Beware agriculture’s market volatility

Article Excerpt

Despite the significant long-term growth potential in food demand, the prices of agricultural commodities are volatile and as a group have performed poorly over the past 17 years. Still, many of the top companies involved in the industry have done well and outperformed the S&P 500 since 2007. Certainly, investors should note the high level of volatility and risk involved with both agriculture commodities and the shares of the producers. Still, the potential for large gains is real. Food production: a long-term growth industry The $8.5 trillion-a-year food production sector offers enormous opportunities for companies that can position themselves correctly to benefit from the growth in global food and calorie consumption. The global population is rising rapidly, and according to some estimates, will increase by 40%, or 3 billion, by 2050. More food must be produced to feed that growing population. In addition, rapid urbanization and growing per-capita income in developing countries is supporting food and protein demand. Global protein consumption is expected to grow…