Investment strategy

In addition to steady population growth, the increasing demand for protein-rich foods resulting from rising living standards in developing countries is among the main drivers of agricultural prices. Moreover increasing urbanisation is likely to cause a shortage of farmland and thus make it difficult to close the supply gap in the agricultural sector (see chart below). According to the Food and Agriculture Organization of the United Nations (FAO), droughts and floods could reduce worldwide crop yields by another 20 to 40% in future. In order to at least alleviate this looming food shortage, the demand for modern farm machinery and irrigation equipment, efficient seeds, pesticides and fertilizers, aquaculture and suitable animal feed is likely to increase significantly. In this environment, DJE - Agrar & Ernährung invests in shares of selected companies that benefit from the above mentioned trends. But also in the case of falling commodity prices the fund is able to take advantage by specific investments in the food industry. In order to reduce risk the fund seeks to diversify the portfolio both thematically and regionally.

Monthly Commentary

Despite the crisis in the "Middle East", there were no significant price rises on the agricultural markets in October. However, this is likely to change very quickly if the military conflict escalates. Fertiliser prices in particular are likely to react extremely sensitively to a further escalation of the conflict. For example, around 7% of the world's potash fertiliser supply comes from Israel, which could no longer be shipped in a worst-case scenario. On the other hand, the "Middle East" region is an important supplier of gas and nitrogen fertiliser. In the event of a blockade of the Strait of Hormuz, for example, important supplies from Iran would be cancelled in the short term. Accordingly, the portfolio weightings in this segment were maintained despite the usual phase of seasonal weakness. In the food sector, on the other hand, there has recently been a lively discussion about the future influence of the so-called "weight loss injections" on consumer behaviour. In view of the costs of this medication, however, the horror scenarios regarding the sales development of various foods appear exaggerated. In fact, consumers are likely to focus even more on healthy and sustainably produced food in this context. As a result, the topic of "sugar reduction" remains particularly interesting from an investor's perspective.

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