Farm Ireland
Independent.ie

Tuesday 24 April 2018

Positive signs but remember food is a commodity

The rest of the country is slowly waking up to the potential of agriculture. In an effort to focus on the positives in our economy, financial guru Eddie Hobbs had a well-known US investor, Jim Rogers, on his radio show last week.

Mr Rogers made vast fortunes in partnership with George Soros in the 1970s by focusing on investing in commodities. The US billionaire now says that the golden era for the financial sector or "money shufflers" as he calls them, is over. He predicts it will be better to be a farmer or miner than a banker or MBA-type in the years to come.

Like so many other investors, he believes that producers of food and other commodities are going to be the winners in a world that is increasingly scrambling for ever scarcer natural resources. He adds that the longer the sceptics believe that the current buoyancy in commodities is just a temporary spike, the longer this bull run will last.

Stagnate

Farmers have heard all this before.

Despite a constant slew of facts and figures about increasing global populations and rising demand for food during the past 10 years, producers saw their prices stagnate or even fall in real terms. It confounded logic until the recent turn-around in farm prices.

Now optimism abounds in agriculture, as evidenced by the 3:1 ratio of student applicants for agricultural college places.

But the memories of 2009 and the milk price slump, along with poor grain, beef and lamb prices are still raw. The last time food prices began to rise steeply in 2007, we were told that we had entered a 'new era' for food prices. It didn't last long.

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There are tentative signs that the latest price increases may be more lasting than most. Why else would a global player like Glanbia be content to offer their winter milk suppliers fixed prices for the next three years at levels that compare favourably to what these same producers had to fight tooth and nail for every year in recent memory?

Why are superpowers such as China attempting to buy up vast tracts of land everywhere from New Zealand to Sudan, despite the fact that land prices have hardened almost everywhere -- Ireland is an anomaly -- in the past year?

These are promising signs for the world's food producers, as long as they never forget that they are trading in international commodities. This new era of volatility means that if, or when, China sneezes, the world's commodity markets may catch a cold. To weather that particular storm, make sure you have invested in a warm jacket.

Indo Farming