Reuters | 17 March 2010
Food-the next big bankable idea?
By Dhanya Skariachan
(Reuters) - The world keeps seeing more mouths to feed, a fact that leads to smart investment bets.
Seeds, land and fertilizer are among the top places food and agriculture executives and economists said they would put their money, betting on global population growth.
Those looking for the next big bankable idea should park their money in companies that deal with resources in tight supply and growing demand such as food and water, according to participants in the Reuters Global Food and Agriculture Summit in Chicago, London, Paris and Singapore this week.
"World demand has inexorably and silently been sneaking up," said Jim Prokopanko, chief executive officer of the world's second largest fertilizer producer Mosaic Co (MOS.N). "Now, the world finds, you have got to put the accelerator down to the mat to produce more."
With the world expected to have about 9 billion mouths to feed by 2050, investing in agriculture equipment makers as well as companies that supply technology to improve the quality of seeds and those which own rich farmlands in emerging markets is a good idea, many said.
"I think farm land is a pretty good investment. You know, the broad basket of seed companies is good. Picking the winner is kind of tricky. There is a lot of technology, and the winners are not obvious. So there are the DuPonts, Syngentas," Prokopanko said, when asked where he would invest $10 million, other than in his own company.
DuPont (DD.N) is a U.S. chemical company, while Syngenta (SYNN.VX) is a Swiss agricultural company.
Denis Seudieu, chief economist of the International Coffee Organization, also saw good prospects for the food industry.
"I would invest in the food industry, either rice or beans," Seudieu said.
"Why do we not use our intelligence and our technology in food? I am sure there will be enough food for the 9 billion people there will be in 2050 if we spend a lot of money on biotechnology," said Michel Portier, founder and director of French grains consultancy Agritel.
THINK GLOBAL
Many executives urged investors to think global while investing in the sector.
If he had $10 million to invest, Janney Capital Markets analyst Jonathan Feeney's strategy would be simple: "A third Hershey, a third Ralcorp and a third agricultural land in emerging markets, in Latin America specifically."
Feeney likes Hershey Co (HSY.N) for its pricing power in a confectionery category where brands matter and likes leading private label company Ralcorp Holding Inc (RAH.N), which competes in categories like cereal and pasta, where many consumers think getting a low price is more important.
"The economic realities of the businesses are such that here is a company that is providing the lowest cost option to consumers in all these different categories," Feeney said.
Feeney also recommends banana producers Dole Food Co Inc (DOLE.N), Chiquita Brands International Inc (CQB.N) and Fresh Del Monte Produce Inc (FDP.N) as they own rich farmland in Latin America.
"People eat bananas the world over," he said.
Executives also like markets on the other side of the Atlantic.
"Definitely in Ukraine," said Charles Vilgrain, chief executive of farm investor AgroGeneration SA (ALAGR.PA), which is currently only present in that Black Sea country, although he said it envisaged investments in Latin America.
"Ukraine is the country of large production and low-cost production for agricultural raw materials. I don't see any other country today that offers the same quality, opportunity, potential there is in Ukraine," Vilgrain said. The French group currently farms 50,000 hectares in Ukraine.
"In terms of agriproduction there's no better place on earth to do a large project."
Mayo Schmidt, chief executive of Canada's biggest grain handler Viterra Inc (VT.TO), likes India more.
"I think one of the greatest emerging opportunities in the world today is ... India," he said, citing the country's food collection system and explosive population growth.
(Reporting by Dhanya Skariachan, Ernest Scheyder, Carey Gillam, Rod Nickel, Julie Ingwersen, Lisa Baertlein, Martinne Geller, Jessica Wohl, Brad Dorfman in Chicago; David Jones and Nigel Hunt in London, Gus Trompiz, Marie Maitre, Sybille de la Hamaide and Valerie Parent in Paris; Editing by Gerald E. McCormick)
