Reaping Rewards in Agriculture

With soft commodity prices at record highs, is it time to invest in the sector?

Agriculture stocks are still good long-term investments, but investors should be wary of the short term, as a correction for the sector may be due, according to Alexis Dawance, fund manager at Global-Cap.

Dawance prefers smaller companies to large-cap companies like Potash and Mosaic as they have had a "tremendous ride," making shares are "pretty expensive" currently.

"We fear that these names are over-owned, therefore we prefer smaller companies who have bought some land and are doing some exploration," Dawance told "Power Lunch Europe".

Bunge is one stock Dawance likes.

It is one of the oldest grain traders in the world and was and recently acquired the international sugar trading and marketing division from Britain's Tate & Lyle, as well as buying Corn Product International , which puts it in a good position, according to Dawance.

"They have capable abilities to source the commodity, to move it, to process it. They are really a true global company and the valuation is not demanding."

Chicken producer Pilgrims Pride (PPC) is another investment opportunity, according to Dawance.

With rising grain and corn prices, poultry has a better grain-to-kilo conversion than beef.

Currently shares of chicken producers have taken a major hit and Dawance said he believes we are now approaching "replacement value" on the stock.

"We believe the risk return now is interesting in that space because the sentiment is so negative that we believe that most of the bad news it out," Dawance told CNBC.

Buying farmland through companies, especially those in Brazil, Ukraine, Germany and Eastern Europe, is also another way to play the agriculture market.

The agriculture sector is a place that has seen underinvestment during the past 40 years, as inventories are generally thin.

But with the recent onslaught of initial public offering seen in the sector, supply is growing, Dawance pointed out.