Global Agriculture Story Still Unappreciated

By Chip Hanlon | September 24, 2007 | 12:48 PM | 1 CommentTweet This

Alfalfa.  Soybeans.  Wheat.

They probably don't arouse the senses the way the words "I-phone," "biotech" or even "gold" do.  In fact, after a month of travel in support of the Delta Global Agriculture UIT, I'm quite certain those agricultural terms do not yet awe or inspire the average investor.  How do I know?

Because they don't yet inspire the vast majority of above-average investment professionals, despite the sector's strong performance of late (example: as of Friday's close, the above-mentioned ag portfolio was up 6.7% on the offer since its inception on July 10^th, while the S&P 500 has yet to even reclaim its highs of mid-July).

When you speak publicly often enough, you surely get a sense of when you "have the audience," when your listeners are tuned in and are very interested in what you're saying; that simply was not the case during most of the speeches I gave on the subject of global agriculture this month.

And I don't mean this as a knock on the people to whom I was presenting; I was sincerely quite impressed with the professional, classy caliber of the audiences I was in front of.  That being said, after a while I took to starting my presentations with the glib question, "By a show of hands, who in here is just dying to know about global agriculture?" a line which was met by the appropriate amount of laughter.

These advisors knew what I meant: global ag--what a yawner!

But it isn't.  In fact, the segment is showing the same demand-side strains that have been the drivers of the multi-year commodity boom we've seen in energy, industrial and precious metals.  Global grain stocks are at multi-decade lows and the world's arable land base is still shrinking, both while a brand new middle class demands a protein-rich diet it couldn't previously afford.  That additional livestock is the huge new consumer of grain; depending on a cow's age, it can take nearly 10 pounds of feed to produce one pound of beef!

But this article isn't about the powerful statistics underlying the global agriculture story; one of us here at Delta Global will write again soon about those compelling figures (in the meantime, Emanuel Balarie wrote a solid primer on the topic here just days ago).  And it's not even about the blow-out earnings that agriculture companies have been reporting.

No, the point of this article is sentiment: it's my distinct impression that the demand-side story for grains is either misunderstood (example: this is NOT just an ethanol story) or just completely unknown.  That is very bullish and supportive of the notion that this agriculture bull market has a long way to run.

Position disclosure: Hanlon owns shares of the UIT mentioned in this article.

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great article I'm surprised to hear that brokers aren't all over this theme. These companies have been flying; I would have thought they would be piling in right now. If you would have said that, I would have thought about selling.I guess I'll keep holding. I have been in these for a year, and I'm up so much. I guess they have more up side. Please do write a follow-up on the article about worldwide food statistics. That would be interesting. Submitted by Aardvark on Mon, 2007/09/24 - 12:45pm » reply |

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