As the world seeks to reduce consumption of oil and gas, there’s one commodity we can’t cut back on—food. Everyone has to eat and our constant craving means agriculture-related commodities have a lot of potential to grow in the coming years.
Food is fast becoming a powerful global commodity, especially as prices continue to climb and food becomes scarcer. In fact, in a recent chat with the always-fascinating Gordon Clark, Co-director of the Oxford Sovereign Wealth Project, I got to hear where he sees the next big sovereign wealth funds coming from—agriculture-rich countries.
Sure, some big sovereign wealth funds have been snapping up land to feed populations back home, but what happens when countries with agriculture-based economies start tapping into food as a major source of national wealth (instead of selling off arable land to the highest bidder….)? Sovereign wealth funds from land rich countries aren’t far off says Clark.
There are also a lot of reasons for pension funds to bite into agriculture—food provides a decent inflation hedge, especially given that the price of food has been a big part of the inflation picture.
But getting exposure to the asset class can be challenging—some of the biggest funds are able to get access to good deals, but smaller plans have a harder time.
ETFs might make sense as a first step. I wrote a few weeks ago about how infrastructure-linked ETFs could give some plan sponsors an edge in that space—so why not do the same for food?
There are now 153 agriculture ETFs available globally, providing exposure to cattle, corn, wheat and more. Inflows into them have been stellar this year, with investors taking a shine to wheat in particular. Given that bread and other flour-based food items are rising exponentially in some countries, it makes sense.
It’s food for thought for today’s inflation-hampered plan sponsors.
Meantime, I think I’ll go and grab some lunch….