Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Junior Gold Mining Stocks Setting Up For Another Rally - 22nd Jan 20
Debt the Only 'Bubble' That Counts, Buy Gold and Silver! - 22nd Jan 20
AMAZON (AMZN) - Primary AI Tech Stock Investing 2020 and Beyond - Video - 21st Jan 20
What Do Fresh U.S. Economic Reports Imply for Gold? - 21st Jan 20
Corporate Earnings Setup Rally To Stock Market Peak - 21st Jan 20
Gold Price Trend Forecast 2020 - Part1 - 21st Jan 20
How to Write a Good Finance College Essay  - 21st Jan 20
Risks to Global Economy is Balanced: Stock Market upside limited short term - 20th Jan 20
How Digital Technology is Changing the Sports Betting Industry - 20th Jan 20
Is CEOs Reputation Management Essential? All You Must Know - 20th Jan 20
APPLE (AAPL) AI Tech Stocks Investing 2020 - 20th Jan 20
FOMO or FOPA or Au? - 20th Jan 20
Stock Market SP500 Kitchin Cycle Review - 20th Jan 20
Why Intel i7-4790k Devils Canyon CPU is STILL GOOD in 2020! - 20th Jan 20
Stock Market Final Thrust Review - 19th Jan 20
Gold Trade Usage & Price Effect - 19th Jan 20
Stock Market Trend Forecast 2020 - Trend Analysis - Video - 19th Jan 20
Stock Trade-of-the-Week: Dorchester Minerals (DMLP) - 19th Jan 20
INTEL (INTC) Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 18th Jan 20
Gold Stocks Wavering - 18th Jan 20
Best Amazon iPhone Case Fits 6s, 7, 8 by Toovren Review - 18th Jan 20
1. GOOGLE (Alphabet) - Primary AI Tech Stock For Investing 2020 - 17th Jan 20
ERY Energy Bear Continues Basing Setup – Breakout Expected Near January 24th - 17th Jan 20
What Expiring Stock and Commodity Market Bubbles Look Like - 17th Jan 20
Platinum Breaks $1000 On Big Rally - What's Next Forecast - 17th Jan 20
Precious Metals Set to Keep Powering Ahead - 17th Jan 20
Stock Market and the US Presidential Election Cycle  - 16th Jan 20
Shifting Undercurrents In The US Stock Market - 16th Jan 20
America 2020 – YEAR OF LIVING DANGEROUSLY (PART TWO) - 16th Jan 20
Yes, China Is a Currency Manipulator – And the U.S. Banking System Is a Metals Manipulator - 16th Jan 20
MICROSOFT Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 15th Jan 20
Silver Traders Big Trend Analysis – Part II - 15th Jan 20
Silver Short-Term Pullback Before Acceleration Higher - 15th Jan 20
Gold Overall Outlook Is 'Strongly Bullish' - 15th Jan 20
AMD is Killing Intel - Best CPU's For 2020! Ryzen 3900x, 3950x, 3960x Budget, to High End Systems - 15th Jan 20
The Importance Of Keeping Invoices Up To Date - 15th Jan 20
Stock Market Elliott Wave Analysis 2020 - 14th Jan 20
Walmart Has Made a Genius Move to Beat Amazon - 14th Jan 20
Deep State 2020 – A Year Of Living Dangerously! - 14th Jan 20
The End of College Is Near - 14th Jan 20
AI Stocks Investing 2020 to Profit from the Machine Intelligence Mega-trend - Video - 14th Jan 20
Stock Market Final Thrust - 14th Jan 20
British Pound GBP Trend Forecast Review - 13th Jan 20
Trumpism Stock Market and the crisis in American social equality - 13th Jan 20
Silver Investors Big Trend Analysis for – Part I - 13th Jan 20
Craig Hemke Gold & Silver 2020 Prediction, Slams Biased Gold Naysayers - 13th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Rewarding New Decade for Agri-Foods Investors

Commodities / Agricultural Commodities Jan 12, 2010 - 01:49 AM GMT

By: Ned_W_Schmidt

Commodities

Best Financial Markets Analysis ArticleWhat needed remembering this past week as a goodly part of the Northern Hemisphere sat frozen was that all that cold was a mirage. This cold weather, practically everywhere, was really just cloaking the underlying warming trend of the world. Do not let this cold weather fool you! This phony cold weather does, however, have some hidden dangers. We have been, here in south Florida, under an Iguana Alert. Iguanas, which are illegal immigrants without a natural predator, become immobile at temperatures below 40 degrees. They were falling out of the trees, which made walking under Iguana filled trees dangerous.


