Porcine problems highlight Gartmore global focus stance on agflation

The recent sight of pig farmers protesting about falling pork profits outside Downing Street is another timely reminder of ‘agflation’. Among the porcine-related grumbles at the ‘Pigs are worth it! Rally’was the complaint thatfeed prices have doubled over the past year. Pig farmers are now losing more than £20 on every pig raised, according to the British Pig Executive.

In response to agflation, Neil Rogan, Head of Global Equities at Gartmore, has established, in the Gartmore Global Focus Fund and Gartmore SICAV Global Focus Fund, both of which he manages, a number of holdings to tap this trend. Agflation inspired holdings in both Funds include US-based Deere, the leading manufacturer of farming equipment. “Some farmers,” he notes, “are clearly benefiting from rising commodity prices and are making hay while the sun shines, postponing retirement plans. Unused to full pockets, farmers can be expected to invest in new agricultural equipment as the pricing gap with used equipment shrinks.”

Deere has been focussing on operational excellence and this has helped the company, which also makes construction and forestry equipment, to avoid some of the capacity problems that have bedevilled its rivals, comments Neil. (Construction and forestry margins were the highlight in Deere’s fiscal first-quarter results, which came in above expectations.) The US government’s 2008 Economic Stimulus Bill may prove to be a boon to the machinery sector, with agricultural machinery, in particular, likely to benefit. A strand of the bill encourages businesses to spend more on capital goods by offering accelerated depreciation. With record cash receipts, US farmers may choose to take up this fiscal advantage to shield incomes from tax.

An Associate Member of the UK Society of Investment Professionals, Neil is rated AA by Citywire. Neil has been at the helm of both Gartmore Global Focus Fund and Gartmore SICAV Global Focus Fund since their respective inceptions in 2001 and 2004.