Why I’m betting on agriculture and farming for the long run ?>

Why I’m betting on agriculture and farming for the long run

According to the Population Reference Bureau (PRB) the world population reached 7.3 billion in 2015, being China and India the most populated countries in the world with 1.372 and 1.314 billion respectively.

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Source: Population Reference Bureau

As we can see in the chart above, 9/10 of the most populated countries have a lower than the $15,030 average gross national income per capita, so we can assume that those countries are not developed and that the main part of its population has low income. We can also see that most of the world population is concentrated in Asia.

Taking a look at the graph below, we can see that the greatest part of the world population is a low and middle class (4.702 billion of the whole population is living in less developed countries excluding China according to the PRB), what joint with the assumptions we have seen before makes me think that the greatest part of the population has low income.

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Source: PRB

We also have the fact that vegetal food is cheaper than other sources of food such as meat, specially simple grains like rice or wheat. There’s also the reality that grains can feed much more people than meat nowadays, as its production it’s easier to increase in order to match production with demand. So if we mix all those things, we can assume that the bulk of the world population is eating grains and vegetables.

Now, if we look at the world population growth prospects set by the PRB, we can see that the world population is going to increase from 7.3 billion to 9.8 in 2050. That growth will increase the food demand, and, as we have seen before, a great part of that demand will be from less developed countries, demanding inexpensive food. There are population projections that says that demographic growth will be negative in developed countries such as the European Union, so this reinforces my theory).

As most of those countries are growing at good rates, we’ll also see how middle classes increases, and as a consequence, meat demand.

Some people may think that as demand will be higher supply will be increased and prices will remain mostly flat, and it can happen. But the increase in volume will increase revenues for producers, distributors and ‘complementary services’ providers (like fertilizers, livestock food, etc). So in my opinion is a must have for the long term.

4 thoughts on “Why I’m betting on agriculture and farming for the long run

  1. Hello Alvaro,

    I like your point of view and i have a similar vision, I just looked shares in the meat sector (I like a lot Sanderson Farms and Astral Foods) , what actions you looked in the agricultural sector?

    I think it might be interesting to add some to my portfolio.

    1. Hi Víctor,

      I’m glad to read that.

      As the two most populated countries of the world are (and will be in the mid term) in Asia, I’ve been looking for something there.

      I’ve found a farming company, ‘Sino Agro Food’, listed in the OTC and the Oslo stock exchange. For what I’ve seen it has great numbers and it seems that they have been doing things well, hiring reputated and experienced board members (as the CFO), insiders own an 8% of total shares and it seems to be undervalued b the ratios I’ve seen. The company is focused in the Chinese middle class.

      I still have to take a deep look, but the first impression is good. I encourage you to take a look on it.

      Once I finish it, I’ll look for some grain producers. If I find something interesting I’ll post it 😉

      Regards

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