Singapore: Agricultural commodities such as sugar and corn will benefit from increasing crude oil prices, said Jim Rogers, who predicted the beginning of the commodities rally in 1999.
“The fact that the oil price is so high and demand is going up means prices of agricultural commodities are going up too,” Rogers said in a Hong Kong interview. “Agriculture is a way to play the oil market.”
“The world has consumed more food than it has produced six out of the past seven years and the result of that is inventory of food is at the lowest level since 1972,” he said. “The number of hectares planted with wheat has been in decline for 30 years,” Rogers added.
Crude oil in New York retreated on Thursday after rising to the highest level in six months after Iran detained 15 British navy personnel, heightening tension in the Persian Gulf. Oil for May delivery was at $63.68 (Rs2,738.24) a barrel, down 40 cents, in after-hours electronic trading on the New York Mercantile Exchange at 5:03pm in Singapore.
Rogers, 64, who created a series of commodities indexes and has advocated a long-term bull market in oil, metals and grains, said he hadn’t changed his positive view.
He was in Hong Kong to speak about commodities at an event organized by Credit Suisse, and said the rise in oil consumption in countries such as China and India still had a long way to go while supply was being depleted in global oil fields.
“China only uses one-fifteenth of what people in America use,” he said, referring to the country’s 0.049 barrel of oil per capita consumption a year compared with 0.677 in the US.
“Even if they use same amount as people in Japan and South Korea, imagine how much demand is yet to come.”
Japan consumes 0.438 barrels of oil per capita a year while South Korea uses 0.446.
Investment in commodities was still low compared with the money poured into stocks and bonds, Rogers said. “There are more than 70,000 mutual funds in the world invested in stocks and bonds while only less than 50 invested in commodities.” Corn, wheat, sugar and cotton will perform well in the years to come because of rising demand from China and India, he said.
Rogers, chairman of Beeland Interests Inc., travelled the world by motorcycle and car in the 1990s, researching investment ideas for his books, which include Adventure Capitalist and Hot Commodities.