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
Amazon.com 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.