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23-Sep-2010 | Reggie | One recurring trend with investors looking over the long term is food stuffs. The idea is as the world population continues to increase at a quick pace, while the amount of arable land remains static, that there will be a threat of the demand for food outstripping the supply. This is a topic that is once again garnering a lot of attention with investors thanks to the flurry of interest surrounding Potash Corp and BHP’s efforts to take it over. With only so much land available for farming, one way to make that land more productive is by using fertilizers. Before the recession hit a couple years ago Potash Corp was trading for ever $240/share.
Fertilizer companies aren’t the only way to profit from increased food demand. There are many types of businesses that will benefit as farmers look to be more productive with their land and ship more product to places in need. When being as productive as possible, having the right machinery for the job can make a huge impact on the margins and yields. With satellite guided navigation, farmers can insure that they are doing their seeding, fertilizing, spraying, harvesting, and tilling in the most efficient way possible with extremely minimal overlap. These gigantic, technologically advanced machines don’t go for cheap. Rocky Mountain Dealers owns 22 dealerships throughout western Canada who’s focus is to sell, rent, and service these heavy-duty pieces of farm and construction machinery. They trade on the TSX under the symbol RME. Read more about them here.
Another periphery of the food production industry is the actual processing of the harvest itself. When a crop is cut off the fields, it isn’t quite ready to eat. It has to be cleaned, separated from the stem, and then sorted into the usable parts. Over the past few years there has been a growing demand for more specialty crops like lentils, peas, and pulses. Alliance Grain Traders caters to this market by buying these crops, doing the cleaning, sorting, and repackaging, before reselling them for world wide consumption. They have been growing aggressively through both organic and though making acquisitions. Most recently they took over a Turkey based company. Read more about them here.
Fortunately for Canadians, we have more arable land per capita than just about anywhere else in the world. That puts us in a great position to benefit as we ship our goods overseas to counties in need. As the population of the world continues to shoot upwards, world wide demand for food is something that will not be going away anytime soon.
