Look beyond commodities for food profits

Article Excerpt

Despite the significant long-term growth potential in food demand, the prices of agricultural commodities are volatile, and as a group performed poorly over the past 15 years. Still, many of the larger companies involved in the industry have done well and outperformed the S&P 500 since 2007. Investors should note the high level of volatility and risk involved with both agriculture commodities and the shares of producers. The potential for large gains and losses is also real. Food production—a long-term growth industry The $4 trillion-a-year food production market 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 almost 3 billion by 2050—40% more than the current level. More food must be produced to feed the growing population. At the same time, arable land per capita is declining, making it even more important that soil productivity, especially in developing countries, be…