Famous investor foresees agriculture producing billionaires
“If you want to be rich, you should learn to drive a tractor.” These are the words of legendary American investor Jim Rogers, who is so bullish on agriculture’s prospects he is betting big on the sector producing the next generation of super-billionaires.
Rogers is arguing that the world, for the first time in decades, has “very low inventories” of food stockpile and a shortage of farmers, a combination he predicts will drive up the prices of agricultural commodities as demand for food outstrips supply.
“There’s going to be a huge shift in American society, American culture, in the places where one is going to get rich. The stock brokers are going to be driving taxis. The smart ones will learn to drive tractors so they can work for the smart farmers. The farmers are going to be driving Lamborghinis,” Rogers once told Steve Forbes, the founder of Forbes magazine.
“If you want to be rich, you should learn to drive a tractor.”
While investor stampede into buying shares in farms, farm equipment, fertiliser and seed companies is yet to materialise on a large scale, Rogers has one supporter in Timothy Burcham, dean of agriculture and technology at Arkansas State University. Burcham echoes Rogers’s sentiments that agriculture is the next big thing.
“We are going to be trying to feed 9 billion people by 2050 with the same number of acres of arable land. The opportunities for a person that has a graduate degree in agriculture are great now, but they are going to be really, really excellent going into the future,” Burcham recently told TV network CNBC.
South Africa must capitalise on food boom
If South Africa is to capitalise on Rogers’s predicted food boom and create the 1 million agricultural jobs promised in the National Development Plan (NDP), it will have to reverse the severe decline in the number of commercial farmers in the last three decades. The number of commercial farmers in South Africa has dropped from approximately 128 000 in 1980 to 58 000 in 1997 and again to less than 40 000 today. Some analysts have predicted that the figure could fall to 15 000 farmers in the next 15 years.
Efforts to boost commercial farmer population in South Africa should be coupled with increasing cultivable and irrigated land to ensure that the country becomes a powerful food producer and exporter.
Rogers co-founded the Quantam Fund with George Soros in 1973 and over the following 10 years, the portfolio soared 4200% while the S&P 500 (500 largest listed companies on the New York Exchange and Nasdaq) gained about 47%.
He predicted the commodities super-cycle which made a lot of people around the world extremely wealthy, including our own Patrice Motsepe, Cyril Ramaphosa and Sipho Nkosi, whose net wealth is estimated to be R22.6 billion, R3 billion, and R2 billion respectively. They all made a big chunk of their money in the resources sector.
Although a few South Africans made money from the resources boom, the country unfortunately did not fully reap the benefits of the boom due to its infrastructure bottlenecks in our energy production, poor rail freight and ports infrastructure. This meant that South Africa could not export to fast-industrialising China at the rate it would have wanted to. If Rogers was right about the commodities boom, his predictions of an agricultural boom cannot be discounted or dismissed.
Food demand outstripping supply
Food prices have spiked sharply around the globe. Varied and often highly contested explanations for the huge rise in global food prices have been advanced. A research study published in 2012 by global investment bank Deutsche Bank points to demand outpacing supply as the main reason for rising prices for agricultural commodities.
“Key drivers include global population growth, rising incomes, changing diets in developing and threshold economies, and bio-fuel production. At the same time, water shortages, extreme weather, climate change, poor infrastructures, unjust land distribution and other factors are restricting supplies of agricultural products,” the report explained.
But the World Bank has fingered the high crude oil prices as the culprit behind rising agricultural commodity prices. However, non-profit organisation Oxfam last year accused investment banks trading agricultural commodities, including Deutsche Bank, of pushing prices in the food markets through their speculative trading, which it labelled “speculating on hunger.” In the wake of Oxfam’s allegation, some banks suspended their commodities funds while Deutsche Bank denied the charge.
Away from the Oxfam’s stand-off with investment banks, South African consumers have also felt the brunt of skyrocketing food prices, which analysts argue are driven by high fuel and electricity costs.
A comparison last year between baskets of goods by City Press newspaper over a 5-year period concluded that seven basic items alone have increased by an accumulative 49% from January 2008 to April 2013.
The publication reported that the cost of bread, meat, milk, cheese, vegetables, sugar and cooking oil among others in January 2008 were compared with prices for the same products in April 2013. Where consumers had to pay R189.94 in January 2008 for these products, they now had to fork out R283.09 for the same items, a 49% increase.