Options and Futures Complement Investment in International Food Production
Boston, September 16, 2008 – Speaking to the Commodities Portfolio Management Conference (CPM) in Boston, Rick Gilmore, President and CEO of GIC Group, outlined a new era for commodity markets and players. “We are witnessing a paradigm shift in commodity markets,” Gilmore said, “where volatility rules the day and where there are new challenges and variables for investors.”
With institutional investors having joined the rush to commodities, today’s strategies require shrewd risk minimization, Dr. Gilmore explained. “Any private equity deal,” Gilmore stressed, “now requires a dual alpha and beta strategy. The old assumption of long and short positions is no more. Any hedging strategy now needs to account for a mix of variables that impact on equity valuations as well as commodity prices.”
In his remarks, Gilmore pointed out that a new dimension is the cash suppliers like Russia and Ukraine who have been basically out of Western markets for several years. “Their supply potential,” Gilmore noted, “offers both opportunity and peril.” On the demand side, Gilmore pointed out that China and India could both improve their self-sufficiency ratios with the introduction of biotech seeds and new production technologies. “Biofuels may have had an exaggerated impact on the market because of conditions in Europe but as we move to second and third generation technologies,” Gilmore stated, “the market should correct for any supply tightening effects.”
CPM conference participants and presenters are looking at non-traditional commodity investment vehicles. In his concluding remarks, Gilmore said that the conference demonstrates that there is now a broad and diverse interest in commodity markets. Specifically, Gilmore noted endowment funds like the Harvard Endowment and pension funds like Calpers were now balancing their portfolios with commodity plays. AIG and Syngenta equity deals were examples of the equity play in commodities.
“Food, feed, and beverage processors also have had to come to grips with new supply, income and demand effects. Gone are the days of naked hedges in a world of predictable commodity prices. Global supply chain management and FIFO and LIFO strategies require hedging strategies which is exactly what industry leaders are now doing. It’s a new world in commodities; the adjustment is underway. There’s no choice when it comes to managing global risk,” Dr. Gilmore concluded.
GIC Group is a financial services and market research consulting firm that provides advisory assistance to strategic and institutional investors in agribusiness worldwide. GIC Group was established in 1980, and located in Alexandria, Virginia. For more information about GIC Group: http://www.gicgroup.com
Dr. Gilmore’s presentation is part of the 3 rd Annual Commodities Portfolio Management Conference being held in Boston, Massachusetts at the Renaissance Boston Waterfront Hotel from September 15-17, 2008. For information about the conference: http://www.wbresearch.com/cpmusa/
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Contact:
Susan Scurlock Theiler, GIC Group
1434 Duke Street , Alexandria, VA 22314
703-684-1366, susantheiler@gicgroup.com
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