Barings' Jonathan Blake has increased exposure to fish and poultry suppliers within his £151m Global Agriculture fund as a result of subdued grain and fertiliser prices.
Blake, who has managed the fund since launch in 2009, has opened a 6% weighting in fisheries with a particular bias to salmon farms, and has upped exposure to chicken producers from 5% to 8%.
In addition to benign grain prices, Blake says lower input costs for materials such as
feed and fertiliser also prompted the move.
He says while demand for salmon remains strong, supply has been hit by diseases which have decimated Chilean stocks, prompting him to introduce a 3% weighting in Norwegian farmer Marine Harvest.
"The Chilean salmon industry has been affected by a very nasty disease, which resulted in farmers culling their stocks, and they are not going to rebuild those stocks until the disease is firmly under control," Blake says.
"This is something that is going to take some time to work through so, while we see continued strong demand in the short term, supply is being impacted by this issue."
Blake has also increased his exposure to agricultural machinery as bumper crops have bolstered balance sheets and credit has become more available.
He has built up his weighting in machinery manufacturer Deere & Co from 2% to 3%, and to the sector as a whole from 5% to 9%.
"Despite this benign soft commodity environment we find ourselves in, farming economics have changed for the better," he says. "They are at relatively high levels, and the reason for that is the input costs of farming have reduced significantly.
"After a couple of good harvests in recent years, their balance sheets are now in fairly strong positions, which allows them to begin looking at making capital equipment purchases for farming.
"Meanwhile, credit markets have by and large begun to ease and credit has become more available," he adds.
"The purchase of bigger ticket items has therefore become more possible, and the outlook for that sector continues to look attractive, particularly in areas such as Latin America."
