TORONTO, ONTARIO, May 25, 2012 (MARKETWIRE
via COMTEX) -- Strong emerging-market demand, supply constraints and scope for
further product development all represent compelling reasons for continued
investment in agriculture-related industries, according to a new report from
BMO Economics.
"While farmland values and
agriculture-related equities have substantially outperformed - warranting some
caution - fundamentals suggest that promising investment opportunities still
exist through the agricultural value chain," said Robert Kavcic,
Economist, BMO Capital Markets. "Additionally, agriculture provides relatively
defensive exposure within the broader commodity sector and is a lower beta
alternative for investors emotionally drained by the impact of changing global
growth prospects on the more volatile energy and base metal sectors."
"Although the Canadian equity markets
have lagged others recently, there appears to be considerable up-side for
Canadian investors in the agricultural sector," said Paul Taylor, CIO, BMO
Harris Private Banking and BMO Global Asset Management. Mr. Taylor pointed out
that global trends such as solid population growth, strong per capita GDP
growth in developing economies, loss in arable land per capita, urbanization
and the emergence of alternative fuels are expected to push food demand much
higher in the next few decades.
The report states that demand for food and
other agricultural products is expected to expand at a robust pace,
particularly in emerging markets, where brisk population and income growth is
boosting consumption. For example, in China:
-- Per-capita food consumption in
China has topped 2,900 calories/day,
above the global average
-- Higher incomes have led to a
shift to protein-rich diets; China's
protein consumption has surged above the global average
-- More meat consumption has an
impact along the supply chain, including
higher demand for feed stock
"Growing demand for food is coming up
against increasingly scarce resources, particularly land and water, supporting
a secular uptrend in the prices of key farm commodities, related equities and
farmland," noted Mr. Kavcic. "After being stagnant for about 20
years, agricultural commodity prices have surged, with the S&P/GSCI
Agricultural and Livestock Index at levels more than twice as high as a decade
ago."
According to the report, there is also scope
for new product development in the agri-food sphere:
-- Costly non-renewable energy is
fuelling a search for other sources; U.S.
ethanol production has nearly tripled since 2006.
-- Health care is shifting to
disease prevention and the use of natural
products such as nutraceuticals, including eggs with OMEGA-3 from flax,
calcium-enriched fruit juice, and tomatoes with higher levels of
lycopene.
The full report can be found in the weekly
Focus publication at www.bmocm.com/economics .
BMO's roots in the Canadian agricultural
sector date back to 1817, when it first began working with farmers. The
second-largest Ag-Lending bank in Canada, BMO Bank of Montreal provides
customized loan and deposit solutions to Canada's agri-business owners, the
single largest core commercial sector that the bank serves.
BMO Harris Bank is one of the 10 largest
Ag-Lending banks in the United States, and the largest in Wisconsin. BMO Harris
Bank brings a tremendous amount of expertise in serving Ag customers; it added
new customers this year, increased its overall customer base and plans on
continuing to grow its business and serve Ag customers.
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO
Financial Group is a highly-diversified North American financial services
organization. With total assets of $525 billion as at April 30, 2012, and more
than 46,000 employees, BMO Financial Group provides a broad range of retail
banking, wealth management and investment banking products and solutions.
Contacts:
Media Contacts:
Peter Scott, Toronto
416-867-3996
PeterE.Scott@bmo.com
Nini Krishnappa, Toronto
416-867-3996
nini.krishnappa@bmo.com
Ronald Monet, Montreal
514-877-1873
ronald.monet@bmo.com
Laurie Grant, Vancouver
604-665-7596
laurie.grant@bmo.com
SOURCE: BMO Financial Group
mailto:PeterE.Scott@bmo.com
mailto:nini.krishnappa@bmo.com
mailto:ronald.monet@bmo.com
mailto:laurie.grant@bmo.com
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