A Bull Market for Agriculture

For awhile I have been pushing agriculture as a research topic at MIT.

This quote from Barron's sums up why agriculture is important:

"Prices of soft commodities—a group that primarily includes coffee, cocoa and sugar, but also extends to cotton and grains—have been jumping lately, not least because of 2010's string of droughts in Russia, floods in Pakistan, mudslides in central China and bushfires in Australia. ... Yet, long-term, prices are probably headed higher. Olam figures the global population expands by at least 75 million each year. All those people need to be fed. Meanwhile, per-capita income is rising, and people in emerging countries are eating more protein and less cereal. This collides with a decline in arable land, caused by rising urban populations. 'Farms are literally being transformed into parking lots as Chinese car ownership increases,' observes Sunny Verghese, Olam's chief. 'There will be more episodes of droughts and floods over the net 25 years, and we will see a significant supply-demand imbalance.'"

Norton, Leslie P., 2011. Asia's hungry agribusinesses. Barron's, Jan. 8.

It appears that the big four Western agribusinesses (Archer Daniels Midland, Bunge, Cargill, and Louis Dreyfus) are beginning to experience competition from Asian-based firms (Elan, NobleGroup, Wilmar).

It is interesting that tracking of agricultural products is considered an important part of the competitive advantage for all agribusiness firms.

Another interesting point from the article:

"SINGAPORE-BASED WILMAR is Asia's leading agribusiness group and the world's largest integrated palm-oil company, with a huge market value of S$35.6 billion. Demand is expected to grow swiftly because of demand for biofuels."

I did not realize that some believe that biofuels feed stocks will include palm oil to a significant extent. For example, the US is promoting biofuels from five sources, sugar cane, algae, hardwood, switch grass, and sorghum.