SVS Securities – AGIRICULTURE AND THE WORLD FOOD CRISIS

The world food crisis is a growing problem in the world today. A growing population and dwindling resources are pushing up the prices of soft commodities and exacerbating the whole situation. In 2010, 925 million people went hungry. Poverty is the principle cause of hunger. The rise in soft commodity prices, although it may offer a good opportunity for investors to realise a profit, is making it even more difficult for the worlds poor to find the money to eat. For this reason, speculating on the price of soft commodities is an ethical “grey area”. We’re not suggesting that you be completely altruistic and donate all of your money to charity, but the world is getting smaller and it is about time we began to think of the ethical implications of our investments.

SOFT COMMODITIES AND FARMING:

Soft commodities refer to commodities such as coffee, cocoa, sugar, corn, wheat and fruit which are generally grown rather than mined. There are a number of people suggesting that soft commodities and farming might be a better long-term investment in the current market conditions than other “hard” commodities. In most cases an excess of a commodity or a lack of demand will cause commodity prices to drop. Similarly, if there is a drop in supply or a rise in demand, prices will rise. There are four main factors currently affecting the supply and demand of soft commodities and farmed goods.

1. The global population is rising exponentially. A growing population increases demand for food, soft commodities and farmed goods.

2. Arable land is being lost to urban sprawl. This decreases the quantity of food, soft commodities and farmed goods it is possible to produce and therefore limits supply.

3. Recent movements towards renewable energy have led to an increased demand for biofuel and the crops that are used to produce it.

4. Investors speculating on commodity prices cause sudden peaks and troughs in demand, increasing volatility in the market.

Meera Patel of Hargreaves Lansdown commented “The global population is growing faster than the amount of new farmland available, and, at the same time farmers are under pressure to use less water and fewer chemicals, which is likely to constrain supply even further. The resulting excess of demand over supply is likely to lead to rising prices over the long term.”

This is because, with the exception of speculation from investors, factors affecting the price of farmed commodities are relatively stable. The global population is increasing steadily with estimates from the United Nations suggesting we will require a 70% increase in food production by 2050. This growth in population size is a contributing factor to the loss of arable land. Though there is currently a real push for renewable fuels, the demand on soft commodities for biofuel purposes are more likely to increase steadily than shoot up suddenly.

SVS Securities – PORTFOLIO THEORY

Investing in stocks and shares is all about research and analysis. The more you do, the better you’ll become at recognising good investment opportunities and (hopefully) the more profit you will realise. Analysing and researching investment opportunities is a long and arduous task. It is for this reason that advisory accounts are so popular amongst investors. Advisory accounts offer investors access to the analysis and research carried out by experienced analysts and brokers. Clients are still required to manage their own risk and make their own investment choices but having a professional to turn to is often a great help. Even if you do hold an advisory account, it is useful to have some knowledge and understanding of portfolio theory so as to better understand your investments and how to make the most of them. Portfolio theory has changed a lot over the years and will no doubt change even more in the future. It is worth, every so often, reading over news pieces or text books about portfolio theory to make sure that you are up-to-date and that you are doing everything you can to make the most of your investments.
COMPANY PERFORMANCE

Before you invest in a company, it is good to know exactly how the company is performing. The problem is that there are a variety of different ways that you can try and measure a company’s future prospects. None of these methods are guaranteed to give you a genuine insight into the company’s performance. Analysing the results of a number of these indicators may give you a good indication of how the company is performing in a very general sense. The more research you do and the more indicators you compare, the more reliable your findings will be.
ROE

ROE or Return on Equity is the most common measure of a company’s performance used by analysts and investors. ROE measures the rate of return on the shareholder’s equity. It shows how well a company uses invested funds to generate earnings growth. ROE is judged against the rest of the sector and the cost of capital in that sector. Therefore a Return on Equity less than the cost of capital is considered destructive. Despite its popularity, measuring a company’s performance using ROE is not without its draw backs. Companies can artificially create a healthy ROE (for a time at least) by leveraging debt and buying back shares using accumulated funds. This can leave a healthy ROE calculation whilst company performance is actually in a slump. Companies are keen to maintain a healthy ROE due to its popularity as an indication of performance. A dip in ROE could result in a dip in share prices and a loss of investor confidence in the company. It is for these reasons that we suggest considering a number of different indicators when considering an investment.

SVS SECURITIES – SHARE DEALING

Based in the City of London, SVS Securities PLC offers clients access to a broad range of investment opportunities in a friendly, simple and cost-effective manner.

SVS Securities offers trading in all UK markets via one of two dealing accounts. These accounts were created so that investors could pick the one which best suits their investment goals, giving everyone the opportunity to make the most of their investments.

ADVISORY ACCOUNTS

SVS Securities’ Advisory account is designed for investors who take an active interest in the market but who also want to be able to call on the advice of a professional when they feel the need. SVS Securities’ advisors are dedicated to providing not only great customer service and prompt and professional trading, but also relevant advice and analysis based on their experience, skills and expertise.

EXECUTION ONLY ACCOUNTS

SVS Securities’ Execution Only account is designed for investors who simply want to deal quickly and efficiently without the need for investment advice. This service is for investors who know what they want to trade and when. Our role is simply to provide factual information and execute trades at the investors’ instruction.

RESEARCH

SVS Securities serves sophisticated investors by providing practical strategies and technical and fundamental equity research. Written by market professionals, SVS Securities’ research provides timely updates to complement investor’s trading strategies, whether your aim is to achieve steady income, capital appreciation, or both.

If you would like to know more about SVS Securities and the products and services we offer, this can be seen on their website: www.svssecurities.com