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Farming in India is still regarded as simply not the best idea for young graduates and business executives. But times are changing and need to change fast. There is huge potential for investing in farmland and agricul..

24 Oct 2013

NEW DELHI (Commodity Online): Recently, global commodities investor, Jim Rogers made headlines when he recommended agriculture as the best sector for investment. According to him there were many options in agriculture-related sectors including farmland, agriculture stocks, food companies, processing plants and companies that make tools, machines, tractors, fertilizers etc for farming.

Stock markets in India and across the globe have been moving without direction even as equity pundits and analysts continue to give confusing ‘buy’ and ‘sell’ calls on companies and stocks. In India, equity market is largely driven by a handful of star stocks, leaving millions of investors in permanent losses as their mid-cap or small-cap shares have refused to go up.

Commodities markets have been hit by uncertain global events in the past few months. Crude oil prices dramatically rose when United States mulled military action against Syria two months back; but the war fear is now over, leading to the softening of crude oil prices.

Hot bullion and metal commodities such as gold, silver, copper and zinc have been oscillating from bull to bear markets in a span of two or three months, giving investors with uncertain research and fundamental guidance on whether to put their money in commodities or not.

Amidst this uncertain investment climate, there is a bright investing chance that is coming up across the world, and in India: agriculture. Jim Rogers is right when he says that investing in farmland is the best bet that sensible people should think about.

But why agriculture and farmland? Simple, land across the world is limited, and the ever-growing population requires increasing agricultural products for consumption. The biggest challenge for the world’s largest populous country China is how to feed their people. There is not enough cultivable land now available in China that Chinese companies are buying land and agricultural properties across Latin America, Australia and Europe for cultivation.

Farming in India is still regarded as simply not the best idea for young graduates and business executives. But times are changing and need to change fast. There is huge potential for investing in farmland and agriculture in India. Recently, newspapers reported a few techies from Bangalore giving up their software jobs to buy 10 acres of land to start cultivating all kinds of vegetables, commercially.

In the last few years, investment in agriculture in India has been going up. The percentage of farm GDP has climbed from around 16 per cent in 2007-08 to 20.3 per cent in 2009-2010 — the highest in last few decades. Analysts now say the figure has been rising since then and has touched 25 per cent in 2012-13.

Agriculture stocks in the US and Australia have always been bullish; even in India, stocks of agriculture and food companies have always been giving handsome dividends.

According to dailyreckoning.com, there are five reasons why people should invest in agriculture, globally.

1. Grain inventories are falling to their lowest levels in more than 40 years

2. Grain consumption is on the rise. The world consumes, on average, 2,600 bushels of grain crop per second!

3. Biofuels are driving ag demand up to new levels. Most every oil-consuming country has biofuel targets in place that will kick in over the next five years. These places include the U.S., the EU, Canada, Japan, Brazil, India and China.

4. Arable land per person is falling. Globally, it’s clear we are eroding soils at a rate much faster than they can form, notes John Reganold, a soils scientist at Washington State University. Estimates vary, but in the U.S., the National Academy of Sciences says we’re losing soil 10 times faster than it’s being replaced. The U.N. says that on a global basis, the rate of loss is 10-100 times faster than that of replacement.

5. Low water supplies cut down farm productivity. China is a biggie to watch when it comes to food supply dynamics. It feeds 20% of the world’s population on only 10% of the world’s arable land and with only 6% of its water. China’s water tables are falling too.

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