Growing money

Last week, I wrote about the essential asset class of energy. This week, I want to highlight another essential asset class that has been a solid long-term investment and a significant export driver for the U.S. economy: agriculture. U.S. agriculture exports have grown over 50 percent in the last three years alone as we attempt to feed the insatiable appetites of our emerging world. In 2013, the U.S. will export a record roughly $145 billion in agriculture products, as the world loves our soybeans and wheat. Demand is surging from China and Southeast Asia, and it is important to remember that we have experienced this growth in less-than-ideal growing conditions. We saw what droughts can do to yields, prices, and river depths. The United Nations claims that global food production will need to double by 2050 to keep up with the demand of an emerging population growth. At CLS, we feel we can play this agriculture trade two ways: buy things that grow (softs and livestock) and buy things that help things grow (fertilizer and machinery). One interesting variable is farmland, without which there is no domestic agricultural trade. Maybe that is why Iowa farmland has been outperforming the S&P 500 lately! Regardless, we feel the essential asset class of agriculture presents an attractive valuation at current levels. Look for a lean hog sipping on a glass of orange juice in a portfolio near you.

Comments provided by guest writer Matt Santini, CLS Portfolio Manager

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