Jim Rogers is nothing if not outspoken, as you’re no doubt aware if you’ve read the various interviews he's done with Investors Chronicle in the past. He’s waxed lyrical on subjects ranging from the ineptitude of politicians to the demise of western civilisation, so it's no surprise that he's been a big fan of physical commodities, particularly gold, for some time.
That's because Mr Rogers believes that the West’s reliance on relentless money printing as an apparent cure for its financial ills will be a major contributor to a continued rise in the prices of raw materials in the coming years, which are seen as safe havens against devaluing currencies. It's also because of demographic trends in emerging markets, where fast growing populations are becoming more affluent and demanding more goods - and higher living standards will increase demand for the most basic, and necessary, commodity of all: food.
So, as Mr Rogers recently pointed out at the Reuters 2011 Investment Outlook Summit earlier this month, time is ripe, he says, for the balance of power to revert back towards the manufacturers and growers of the world. “Throughout history we’ve had long periods when the financial centres were in charge. But we’ve also had long periods when people who produced real goods were in charge – the farmers and the miners," he says. Rising commodity and food prices during the second half of this year have already shown that supply and demand are precariously balanced - and competition for increasingly scarce resources to feed a population expected to rise to around 8bn by 2025 – and additional 1bn mouths to feed - means it is becoming a seller’s market. The World Bank says food production will need to rise by more than two thirds in the next 30 years to cope.
While we hear a lot about the miners here on the UK markets, we don’t hear much about the farmers, though. Mining shares account for 15 per cent of the FTSE 350 by market capitalisation, and constant speculation over Chinese monetary policy and its effect on commodity prices exerts a huge influence on the UK’s blue chip index. But agricultural stocks are few and far between – although some miners do now come with a distinctly agricultural twist thanks to their involvement in mining for fertilisers such as phosphates, nitrates and potassium (potassium carbonate, in fact, more commonly known as potash – see boxout).
