Blackrock Favors Seed, Machinery Makers Over Food as Investment
BlackRock Inc. (BLK), the world’s biggest money manager, said producers of seeds and farming equipment make a better investment than agricultural commodities as new technologies boosting production may lead to lower food prices.
World food prices reached the highest ever last February on surging grain prices, before slipping 11 percent through December, according to the United Nations’ Food and Agriculture Organization. Global food output must rise 70 percent by 2050 to feed a world population expected to grow to 9 billion from 7 billion and as increasingly wealthy consumers in developing economies eat more meat, according to the FAO.
“People are going to consume more food,” Catherine Raw, a fund manager at BlackRock, said at a conference in London today. “That doesn’t necessarily translate into higher commodity prices because what it may lead to is technical innovation. The better way of playing this trend is being exposed to inputs: the seed manufacturers, the equipment manufacturers, things to make farming more efficient.”
Since the end of 2009 corn prices have risen 56 percent as record demand eroded inventories, and cattle futures rose 50 percent. Total meat consumption per person will rise every year through at least 2020, the Organization for Economic Cooperation and Development in Paris and the Rome-based FAO forecast in a June report.
“What you have is a structural change in price to incentivize new production,” Raw said. Grains prices may fall, while they will probably stay at elevated levels that are needed to incentivize innovation in production, she said.
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