Several wealth managers are waving the flag for agriculture investment, and their enthusiasm is well justified, according to the latest figures on the GAIA Farming Index calculated by Indxis.

The Index - which was launched a year ago - has returned 10.3 per cent over the past 12 months on a cumulative basis. Looking at back-tested data for the past four years the Index’s performance is even more compelling, it having delivered 18.4 per cent. 

The Index invests in listed companies that mainly operate farms producing meat, grains, edible oils, dairy, fish and other diversified farming methods. The main exposure is to large-scale, diversified agri-producers, primarily in emerging markets where large-scale farming is prevalent.

Investors in argriculture might be reaping some healthy profits, but Indxis also points to the role that those putting money into agribusiness play in “feeding the world” at a time when listed farming companies are undercapitalised.

“Structurally low stock-to-use ratios are the clearest sign of the fundamental shortfall of food production. This situation will become even more critical unless the sector attracts investment to boost production and productivity,” added Coast Sullenger, investment manager at GAIA Capital in Geneva.

Those looking to gain exposure to the agriculture story should look to the dairy opportunities presented by China, according to the firms. The country spent more than $250 million on 100,000 foreign heifers in 2011, more highly regarded than native breeds, feeding domestic demand for liquid dairy products that is expected to reach double-digit growth by 2020, it points out.

One stellar performer is China Modern Dairy, one of the constituent companies in the Index, which reported a 127.2 per cent profit hike for the for 2010/2011 fiscal year.