by Michael Arbow, MBA
Partner, RSD Solutions.com
Occasionally this blog talks about the rising cost (real and nominal) of the soft commodities (food) and has also pointed out that farmland is becoming an alternative asset in the investment portfolios of billionaires; well it looks like hedge funds are now moving down on the farm. It is estimated that US farm land will be increasing at a rate of between 5-10% per year in the foreseeable future. Add onto this the return of the food grown and farmland is looking pretty attractive. Of course the road will be rough (volatile) but the trend is entrenched as long as the wealth in China and India and numerous other emerging markets increases.
Where does that leave the food processors; the candy makers, the bio-fuel creators and the brewers? Well for them, the future will be filled with uncertain prices and shifts in consumer tastes towards alternatives. Budgeting and price forecasting will become more uncertain as will consumer tastes as demand destruction begins to control the markets. This world is no longer on the horizon, it is here and the hedge funds know it and are making plans to profit from it. Meanwhile for commodity users: are they ready, has the risk team and the Board updated themselves with viable alternatives to reduce the worry and volatility, are hedging strategies been re-visited? According to the attached article, time is running out.
For more on this story follow the link to The New York Observer article:
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