Food prices have soared globally posing problems for governments across Asia—yet creating opportunities for investors, says a study by global financial services group Credit Suisse.
Most Asian governments have regulated exports and controlled trade—and the crisis has also created investment opportunities. Prices are not going to come down any time soon as consumption exceeds domestic production in Asia. Food is going to show new trends and provide opportunities to investors in the long run, says the study that covers nine Asian countries and is titled ‘Asian Food and Rural Income – Towards re-regulation’.
Analysts suggest that Asian countries would strive for self-sufficiency in food over next 10 years and that incomes for the 1.7 billion Asians dependent on agriculture could double by 2015, giving rise to a new kind of consumption wave.
"For Asia food is very critical. One third of household expenditure accounts for food. And 55 per cent of labour force is in farm sector," says Nilesh Jasani, head of equities explaining why he favours themes such as rural income and farm investment. "In India rising procurement prices and controlled public distribution system (PDS) prices is likely to lead to dual benefits for rural income," the report indicates.
Credit Suisse report has identified and analysed stocks relating to rural income, farm inputs, farm equipment, plantation, agri-processing, bio-fuels etc in the report. Likely beneficiaries in India listed there are Bharti, ITC, Hindustan Unilever, which form part of the rural income theme and Mahindra & Mahindra, Jain Irrigation and United Phosphorous from farm equipment and farm input theme.
Others like Praj Industries from bio-fuel point of view, Shree Renuka Sugar from crop switching, Tata Tea from plantation segment and REI Agro from the agri processing sector. Food consumption has grown four per cent annually since 1991, while agricultural GDP growth has been 3.7 per cent, resulting in 30 year low for food inventories. Credit Suisse expects food demand to grow at 3.7 – 3.8 per cent annually over the next 10 years.