Opportunities in agricultural equities remain - Barings

Written by Ilonka Oudenampsen

14/02/2013

Prices in food commodities such as corn, wheat and soybeans rose sharply in 2012 due to extreme weather events, Baring Asset Management said. The investment firm believes that these high prices will remain for the next six months, which will also enhance the investment appeal of companies providing goods and services to farmers.

Companies providing for instance seeds, herbicides and fertilisers to farmers, enabling them to maximise their crop output, are expected to outperform this year.

Barings manager of the Baring Global Agriculture Fund Jonathan Blake said: “Crop production, through the continuous cycle of planting, growing and harvesting robs the soil of nutrients. As a result, these nutrients need replenishing through the application of fertilisers. Additionally, for many farmers these nutrients are highly affordable given the current high prices farmers are able to get for their crops.”

The company is also positive on seafood companies such as salmon farmers, due to relatively muted growth in salmon supply this year and growing affluence in emerging nations, and timber, as China’s increasing levels of urbanisation and domestic consumption are likely to ensure demand remains high to support construction.

Blake said: “Overall, we remain positive on the agricultural equities asset class for 2013 as farmers are incentivised to maximise production by optimising the usage of fertiliser and crop protection and using the best seeds. Our expectation of a recovery in volumes and lower soft commodity prices through the second half of 2013 would be positive for processing and distribution companies and provide lower cost inputs for the meat, fish and dairy sectors.”