Agri-Food Stocks Offer Potential Investment Opportunities

Food prices skyrocketed worldwide in 2007 and early 2008 leading to a crisis in many developing and under-developed countries. In 2008 and last year prices stumbled and the crisis faded away from headline news.

Last November BusinessWeek had an interesting report titled Land Rush in Africa. The article discussed in detail how Agri-business and global investors are scooping up fertile farmland in Africa. In the same month World Bank President Robert B. Zoellick warned that low food stocks and shortages could force food prices up again in 2010.At a panel discussion on food crisis three leaders warned that the food crisis may repeat again. One of the leader that shared this thought was Dr.Josette Sheeran of the United Nation World Food Progamme(WFP). She said that the cost of cereal had risen 17% and global food prices are 50% higher than just five years ago.

Some facts from the World Bank site on Food Crisis:

  • 1.1bn people were living on less than $1 a day
  • A 2 kg bag of rice now costs half the daily income of a poor family in Bangladesh
  • Between 130m and 155m people fell into poverty in the last 2 years due to high prices
  • Although lower than at their peak in 2008, major food grain prices are still above average
  • Although international prices have fallen, local prices in many countries have not

In the World Investment Report 2009, UNCTAD said over 900 million people worldwide are undernourished and 65 countries are in serious danger of food shortages. Globally Foreign Direct Investment (FDI) in the agriculture sector has increased sharply since 2005. many of the large companies are getting involved in the upstream and downstream of the value-chain.Large multi-national companies participate in agriculture production by contract farming. Some of the countries with heavy investment by foreign companies in farming include Vietnam, Kenya and Brazil.

The continued rise in oil prices, weather-related and man-made events can cause food prices to go higher this year. During the crisis in 2007 many Agri sector stocks had incredible runs.

The Top 25 Trans-National Food and Beverage Companies that are increasingly moving into other parts of the value-chain are:

  1. Nestlé SA (OTC: NSRGY)
  2. Inbev SA (BUD)
    Note: Budweiser merged with Inbev to form Anheuser-Busch InBev
  3. Kraft Foods Inc (KFT)
  4. Unilever (UN, UL)
  5. Coca-Cola Company (KO)
  6. SAB Miller (SAM)
  7. Diageo Plc (DEO)
  8. Pernod Ricard SA
  9. Cadbury PLC (CBY)
  10. Bunge Limited (BG)
  11. Heineken NV (OTC: HINKY)
  12. Pepsico Inc (PEP)
  13. Molson Coors Brewing Company (TAP)
  14. Kirin Holdings Company Limited
  15. Archer-Daniels-Midland Company (ADM)
  16. Associated British Foods PLC
  17. Carlsberg A/S
  18. HJ Heinz Company (HNZ)
  19. Danone (OTC: DANOY)
  20. Anheuser-Busch Companies Inc
  21. Wilmar International Ltd. (Singapore)
  22. Sara Lee Corp. (SLE)
  23. Constellation Brands Inc (STZ)
  24. Fraser & Neave Ltd. (Singapore)
  25. Danisco A/S

Source: UNCTAD

Note: These companies were selected based on 2007 foreign assets

Investors can use the above list as a starting point to do further research for selecting stocks.

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