Agriculture moves into investment spotlight

Potatoes, Cattle and Wheat – These could be the surprise winning investments for 2009. Unlike the stock market, agriculture could be a safe bet in the unfolding crisis.

It may sound strange, but wheat and potatoes could be worth their weight in gold.

With high levels of volatility on the stock markets and the possibility of a second wave of crisis hitting the economy, many are turning to the land for a better return on their investment.  According to Yaroslav Lissovolik, Chief Economist at Deutsche Bank Russia the agricultural sector has a lot of promise.

“Russia's agriculture is among the most promising sectors of the Russian economy today. Russia is endowed with tremendous resources in terms of land. The average labour productivity in Russia’s agriculture is less than 10% of the same indicator in western countries, so the scope for catch up growth in terms of labour productivity, for Russia, is tremendous.”

Entrepreneurs don't seem to be spooked anymore by the long payback period in agriculture. In livestock, it takes 10 years. With Ostrich farms, it’s just one year. Agriculture has three great advantages – steady demand, falling land prices, and growing government support for the sector according to Andrey Danilenko, Head of Russian Farms.

“With the rate of inflation we are seeing all over the world, and including Russia, I prefer to have my money invested in food than in a bank. I think that also we’ll see some more foreign investment coming in because Russia, up until today is still importing food products, but down the road, domestic producers are going to be much more competitive.”

It will take effort from domestic producers to become more competitive, modernise production and keep costs down to beat inflation.  The growing interest of businessmen in agriculture will boost the competitiveness of the sector, which is becoming less reliant on imports – currently running as high as 40%.