Place your bets on farming

FARMING or gold mining look like promising areas to work in, after the economic upheavals of the past week.

Prospecting for gold looks the best bet, after the price of the precious metal rose above €1,250 per ounce this week.

But digging down on the farm doesn’t look too bad either, with global crop prices proving relatively immune to the new downturn.

With the benefit of hindsight, selling farmland or using it as security for borrowing, to raise cash for investment outside of farming, looks worse and worse — unless you invested in gold.

High-flying analysts agreed over the past week that agricultural prices do not react as strongly to economic downturn as other commodity sectors.

Forecasts for tight food supplies, agricultural growth’s strong links to population growth in emerging markets, and dollar weakness were among the factors boosting farming prospects — even as stock markets plummeted, and crude oil prices weakened.

Whatever about the climate on stock markets, agriculture depends more on the real world, with drought in the southern US and a possible La Niña global weather pattern seemingly bigger worries than the sovereign debt crisis.

As stock markets plummeted, maize futures even gained 4.1% in Chicago, due to signs of poor pollination which could hit US yields. And wheat gained 1%. Near-term futures in live cattle and lean hogs showed small gains.

Of course, agricultural prices are not totally resistant to demand shocks, with sources at Goldman Sachs saying global downturn and negative financial events would likely push crop prices lower, driven by lower oil prices, and a likely decline in US domestic ethanol consumption alongside lower fuel demand. However, the bank expects agricultural prices to outperform other commodities.

Meanwhile, Potash Corporation, the world’s largest fertiliser enterprise, predicted sales remaining strong through 2011, after reporting record second-quarter earnings of $840 million, their second-highest total for any quarter in their history, providing further evidence of agricultural earning power.

As Ireland, and most of Europe, face into many years of economic recovery, agriculture looks set to remain a valuable sector, one worth supporting through the inevitable austerity of the years to come.