countries and focusing on strengthening the National Agricultural Researchers [NARs] in these countries.”

Mr Core also spoke of the need to examine why some partner countries can grow at a faster rate than others, and what role agriculture plays in this growth. “For me the question is the economic case for intervention and what has the highest likely pay-offs – is it a new bridge, is it better village education, is it farm level productivity enhancing research outputs or is fostering agribusiness linkages for an enterprise, village or region?”

“I think one of the real drivers of sustainable development is the quality of national institutions. Both China and India have nurtured their agricultural research systems. I know that development requires excellence across a range of institutions in partner countries but one thing I am very proud of is the way the ACIAR partnership modality has, over the years, enabled Australian research agencies to support NAR’s development in partner countries of the region.”

Investing in Australian Agribusiness offers diversification, long-term returns and tax effectiveness. Agribusiness Managed Investment Schemes (MIS) cover a wide range of agricultural commodities including horticulture and forestry.

Agribusiness is an alternative investment class to include in your portfolio as agribusiness combines well with shares, fixed interest and property investments.

AGRIBUSINESS OFFERS INVESTORS…

Enhanced returns

An investment in agriculture offers the possibility of substantially higher after-tax returns than can be obtained from traditional asset classes, such as cash, fixed interest, property or shares.

Diversification

Agribusiness is a unique asset class that is weakly correlated with the stock, bond and property markets, and thus offers investors another level of diversification to a portfolio spread across these asset classes.

Choice of long-term compounded returns or regular income
Some agribusiness projects, for example forestry projects, are long-term investments offering superannuation-style returns with a one-off lump sum from harvesting in approximately ten years. Others, for example horticultural projects, can produce income in the first year, and continue to pay annuity income for ten to 20 years.

Tax-effectiveness

Agribusiness investments offer substantial up-front tax benefits, supported by Australian Taxation Office (ATO) product rulings, providing more flexibility in cash flow, debt management and taxation planning.

Inflation hedge

Investing money upfront and receiving the income on that investment in future dollar values can negate the effect of inflation.

Although many people associate agribusiness with investors in a high tax bracket reducing their tax liability through investment in a managed investment scheme (MIS), the reality is that agribusiness is appropriate for investors who are seeking to build long-term wealth in an asset class that is not correlated (in terms of movements in market prices and returns) with the other major asset classes.