Myths often add value to many aspects of life, but unfortunately in investment, they are of no worth. Here are a few myths about agricultural equity investment that requires attention in order to prove the companies are meant for consideration for inclusion in a well-organized portfolio.
Myth 1
Prices of soft commodity should increase to gain positive returns from agricultural equities.
Truth
It is not only the prices that are solely responsible for its performance. Revenue is the outcome of four basic factors: quantity of production, scale of operations, cost and productivity performance, including the nature of agricultural business. Actually, agricultural equity revenues have been resilient when the prices of soft commodity fluctuated.
Myth 2
Returns of agricultural equities are unstable.
Truth
Agricultural equities are not ‘directional’ investments. They offer relatively uncorrelated returns to the soft commodity prices by investing across the agricultural value chain, which suffocates the volatile return of overall agricultural equities. No single component will perform well at all times. Some segments like pulp production, benefits from improving market consumption trends, whereas others, like forestry, did well due to developed countries’ better economic conditions.
Myth 3
The ecosystem of agricultural is small.
Truth
The listed agricultural ecosystem is vast. More than 1,100 companies are registered in 81 countries that constitute this industry. It has a market capital of 1.1 trillion US Dollar that becomes potentially best fit for a diversified portfolio, which is usually weighted towards industrial, financials, technology and healthcare.
Myth 4
Food prices have increased after investment in biofuels production agricultural equities.
Truth
Investment in agriculture sector is done to increase production of food or accelerate production process. Such investment companies make food products available to more people everywhere. Latest biofuel production is about 2% of global arable land and land for biofuels is in no means capturing land for food.
Synopsis
In the light of above myths and the associated truths, agriculture industry can be considered to be high revenue yielding industry if right volume of investment in agriculture sector is made by financial institutes.
Myth 1
Prices of soft commodity should increase to gain positive returns from agricultural equities.
Truth
It is not only the prices that are solely responsible for its performance. Revenue is the outcome of four basic factors: quantity of production, scale of operations, cost and productivity performance, including the nature of agricultural business. Actually, agricultural equity revenues have been resilient when the prices of soft commodity fluctuated.
Myth 2
Returns of agricultural equities are unstable.
Truth
Agricultural equities are not ‘directional’ investments. They offer relatively uncorrelated returns to the soft commodity prices by investing across the agricultural value chain, which suffocates the volatile return of overall agricultural equities. No single component will perform well at all times. Some segments like pulp production, benefits from improving market consumption trends, whereas others, like forestry, did well due to developed countries’ better economic conditions.
Myth 3
The ecosystem of agricultural is small.
Truth
The listed agricultural ecosystem is vast. More than 1,100 companies are registered in 81 countries that constitute this industry. It has a market capital of 1.1 trillion US Dollar that becomes potentially best fit for a diversified portfolio, which is usually weighted towards industrial, financials, technology and healthcare.
Myth 4
Food prices have increased after investment in biofuels production agricultural equities.
Truth
Investment in agriculture sector is done to increase production of food or accelerate production process. Such investment companies make food products available to more people everywhere. Latest biofuel production is about 2% of global arable land and land for biofuels is in no means capturing land for food.
Synopsis
In the light of above myths and the associated truths, agriculture industry can be considered to be high revenue yielding industry if right volume of investment in agriculture sector is made by financial institutes.
