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Saturday, 07 May 2011 11:22

The Investment Opportunity in Soft Commodities

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Soft Commodities are commodities that are grown not mined, and they include:
• Coarse grains, such as corn, wheat and barley
• Specialty products such as coffee, cocoa, sugar and palm oil
• Proteins such as beef, pork, chicken and fish
• Forestry products

The global soft commodity sector is experiencing a structural change predominately driven by growing demand from the developing world and constrained supply. The important question from an investor’s perspective is: how can I benefit from this trend? The answer we believe, is that superior investment returns can be made from investing in companies that are able to grow volume to meet this demand.

The rising long term demand for soft commodities is being driven by 3 factors:
1. Population Growth – United Nations is forecasting 40% population growth by 2050
2. Rising Living Standards – increasing wealth per capita in emerging economies is resulting in shifting patterns of food consumption and a rise in demand for grain and other soft commodities

At the same time, supply of soft commodities is being constrained by:
1. Falling arable land per person
2. Slowing productivity gains
3. Water – is currently being consumed above its replacement rate
4. Climate Change

Any time where there are large imbalances between supply and demand of commodities, an interesting investment opportunity exists. This is a very difficult theme to play within Australia as the companies exposed to this sector are relatively small by world standards.

There is a comprehensive 8 page paper available from GEM Capital that further explores one way of investing in this sector. If you would like a copy of this report please contact us by either phoning (08) 8273 3222 or via email on This email address is being protected from spambots. You need JavaScript enabled to view it.

Read 1367 times Last modified on Saturday, 07 May 2011 11:22
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