Opportunities in the agricultural sector have never been so varied
While celebrations are being held worldwide for the birth of the seven billionth baby, questions are being raised as to whether the world's resources will be able to support its growing population. With this milestone, and the expectation that the world’s population could double by 2100, agronomists and scientists continue to research the agricultural solutions to address these issues, says Ralf Oberbannscheidt (pictured), portfolio manager, DWS Invest Global Agribusiness...
The DWS Invest Global Agribusiness fund continues to focus on companies which provide solutions to the stresses in the agribusiness food chain, monitoring the relationship between producers and consumers. For investors, exposure to the agricultural sector has never been so varied.
The corporate sector looks well positioned to increase investment spending further, with strong profit and cash levels, which is good news for investors looking for healthy returns. Indeed, three individual large-cap stocks viewed as quality blue-chip companies in the agribusiness space added to the positive performance in with stock gains of 19-24%.
We continue to believe that the private sector can provide a significant solution to the challenge of global demand, particularly in logistics, but this industry must gain scale and breadth to deliver even more efficiency within the value chain. Global food trade will need to grow because the location of population growth is mismatched with land availability and productivity. The private sector will have to work with the public sector to help bridge this financing gap and develop profitable enterprise that supports the sustainable development of agribusiness.
Solid performance contribution by our top ten holdings derived better than expected earnings in the current environment of volatile crop prices. The higher concentration level of the top ten holdings expresses our risk adjusted upside potential for many of them. Most of last month’s laggards bounced back, thereby supporting our positioning during the recent sell off.
Meaningful outperformance came from two U.S. based nitrogen and phosphate manufacturers and a combination of Norwegian, German and Australian fertiliser manufacturers. These holdings added 446 bps of performance, driven by meaningful volumes shipped and positive pricing trends at bench-mark destinations.
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