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This article first appeared in The Edge Financial Daily on January 15, 2018

HANGZHOU: An agriculture boom is forming, said Jim Rogers, who intends to invest in agriculture more than in Inc.

The billionaire commodity guru believes agricultural product prices are hitting bottom now, and that they will rebound soon as supply would not be able to keep pace with demand growth.

Against such a backdrop, he anticipates rising inflation would be the by-product that would come along with the climb in crop prices.

Rogers observed that the supply of agricultural products, be it foodstuff, or crops like cotton or silk, would be in shortage in coming years, simply because there are fewer people who will want to farm.

“No one wants to be a farmer anymore, as compared to the past, when farmers were like masters of the universe for a long period of time.

“The agriculture sector has been a disaster for 35 years. Things are so bad. The average age of an American farmer is 58, the average age in Japan is 68. And do you know that the highest suicide rate in the UK is in the agricultural sector … thousands of Indians commit suicide every year …,” Rogers told selected Malaysian media at the sidelines of the three-day 2018 Investment & International Trade Forum in Hangzhou, central east China, over the weekend.

As such, there will be shortage of supply as a result of lower production in the coming years, he said. On the other hand, rising affluence in developing economies, such as China, India, Russia and Asean countries, will continue to fuel demand growth.

“There will be an imbalance in the future between demand and supply in agricultural commodities … and that will drive prices higher. I am not talking [about] all commodities … I am referring to agricultural commodities, for example sugar, or palm oil as you mentioned,” said Rogers.

To ride on anticipated high agricultural commodity prices, the veteran investor’s advice is to invest in futures contracts of, for instance, sugar. Or one may consider investing directly in plantation, like sugar cane plantations.

Although he foresees a climb in prices of agricultural commodities, he isn’t bullish on other commodities, like base and precious metal. “I own some gold but I am not buying gold now… I expect gold prices to go down in the next two to three years. I am waiting for the opportunity to buy gold, silver at cheaper prices later,” said Rogers.

With the belief of a strong rebound in prices of agricultural commodities, Rogers concurs with the investment strategy of taking an overweight position in such commodities over equities and bonds. “US equities and the European stock markets are at their all-time high … I won’t put my money there,” he quipped.

That said, he highlighted that while equities in the West are hitting record highs, some markets in Asia, for example China, are 40% below their all-time high, while the Japanese market is almost 50% below their record high. “I am still looking for shares to buy in China and in Japan,” he added.

Rising inflation

Rogers expects to see rising inflationary pressure when prices of agricultural commodities start climbing. In fact, he has noticed that inflationary pressure has been mounting but the meltdown of crude oil prices have, to a large extent, helped cushion the impact so far.

“We are already seeing inflation in many places and many products, [but] most governments lie about it. They have a reason to lie about it. Prices are going up and it is going to get worse. In the past three or four years, inflation has been covered up by the [fall in] crude oil prices, which have come down so much. It is the single most important thing in the cost of living.

“When agricultural [commodity] prices [start] going higher and oil is also going higher … yes, we are going to suffer [from high inflation],” Rogers commented.

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