Agribusiness is a profitable sector, with US net farm incomes expected to reach a record in 2013. Agribusiness valuations remain well below historical longer term averages; Last year’s drought fuelled a surge in grains prices which led farmers to…..
ETF Securities Research – Martin Arnold, Director – Research
increase planting intentions in 2013, in turn boosting demand for a range of goods and services, like fertiliser.
– Vertically integrated companies are best placed to weather potential supply shocks from agricultural commodities and maintain pricing power.
– Consolidation within the agribusiness sector remains a key theme with numerous deals being signed off in recent months as companies look to add to supply value chains to access significant areas of demand growth in coming years.
– The agribusiness sector is likely to outperform broad agriculture return benchmarks over H2 2013, as agriculture prices remain subdued and agribusiness valuations gain in line with a recovery in cyclical indicators. Agribusiness does benefit, however, from the low correlation of most agriculture prices to the business cycle.
– In our view, agribusiness is an effective way for investors to gain exposure to the term trend of rising emerging market demand for agricultural produce, while providing some of the portfolio diversification benefits of an exposure to the agriculture sector.
Source: ETFWorld.it
