Grains Oilseeds

[Tackler]

Gartmore Global Focus Taps into Agflation
7 February 2008

Amid the general gloom and doom (in our view somewhat unjustified), farmers are among those that can be said to be enjoying good fortune.

“An era of falling food prices, spanning some 30 years, would appear to have to come to an end. This trend has given rise to the new phrase ‘agflation’ and an awareness that the weekly food shop is now more expensive,” according to Neil Rogan, head of global equities at Gartmore Investment Limited. An expansion in the US ethanol programme to wean the country off its dependence on foreign oil has led to rising grain prices, while demand for cereals to use as animal feed has increased as wealthier Chinese and Indians acquire a taste for meat. In response to this developing trend, Neil has established holdings in US-based Mosaic in the Gartmore Global Focus Fund and Gartmore SICAV Global Focus Fund, both of which he manages. Mosaic is one of the world's leading producers and marketers of concentrated phosphate and potash crop nutrients. Fertilisers are applied to improve yield and so help farmers to benefit from rising crop prices.

Among fertilisers, potash has the greatest impact on food quality, and potash prices, which have risen steadily for the past 17 years, are forecast to climb higher, especially in the context of changing dietary habits in emerging economies. In particular, China, which is negotiating contract prices with Mosaic and rival Potash, remains heavily reliant on imports to satisfy its domestic demand. Mosaic enjoys a significant cost advantage given that the company owns the majority of the required phosphate ore, a key ingredient. Additionally, it produces most of its own ammonia and has access to locally produced sulphur, the other key constituents.

The Gartmore Global Focus Fund, which celebrated its seventh anniversary at the end of January, returned 61% since inception on 31 January 2001 to end December 2007, resulting in a top-decile positioning. An Associate Member of the UK Society of Investment Professionals, Neil is rated AAA by Citywire. The Gartmore SICAV Global Focus Fund had its third anniversary in October 2007.