Most of the agriculture market has experienced significant gains in recent years. This sector represents one of the best investments available today. Investment in this industry is particularly active in areas such as China, due to large populations with huge consumption figures.
The Chinese agriculture industry represents 13 percent of the country’s Gross Domestic Product. This figure grows at a rate of eight percent each year. This industry is government-protected and competition from foreigners faces strict regulations. Consumption is increasing and there is often a supply shortage during times of drought, which drives prices up. Investment in this emerging market can be viewed as a hedge against domestic markets, especially when the domestic market is weak.
China is just one example of why investing in agriculture is smart. Some investors feel that agriculture and farmland are the best assets to own during a financial crisis. These provide a tangible product that everyone needs in order to survive. Grain inventories are declining, while grain consumption is on the rise. Increased biofuel production is causing agricultural demand to increase to record highs. In 2008, Massachusetts farmland sold for a record high of $12,200 per acre.
The amount of arable land per individual is declining and China is a prime example of this. One claim states that the Earth has an average of just over three feet of topsoil spread on its surface. It takes hundreds of years for this matter to grow back just one to two inches. Some countries will pay any price to own the scarce amounts of good farmland in existence. In addition, low water supplies reduce the productivity of farms, so investing in companies that find a way to obtain better water supplies will be quite smart.
According to a United Nations report, the population within India, Pakistan, China, and several other large Asian countries is predicted to grow by 1.5 billion by the year 2050. This will double the food demand on that continent. Investing in agriculture and companies that supply energy, food, and water will provide the best returns during this situation.
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