Why Should I Invest in Agricultural Commodities?

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Every single living being on this planet depends on the agricultural industry in a more or less similar manner. The Food and Agricultural Organization of the United Nations reveals that the economic value of the agricultural industry is worth more than $3 Trillion. From time immemorial to this current day, the agricultural sector still remains to be an unswerving high-yielding sector that provides backers or investors a likelihood of long-term growth. This not only secures their financial stability but will also prove beneficial for their family and the generations to come. With the world population expected to climb from 7.5 billion to 11.8 billion by 2100, agricultural commodities are likely to play an even bigger role in the decades coming ahead.

Agricultural commodities have their perks, with the ability to not move in tandem with the business cycle being one of them. 

The grain sector remains of great significance because it is the answer to food demand and supply around the world, thereby providing an opportunity for long-term wealth creation. Agricultural farming prices are controlled by demand and supply and grains being a staple food product, are consumed in almost every country of the world.  A bumper crop that has yielded a remarkably large harvest in certain parts of the world may push prices down considerably while strong economic growth in a major economy like Europe may push prices higher. According to FAO, “at 757.6 million tonnes, global wheat utilization in 2020/21 is expected to exceed the estimated level for 2019/20 by 1.1 percent, largely as a result of a foreseen increase in food use”. The Covid-19 impact was tremendous in the year 2020 and the aftermath is expected to continue in the coming years. Owing to the worldwide increase in population, the demand for grains has notably increased, thereby making grain trading a potentially remunerative business in recent years. 

Grains Exchange Traded Funds (ETFs) are a relatively conventional approach to gain exposure without wading directly into agricultural commodities/futures markets. It is up to the discretion of the investor in the grains space to choose to invest in general agriculture ETFs or on those focusing on specific grains. An ETF can also allow an investor to gain a diverse exposure to the food and agriculture sector. Many agricultural ETFs offer access to a set of businesses that derive a large percentage of their revenue from the sector and carry the least amount of risks for the grain investor. 

Investing in agricultural commodities proves to be more sustainable than real estate or stock markets. 

Grains are a versatile, tangible commodity that yields productive results and greater profits.