Grains and livestock seen as neat play on China growth

Tue Oct 5, 2010 10:30pm IST

Related Topics

* Investors should look at chicken, pork in Brazil

* Investment in grain storage may be good bet

By Pratima Desai

LONDON, Oct 5 (Reuters) - Investors looking to gain from China's phenomenal growth should look further at grains and livestock as food demand in the country will outstrip the country's ability to produce it, a conference heard on Tuesday.

Demand for agricultural commodities has raced ahead in China partly due to changing diets, with rising incomes leading to more consumption of meat.

"China will become an increasingly important importer of food, especially animal feeds such as soy and corn," said Larry Brainard, chief economist at research firm Trusted Sources at the World Commodities conference organised by Terrapinn.

"Support prices have been raised to spur production, but the supply response lags urban demand."

Maize (corn) is the most important crop for animal feed and China, the world's number two producer, has moved from a net exporter to net importer in the last couple of years.

A move to cities, higher wages -- in the region of 20 to 25 percent increases over the next five years, according to one speaker -- and lack of land reform in China mean higher demand for grains, used to feed livestock. [ID:nLDE6941KI]

Demand for a more protein-rich diet because of growing affluence in China means investors should also look at livestock companies in countries with large agricultural sectors.

The growth in consumption in China has contributed to record global demand for grain-fed meat while stocks are at the lowest levels in almost 30 years, according to figures issued by the U.S. Department of Agriculture.

Jack Dzierwa, a portfolio manager at U.S. Global Advisors said companies specialising in chicken and pork in Brazil, Uruguay or Argentina are good bets.

China has been building up strategic reserves of agricultural commodities.

"In the last 50 years the planet's population has doubled, but stocks haven't changed," Greg Smith, chief executive at Australia-based fund firm Global Commodities said.

"You should have fabric in your portfolio."

Reluctance by China's government to reform land laws is part of the problem.

"Ideological barriers are blocking reform of land tenure and labour mobility ... Brazil will be a major beneficiary of rising global demand for agricultural products," Brainard said.

Brainard recommends investors look at grain storage. "There will have to be massive new investment in grain storage."

(Additional reporting by Nigel Hunt in London)

(Editing by Veronica Brown)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Sino-Indian Ties

REUTERS SHOWCASE

Eyeing Stocks

Eyeing Stocks

Interview - EPFO chief urges green light to buy stocks  Full Article 

Stimulus Reports

Stimulus Reports

China cenbank injects $81 bln into major banks to support economy - reports  Full Article 

Monsoon Update

Monsoon Update

Delayed retreat of monsoon rains to start this weekend  Full Article 

Fed Policy Meeting

Fed Policy Meeting

Fed could hint on rate-hike plans as it prepares for policy turn  Full Article 

Grim Outlook

Grim Outlook

Sony deepens loss estimate on struggling smartphone business  Full Article 

Sugar Surplus

Sugar Surplus

India to produce surplus sugar for fifth straight year - industry body  Full Article 

Business Sentiment

Business Sentiment

China, Singapore slowdown weigh on Q3 Asia business sentiment   Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage