Buying into agriculture is a sure bet for the long term, and now it has some solid underpinnings in the short term as well, writes Richard Young of Intelligence Report.
Today, there is a terrible drought in the US heartland. Drought can ruin a season for a farmer...and take a toll on an agricultural investor, if his position is not diversified among multiple climate regions.
Your agribusiness investment strategy should be focused on diversifying worldwide to avoid local weather hiccups. That's why I recommend the Market Vector Agribusiness ETF (MOO) to you.
Diversification is one of the pillars of my investing philosophy, and when it comes to investing in companies at the mercy of the weather, diversification is a necessity. Over 60% of the fund's holdings are based outside the United States. Agricultural powerhouse countries like Canada, Brazil, and Australia are well represented.
Fifty percent of the top ten and 70% of the top 20 holdings are based overseas. Some of the more interesting names on the fund's holdings list are Potash Corp. from Canada, Wilmar International from Singapore, and Yara International from Norway.
World Agribusiness Leaders
Potash (POT) is the world's largest fertilizer company. Potash produces potash, phosphate, and nitrogen. The fertilizer company is responsible for 20% of the world's potash production capacity, making it vital to feeding an expanding global population. The use of fertilizers increases the world's crop yield by 40%.
The major growth markets for Potash are countries like India, where crop yields are typically between 20% and 50% of American yields. Even countries that already produce high crop yields, like Brazil, need fertilizers to continue their production at current levels. Brazil accounts for 60% of Latin America's fertilizer consumption, allowing Latin America to grow nearly half the world's soybeans and sugar and 60% of the world's coffee supply.
Wilmar International (Singapore: WIL) is the world's largest palm and lauric oil producer and refiner, largest bottler of palm oil, one of the largest palm plantation owners, one of the largest oilseed crushers, one of the top ten raw sugar producers, one of the largest edible oil refiners in Ukraine, and a leading importer of edible oils to Africa.
Wilmar has over 300 manufacturing plants and a distribution network throughout China, India, Indonesia, and 50 other countries.
In 1905, Yara International (YARIY) was part of Norsk Hydro, an industrial firm that used its hydroelectric business to create fertilizers in Norway. Today, Yara has a presence in 150 countries and is a leading producer of ammonia, nitrates, NPK and specialty fertilizers.
Yara is the world's largest producer and marketer of mineral fertilizers. The company uses chemicals and nitrogen from the air to produce single-nutrient fertilizers and complex compounds and micronutrients for use on a variety of crops. Yara is also one of Europe's largest distributors of purified CO2.
The Market Vectors Agribusiness ETF has a low expense ratio of only 0.53%. That's 22 basis points below the nearest competitor, PowerShares Global Agriculture. MOO is your most cost-effective vehicle for investing in the global agribusiness economy. Buy.