With the U.S. Environmental Protection Agency moving toward declaring carbon dioxide a hazardous pollutant, global warming may be the least of our worries. Breathing may require a permit from the government. Growing food could become an illegal activity. As a field growing food produces more carbon dioxide than a forest, the EPA could deny farmers the necessary permits to grow food. Instead, they may be ordered to replant their fields as forests. Australia is already moving in that direction.

Those that sipped a cup of coffee in an attempt to stay warm may have discovered that adding sugar to their drink was more expensive than ever before. Our first chart this week, above, is of the price of sugar. Yes, that bag of sugar in your cupboard has outperformed the stock market. In fact, the price of sugar has risen above even the most optimistic estimates of a year ago.

Some important lessons are to be gleaned from the sugar situation. First and foremost, sugar is not made in a factory. Sugar comes from plants, such as sugar cane, which are grown in fields containing dirt. Those fields being the ones that may need to be left idle if the EPA and other radical environmental groups have their way on carbon dioxide.

Two more lessons to be learned, aside from the realization that sugar is not produced in a factory, are that it is produced seasonally and is subject to the weather. If the weather does not cooperate, sugar cane will not be produced as was the case in India due to drought. Or, too much rain could fall as it did in Brazil which prevented some harvesting. No such thing as just in time inventory in Agri-Foods. The internet can not cause sugar that does not exist to be delivered, regardless of which search engine one uses. Sugar production that was lost this past year could not be replaced until the next crop season in 2010.

All of this leads to the all-important realization that the supply curves for Agri-Foods are highly inelastic in the short run. That term describes a supply curve that is extremely steep. Demand for sugar, in the short-term like all Agri-Foods, will not and can not bring forth more supply. The only consequence is higher prices in the short-term. Such is what has happened with sugar.

The truly important lesson to be learned from today's sugar situation is that it provides a glimpse into the future for global Agri-Foods. As global demand continues to expand due to an increasingly prosperous and urban population, the ability of the world to supply food will be tested. As the world's ability to produce Agri-Foods is constrained by land and water limitations, price will be the variable that will adjust. Just as some are being priced out of the sugar market, so will others be priced out of global Agri-Food markets in the decades ahead. Consumers around the world will find themselves competing in Agri-Food markets with buyers from China and India, carrying far more dollars with which to compete.

Let us not forget too that sugar is a nonessential food. We do not need sugar. Those that wish to consume nonessential foods will have to pay a far higher price in order to compete for land needed to grow essential foods. The world may be a lot healthier without such foods, anyway.

As our second chart, above, portrays, some have already benefitted from the new, forgive me, paradigm for Agri-Food. While the next year will no doubt be far less exciting for the Agri-Food stocks than was the case this past year, the decade ahead should be rewarding. Where else can investors position themselves in front of 1.3 billion Chinese and 1.1 billion Indian consumers all desiring the products produced by those investments. They want more Agri-Food, they will be able to afford more Agri-Food, and they will buy Agri-Food each and every year.

Agri-Food investments come in three flavors. First, some companies provide products and services to the Agri-Food producers, the farmers. Second group of companies is those that facilitate the movement of Agri-Food production from the farm to the food processing companies. Third sector is Agri-Land, which is one the three essential ingredients for Agri-Food production. The other two are water and money. While your defensive investment in Gold has done well, perhaps the time for offensive investing may have arrived. To start learning about Agri-Food use this link: http://home.att.net/~nwschmidt/Order_AgriValueRECENT.html

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: http://home.att.net/~nwschmidt/Order_AgriValue.html

Copyright © 2010 Ned W. Schmidt - All Rights Reserved

Ned W Schmidt Archive

© 2005-2019 http://www.MarketOracle.co.uk - 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