Investing in Agricultural Commodities, Land, and Physical Assets

During and after the global financial crisis, commodities moved in lock-step with equities and bonds as the financial markets were in the mode of ‘risk-on, risk-off’ trading. This chapter identifies the following avenues to get exposure to commodities: purchase of physical commodities (and face storage and insurance costs) futures; options on futures; commodity index investing (with the choice of many indexes); and commodity-linked bonds. These also include: structured products; exchange-traded products (ETFs, ETNs); shares of mining or oil companies; purchase of physical assets (generating the sure transformation spread); and purchase of land. Some argue that agricultural land is the best place to make money in the coming decade: in June 2009, then in August 2011, George Soros stated that ‘Farmland is going to be one of the best investments of our time’ and his view is shared by many others.