Food prices are at an all time high in most places around the globe. We have been reading news on Wheat, Edible Oil, Corn etc reaching their multi year highs. A report on the same topic reads
“Rising Food prices can be good news for the food companies who are attempting to pass along those higher food input prices to the consumer. They are maintaining or expanding margins and they are hopeful that the constraints on food supply and the changing and expanding global demand for food products will continue to put upward pressure on prices. “
Doesn’t this provide an obvious opportunity to invest in Food Companies & Farming ?Â
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Thanks Deepak & Vyaas.
ESMA, Price Controls, awkward rules all discourage INVESTMENTS in the farming/agri sector. Isn’t this a counter productive strategy by the govt ?
“Food price inflation in Indian rupees may also be tempered by a dollar dropping to say 36 rupees”
I would expect all these to be managed by hedging ? 😉
yup sorry. I agree
Vyaas
Vyaas, MCX is where wheat futures where banned (and NCDEX). Banning futures trading can precede (or go along with) the ESMA – if inflation gets worse, the government will be forced to at least LOOK like they are taking action. (Banning futures trading only increases black market trades, does not result in lack of speculation – but the government ends up looking good when it bans)
Plus, ESMA will mean a drop in commodity prices (why pay a lot more on an exchange if you can get it for less on the street? Eventually prices will converge)
Deepak,
Not sure. If you invest thru mcxindia.com which allows commodities futures. ESMA to cannot be lagaoed.
The only hitch is MCXindia is not very investor friendly.
Vyaas
Be careful. There’s ESMA, which can be lagaaoed anytime and can ruin the investor’s happiness. And then there are bans on commodity futures (as happened with wheat last year).
And the government can impose random price controls on such commodities. And free up imports. A good monsoon can result in oversupply (and a good monsoon is predicted. Okay, so they’ve not been very accurate, but still)
Food price inflation in Indian rupees may also be tempered by a dollar dropping to say 36 rupees. Then a 10% rise in international prices is totally negated.