The investment performance of the agriculture sector can be monitored via a symbol of devices and measures that pathway the performance of median investment assets selfsame as quoted equities, as well as a reach of measures that take after price movements in alternative investment assets within the agriculture space homologous as farmland.
In reality, the agriculture sector as a whole relies on a combination of demand for its products, weighed against agricultural productivity. When demand for food, livestock feed and biofuels is high inasmuch as soft - information prices rise, as is also the occasion when poor productivity creates the same widening of the gap between supply and demand. On the other hand, if demand falls back, or bumper harvests create an oversupply of produce, prices fall.
If one is able to gain an understanding of current productivity and demand dynamics, then one is best able to predict the true performance of the sector as a whole.
The performance of agricultural equities alone - as measured by agricultural indices - does not truly reflect the state of fundamentals that support the sector. In many cases, individual issues that affect specific companies can either boost or lessen demand for the stock resulting in movement in the stock price regardless of the performance of the sector as a whole.
Indeed, many consider that the most efficient method of capturing financial gains resultant of the boom in demand for commodities from a population that is growing exponentially is to acquire farmland as an investment. The value of farmland is driven at the most fundamental level by the net revenue earning capability of the individual asset in question. As an example; a one hectare lot capable of generating a net annual income after costs of 1, 000, will be worth more to a Farmer than a similar plot capable of earning only 500.
Farmland values are recorded by different indices in different regions. In the U. S. the National Council of Real Estate Investment Fiduciaries ( NCREIF ) records the quarterly investment performance of farmland. In the UK the Land Registry offers the most accurate picture, although anecdotal evidence from estate agents such as Knight Frank offer some insight, although on a very broad, national basis.
Agricultural equity indices include Standard and Poors GSCI Agriculture Index; S - Network ITG Agriculture Index; Dow Jones - UBS Commodity Index and Socit Gnrale Index Global Agriculture, all of which provide a different viewpoint as they measure a different set of equities or commodities and use different weightings.
Overall, agriculture investments can best be assessed individually, and conclusions drawn as to the potential for each project as a standalone entity, be it an equity investments or acquisition of tangible assets. Investing in any business should not be simply because it operates in a particular sector, farmland should not just be bought simply for its agricultural status, and alternative investments are not going to be profitable just because they are alternative.
