Funds Aiming to Harvest Profit from Agriculture

As the demand for food continues to grow along with the world’s population, businesses that can help farmers become potentially more valuable. This according to a recent article in The New York Times.

The article argues that challenges such as climate change and the U.S. trade war with China only further complicate things for agribusiness.

“Current politics aside,” it says, “American farmers and the companies that support them are likely to continue to help nourish the world,” adding that “rising affluence in formerly poor countries is also putting upward pressure on grain prices”—this according to Lucas White, manager of the GMO climate Change Fund. The article reports that the VanEck Vectors Agribusiness Exchange-Traded Fund, the largest agricultural index fund, returned an annual average of 7.3 percent for the 10 years that ended in September.

“For investors who take a long-term view,” the article notes, “options for investing in agriculture are nearly as varied as the crops in the fields,” ranging from actively managed funds to ETFs. Futures contracts offer another avenue, but can be volatile because the markets are relatively small and the “prices of the underlying agricultural products are whipped around by unpredictable forces like the weather.” Real estate investment trusts holding farmland offer a way to profit from corn and wheat, the article says.

The article offers perspective from Paul Pittman, former investment banker and current chairman of Denver-based firm Farmland Partners, a company that grew out of his personal investment in agribusiness through the purchase of farmland in the 90’s: “I just liked the investment thesis. Owning farmland is hitching your wagon to this incredibly powerful trend of gradual increases in food demand with rare setbacks.”