Legendary investor Jim Rogers has long been a fan of agricultural assets, companies, and a number of other hard assets. His hard-nose investing theory has payed off quite handsomely and his name has become known around the world.
Unfortunately, his words paint a relatively gloomy picture for the overall agriculture industry.
Jim Rogers in 2012
The first thing that Rogers pointed out, and has been pointing out for quite some time, is that the world is short-handed when it comes to farmers. “The average age of farmers in America is 58 years old. In Japan, the average age is 66. In Australia, it’s 58. Hundreds of thousands of Indian farmers commit suicide every year. It’s a disastrous business. In the U.K., the highest rate of suicide is in agriculture. It’s been a horrible business for 30 years. Prices have to go up – have go to up a lot – or we’re not going to have any food at any price,” Rogers stated in 2012.
The 2012 U.S. drought brought his comments back into the limelight as he pointed out that while this drought was very serious in nature, it was only the surface of much deeper-seeded issues that must be dealt with. As it stands, the agriculture industry is doomed unless something changes. Rogers felt that if more people did not turn to farming, prices would simply skyrocket and eventually hurt the consumers. However, spiking prices may be the only way to entice more people into farming. Rogers has noted on several occasions that more people study public relations in the U.S. than go into farming [see also Invest Like Jim Rogers With These Three Agriculture Stocks].
A More Positive Outlook
Despite the negatives outlined above, Rogers asserted he is more optimistic about agriculture than other sectors of the world economy, especially after oil plummeted in the second half of 2014. While he affirms that the basic fundamental problem in agriculture still exists, he doesn’t see “supply yet that can cause a permanent change in the supply/demand.” Further, Rogers claims that the lack of price movement in agriculture makes for a bullish opportunity for investors and affirms, “farmers are going to be much more successful in the next 30 years than in the last 30 years.”
Essentially, just because things are looking shaky for the industry itself does not mean that there is not a great investment opportunity at hand. Below, we outline several options that have the potential to benefit from the pinch in the agriculture world.
- Market Vectors-Agribusiness ETF (MOO): This fund invests in a wide variety of agricultural companies including Monsanto, Potash, and Deere. This fund could go both ways as far as performance is concerned; the lack of farmers and the supply glut could put a major pinch on the profits of these firms, but they may also be able to upcharge their products if food prices soar, allowing them to perform well.
- DB Agriculture Fund (DBA): This futures-based fund invests in a wide variety of agricultural contracts to give investors an all-encompassing exposure to the ag world. If food prices are set to soar, DBA will likely be the best way to take advantage as the very commodities this product invests in will see a massive spike in price.
- Rogers Intl Commodity Agric ETN (RJA): Of course if all else fails you can simply invest in the ETN based on the Rogers International Commodity Index. The fund invests in a basket of 20 different futures contracts with the biggest allocations currently dedicated to corn, wheat, and cotton.
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Disclosure: No positions at time of writing.
