'Agricommodities' Maturing as Asset Class, Attracting New Investor Interest

09 Aug

Investors are flocking to agriculture and agri-related commodities, helping these asset classes to develop and become more mature in the marketplace.  Evidence of this trend can be seen in the sizable new interest in agriculture and commodity-based ETFs.

According to data from BlackRock, ETFs with exposure to agriculture and commodities received $3.6 billion in net inflows during Q1 of this year.  These inflows came after a strong 2010, when the total value of commodity-focused ETFs rose by 41%.

We have been active investors in this space for quite a while, and have identified crucial catalysts driving profit opportunities in the agriculture space, including:

  • growing population
  • supply/demand gap
  • rising industrialization and urbanization
  • shifting dietary patterns
  • competition from biofuels
  • weather and climate concerns
  • reduced available arable land

Agriculture investments along with other crucial commodities are providing some of largest and most interesting profit opportunities in the world. In particular, this sector has seen increased interest as investors shy away from more traditional asset classes, which have stumbled as of late in a tough economic environment.

The agricultural and resource needs of developing economies like China and India are substantial, providing further impetus for investment.  It is estimated that with the growth in global population, the world will require a 70% increase in agricultural production by 2050 to keep up with new demand.

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