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Agriculture Investment in a Hungry World - Articles SurfingETF exchange traded funds are you doorway to agriculture investing in a world crying out for more food. As the world population grows, so will the demand for food. That easy too understand, especially when you learn that the World's population will increase from 6.6 billion now, to a United Nations estimated 9 billion by 2050. That will be like adding three Chinas! Another vital fact is that the population is becoming significantly younger and those younger people will be eating more food than those in aging populations. Even now the consumption of meat is growing ten times faster in the developing world than it is in what we consider the developed countries. At the same time as there is an increasing demand for food we are seeing the amount of land available to produce that food shrinking. Why? Urbanization. People are moving from the country to the cities. They are leaving the farms. There's more bad news. Changing weather is leading to desertification in many countries. The U.N. has released estimates that every year 12 million hectares of land turn to desert and become agriculturally unproductive. As an example of the seriousness of the problem, Beijing's nearest desert is only 70 km northwest of Tian'anmen Square, and this desert is on the move. It threatens to engulf China's capital city within a few years if it can't be stopped. Floods, earthquakes and drought all contribute to the loss of food production. So what does this all mean to investors? Opportunity and lots of it. It's time to start looking world wide for companies involved with land, fertilizers, seeds, transportation, farm equipment, irrigation and veterinarian pharmaceuticals. Rather than trying to pick companies that will prosper, why not buy a basket of agricultural investments in the form of an ETF or ETN. For example: PowerShares DB Agriculture Fund (DBA) This fund consists of futures contracts in soy beans, corn, wheat, and sugar, with 25% being allocated towards each commodity. We expect agriculture to be as recession proof as any investment available today . Even if we should see a global recession people must still eat and you can expect agricultural commodity prices to move higher. Here are some of your other choices: Dow Jones-AIG Agriculture Total Return ETN (JJA) The following are all listed on the London Stock Exchange. You can buy them online through a discount broker like E-Trade: ETFS Agriculture ETF (AIGA-LSE) There are important things to understand about these commodity investments. First, some are structured as ETFs. They hold a basket of stocks like a mutual fund. You will notice that others are ETNs. An ETN is a debt instrument in which the issuer agrees to pay the return of a commodity index, minus fees and expenses. The tax treatment of capital gains and income can also be different for ETFs and ETNs. Some of these vehicles give you exposure to commodities by investing in the futures market and throw off income from bond collateral, while others hold stocks. Funds that use futures contracts receive "mark-to-market" treatment, meaning on a yearly basis any gains from the futures are taxed as 40% short-term, and 60% long-term gains. If nothing else, these investments be your personal hedge against rising grocery prices.
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