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Demand for corn, soybeans and sugar will continue to be driven by imports from emerging markets, said Patrick Armstrong, Managing Partner of Distinction Asset Management Wednesday.
Patrick Armstrong said year-end corn inventories fell by 16% from the previous year, and he expects Chinese imports of corn to rise from 1.5 million metric tons to well over 10 million tons in the next three years.
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"The long-term demand case is driven by income growth and increased purchasing power from emerging markets consumers," Armstrong said.
Regarding last week's sell-off, "we have rebuilt positions in agricultural commodities in our Multi-Asset Real Return funds following last week's broad-based commodity sell-off," said Armstrong.
Armstrong attributed last week's sell-off to silver, "the canary in the coalmine."
He added, "the sell-off was led by silver, a commodity very much in a bubble driven by speculative activity. It's also a commodity that can be manipulated by investment banks and the hedgefunds."
At present, 6% of Distinction's portfolio exposure lies with agriculture. The asset manager medium-term adopts a bullish stance for sugar, despite the recent losses witnessed in futures markets.
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"Short-term supply of sugar does exceed demand. But further out, with China consuming more coffee and coca-cola, the supply picture will most definitely change," Armstrong added.
Armstrong said inventory draw down would definitely be witnessed in corn markets however over the next 12 months.
Regarding Asia growth, Armstrong said China would not be able to sustain growth forever and concerns of inflation are now noted by the government. "A shift from an export driven economy to an economy that deals primarily with internal consumption could happen, leading to a sustainable trajectory growth for the country."
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Source: www.agriculture.com