A growing global population, land scarcity and fewer young people entering the rapidly ageing farming workforce have propelled agricultural commodities to the top of the list of sectors being closely watched by Jim Rogers, co-founder of the Quantum Fund with George Soros.
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"I would prefer to invest in agriculture," said Rogers in an interview with S&P Global Platts from his home in Singapore. "Unless something changes very quickly, agriculture is a very promising place to be in."
Fundamentals of population growth and the availability of land play a big part in Rogers' outlook for agriculture. By 2040 the global population is expected to grow by a fifth to around 9 billion people adding to demand for bulk soft agricultural commodities such as rice, grains and sugar. Rogers warned that food production faces the challenge of meeting increasing demand amid the rising cost of agricultural land, climate change and an ageing workforce.
"In the US we have more people studying PR than farming," said Rogers.
International wheat prices have been on the rise this year. On July 30, Platts assessed FOB Russia 12.5% protein wheat $1.75 higher day on day at $253.73/mt, while FOB Australia Australian prime wheat was assessed $4 higher on the day at $288/mt.
"Agriculture land prices in some places are going through the roof because there is nobody to sell them. The price of sugar is down 70% from its all-time high. All agriculture products are down a lot and that's where the opportunities are going to be because somebody has to produce the stuff," Rogers said.
According to S&P Global Platts Analytics, current Asian origin refined sugar surplus and upcoming Northern Hemisphere crop recoveries are improving the white sugar availability outlook, and are driving the weakness in white sugar premiums.
Rogers added that agriculture would offer a big opportunity in China over coming years and decades. "Beijing says people in the cities have done well but people in the countryside have not. Beijing is now trying to give incentives for the countryside."
For Rogers the bull market for commodities doesn't stop with food.
"I expect oil prices to continue to go higher, not every day because nothing goes straight up. Yes, we will have electric cars and alternative energy. All of that will happen. But that does not mean that oil cannot go higher for a few years. Thirty years from now I am not sure," Rogers said.
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He added that central banks and governments across the globe had printed and borrowed staggering amounts of money, volumes that had never hit the market in such a short period of time.
"History shows that when you have a lot of money it often leads to higher prices. When you have a lot of money, and want to build a factory, it takes a long time. But if you go online, you can buy cotton futures in 10 seconds," Rogers said.
Commenting on the possibility of oil going to $100/b over the longer term, Rogers said nothing can be ruled out. "With all this money floating around, who knows, anything can happen. It has happened in the past and it will happen in the future. Yes, certainly we will have electric cars but that takes time."
Dated Brent crude, as assessed by S&P Global Platts, has climbed over 50% since Jan. 1, 2021 to currently around $75/b, prompting renewed debate over the strength of the market. S&P Global Platts Analytics forecasts global liquids demand to continue climbing to nearly 115 million b/d through to 2040 in its base case scenario despite energy transition.
According to Platts Analytics, stocks draws accelerated in July, with draws likely to bottom out in August. China is currently drawing crude stocks and is assumed to resume building stocks later this year. Crude prices are likely to remain in the mid-$70s in the near term before easing back to under $70/b before year-end, Platts Analytics estimates.
Rogers said with many of the traditional oil majors putting their money into alternative energy sources, investment in the oil sector would be affected.
"I am not saying they are wrong. I am just saying that companies only have so much money to invest. So, if some money is going into the solar sector, then less is going into drilling. And I hope the solar projects work -- solar in most places is not economically competitive without subsidies. So, oil prices are not going to be in the bear market for another 10 years or so," Rogers added.
Commenting on the outlook for metals, Rogers said that investors had piled on to metals, such as copper amid expectations that sectors, such as electric vehicles, would aid demand. This has helped to lift its price to record highs.
"Electric cars will use copper several times more than a regular car. People can see what's coming. For a while it's going to make metals like nickel, lithium and copper very, very popular. And supplies of nickel and copper are not expanding as rapidly as they would have to in order to keep prices down."
Rogers said that he can see bubbles developing in the bond and stock markets across the globe.
"The only thing that I see still cheap are commodities -- silver is down 50% from an all-time high, sugar is down 70%, oil is down 50%. These are not bubbles. Commodities are the cheapest asset classes now," he added.