Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20

Market Oracle FREE Newsletter


Agri-Foods an Offensive Investment Strategy Against Inflation

Commodities / Agricultural Commodities Apr 21, 2009 - 12:39 PM GMT

By: Ned_W_Schmidt


Best Financial Markets Analysis ArticleWhere to put your next egg? That question receives a lot of thought by investors as the Bernanke/Obama Bear Market continues unabated. As always with complex questions , some simple answers exist. For example, if you had put your nest egg in eggs, one would have done better than the U.S. equity market. That is one of the many messages in our first chart this week. It portrays the return on the more important Agri-Food commodity prices compared to the S&P 500 and oil over the past two plus years. The mean return on this basket of commodities for this period of measurement is +9% versus -15% for the S&P 500.


Those results are not what would be expected listening to the business media or reading the business press. A good reason exists for that information vacuum. Most media anchors and market strategists when talking about commodities allow their ignorance to spill out. Commodities is not a homogeneous asset group.

Commodities is an asset class that actually includes three sectors. Each of these sectors has different dynamics and economic drivers. One sector is energy which includes oil, natural gas, coal, etc. Second sector is minerals and ores, such as iron, copper, Gold, etc. Third, and most attractive of the three, is Agri-Food, made up of corn, soybeans, hogs, etc. To lump all of these sectors together and assume that any particular set of economic conditions drive all is simple naive and wrong.

Economic collapse in Western economies may indeed frustrate producers of energy and minerals. However, the Asian economic miracle continues to move forward. China's economy has slowed, but not collapsed due to economic mismanagement as has been the case in Western economies. Slowing of China's economic growth to 6% is importantly not due to frailties of that economy, but rather due to the problems in Western economies. We also note that referring to 6% economic growth as slow is rather amusing as it is an economic growth rate absolutely impossible to achieve under the policies of the Obama Regime.

Economic growth of 6% has two other, important, implications. 6% growth in the income of 1.3+ billion people is a lot of additional income. Second, a goodly portion of that incremental income will be spent on food and, importantly, food higher up the value chain. As our second chart, below, shows, continuing expansion of demand for Agri-Food against a shrinking supply is providing positive support for Agri-Food prices.

China's demand for Agri-Food commodities may already beginning to strain the global Agri-Food production system. In soybeans for example, Financial Times (17 April 2009) reports,

"The US government yesterday reported weekly soyabean export sales of 808,300 tonnes, with half heading to China. This strong demand has increased concerns that US soyabean stocks will be severely depleted to less than 100m bushels by the end of the current season."

"One trader warned that the US soyabean market could not allow China to maintain its current pace of buying and that further price increases would be required to ration demand." [Emphasis added.]

Base Agri-Food Components

Considerable excitement has been generated by the bear market rally in U.S. equities this past month. What has not been reported is how well Agri-Food commodities have done in that same period. Those results are shown in the second graph, above. While the S&P 500 did manage a 9% rally in the past month, the average rise for Agri-Foods has been 7%. Note also that several Agri-Food commodity prices did substantially better than the U.S. equity market.

In considering these results, remember an important factor that has yet to influence Agri-Food prices. The massive debt monetization now being done by the U.S. Federal Reserve has yet to have its inevitable impact on the U.S. dollar. But, it will come. Adding to that which has already occurred the further debt monetization necessary to finance out of control federal deficits of the Obama Regime can only lead to collapse of the U.S. dollar's value by 50% or more. As Agri-Foods are priced in dollars, like Gold, the prices of Agri-Food commodities are about to embark on an Elliot Wave III.

Massive structural economic change has been occurring in China for more than two decades. That condition will continue for at least another decade. More wealth will be created in the next ten years in China than has ever been created in any ten-year period of history. Chinese consumers have two traits, one unique and one not, that should not be forgotten. They are intense savers, and will accumulate massive amounts of Gold in coming years. Second, like all consumers with rising incomes they will spend more money on food, and food of a higher quality.

How has the investment world responded to the structural bull market continuing to unfold in Agri-Foods? Well, as our final chart above portrays, they have responded nicely. Year-to-day returns are not particularly magic, but do seem interesting. Our Agri-Food stock group has risen on average 10% since the beginning of the year while the S&P 500 is off 4%. While some remain mired in discussions of which bank stock might survive, Agri-Food socks seem to have shaken off the oppressive crush of the hedge fund liquidation.

Most enlightened investors have already established Gold positions as a form of Wealth Insurance. Gold, however, is still largely a defensive investment. Gold investors are trying to defend their wealth from those in governments, such as the U.S. Congress and the Obama Regime, that seek to destroy wealth. Agri-Food investments might be considered as an offensive investment to complement your Gold positions. With Agri-Food we have a unique situation. 1.3+ billion people in China, and the government of those 1.3+ billion people, are striving to be able to spend money in a way that benefits Agri-Food investments.

By Ned W Schmidt CFA, CEBS

AGRI-FOOD THOUGHTS is from Ned W. Schmidt,CFA,CEBS, publisher of The Agri-Food Value View , a monthly exploration of the Agri-Food grand cycle being created by China, India, and Eco-energy. To receive the most recent issue of this publication, use this link:

Copyright © 2009 Ned W. Schmidt - All Rights Reserved

Ned W Schmidt Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules