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Active Retirees : Active Retirees Dec-Jan 2013
36 | www.probussouthpacific.org FINANCE Asurge in food demand from developing countries such as China and India makes it likely we will see an 'agriboom' quite soon, but it's not all necessarily good news: that boom could also trigger a signifcant increase in prices of food, such as bread, beef, lamb and corn. Retirees could aim to kill two birds with one stone by investing in agriculture: proft from an 'agriboom' and also get a hedge -- protection -- against higher food prices. The average retiree, however, can fnd it diffcult to buy into agriculture, particularly if they don't want to actively trade risky commodity futures or get their hands dirty and buy a farm. While new products, particularly exchange traded funds (ETFs), can make investing in agriculture cheap and easy, ease and opportunity don't necessarily mean retirees should invest too much in agriculture given its volatility. "Agriculture as an asset class is generally too volatile to be suitable for retirees who should be in the conservative phase of their investing life," says Dugald Higgins, a senior investment analyst at Zenith Investment Partners. Agriculture bulls believe the sector is where the resource industry was a decade ago. They argue that global population growth and the rise of emerging economies such as China will signifcantly boost demand for agricultural products, including 'soft' commodities like wheat, corn and soybeans. But there is limited land available to meet this growing need. "The fundamentals increasingly point to soft commodity prices going to a new phase of growth," Higgins says. Most investors only have exposure to agriculture indirectly, with super funds holding shares in the likes of beef producer AACo or fertiliser company Incitec Pivot. In a portfolio though, it’s an excellent diversifer: when equities and fxed income returns have been negative, commodities have typically generated strong returns. When infation accelerates, real tangible assets such as agricultural commodity prices also outperform. That infation also could make food more expensive. Drew Corbett, BetaShares' head of investment strategy and distribution, says investing in agricultural commodities could help retirees offset some of the impact of food price rises. Where to invest There are a number of ways for retirees to invest in agriculture, and each With agriculture set to take over from mining and resources as the next boom, Ben Power talks to the experts about whether the time is right to invest in agricultural commodities and how to get into the market. Buy the farm? Agricultural companies make up less than one per cent of the market capitalisation of the ASX.
Active Retirees Oct-Nov 2012
Active Retirees Feb-March 2013