An agriculture boom is now in the making, says legendary investor Jim Rogers.
The billionaire commodity guru recently shared his outlook for the industry with The Edge Financial Daily at the 2018 Investment and International Trade Forum over the weekend. It’s bleak for famers, but great for investors who get in early.
That’s because Jim Rogers sees two catalysts on the horizon for the agricultural industry…
The Two Reasons Jim Rogers Is Investing in Agriculture
“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,” said Rogers.
“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?”
As a result, he argues, there will be a shortage of agricultural products in the coming years.
At the same time, China, India, Russia, and other Asian countries will continue to fuel demand growth.
The confluence of these two situations – decreasing supply and increasing demand – will fuel prices higher. “There will be an imbalance in the future between demand and supply in agricultural commodities… and that will drive prices higher,” said Rogers.
One way to ride the anticipated high prices is by investing in futures contracts of popular crops, like sugar. But that’s not the best option for every investor.
Here are two more ways you can invest in the agricultural sector before the boom – plus a look at one “bonus” agriculture play that could mint you huge gains right now…
How to Invest in Agriculture No. 1: Commodity-Based ETFs
Investing in commodity-based ETFs (exchange-traded funds) or ETNs (exchange-traded notes) is a great way to gain exposure to a specific commodity, like corn (NYSE Arca: CORN), sugar (NYSE Arca: CANE), or grains (NYSE Arca: GRU).
There are even ETFs specifically made for investors looking to bundle multiple commodities together. For example, the PowerShares DB Agrifod ETF (NYSE Arca: DBA) presents investors with the opportunity to invest in a basket of commodities. This ETF, which currently trades at just $18.53 per share, invests in corn, wheat, soybeans, and sugar futures contracts.
But buyer beware. Commodities are known for being particularly volatile – meaning the ETFs based off of commodities can be equally volatile.
How to Invest in Agriculture No. 2: Mutual Funds
If you’re looking to spread out your risk across many different holdings, look no further than mutual funds.
Take the Fidelity Global Commodity Stock Fund (MUTF: FFGCX) as an example. This fund invests primarily in common stocks. While at least 80% of this fund is invested in companies in the agriculture field, the other 20% may be in non-farming industries.
The primary benefit of using mutual funds to diversify your investments isn’t always to maximize returns. In fact, many investors use mutual funds to limit the impact of volatility on a portfolio. This is a trade-off many investors feel is worthwhile, especially when they get closer to retirement and become more risk-averse.
Note that it’s important to determine whether a particular fund invests in agriculture-related firms or invests solely in commodities. Many mutual funds also have exposure to other sectors, so if you’re only looking to invest in farming or agriculture, mutual funds may not be for you.
Bonus Investment Method: Marijuana
Jim Rogers states that as the number of farmers lessens, so will the supply of anything that is farmed. And as supply diminishes and demand increases, prices will rise.
While most investors will look to agricultural ETFs and mutual funds to profit from the price rises, we have another take: marijuana.
Rogers says decreased supply and heightened demand will create the agricultural boom. But marijuana companies already benefit from a similar situation – especially now that California has fully legalized marijuana.
We already saw what happened in Nevada when the state legalized pot…
It had to issue a “state of weed emergency” after unprecedented demand caused an extreme shortage.
So it’s not a stretch to assume the same could soon happen in California or any other states set to legalize – which in turn will bring higher prices.
Make no mistake: You can profit from a marijuana price surge.
And we can show you the best stocks to ride to marijuana millions.
Reprinted with permission from Money Morning.