Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Agri-Food Stocks Sector Positive Trends Supported by 2.4 Billion China India Consumers

Commodities / Agricultural Commodities Mar 29, 2010 - 12:33 PM GMT

By: Ned_W_Schmidt

Commodities

Best Financial Markets Analysis ArticleFla. jobless rate reaches record 12.2 pct in Feb” is the headline from an Associated Press report of 26 March. In short, one out of eight workers is unemployed. Per the author of this article, M.  Merzer,  in excess of 1.1 million Floridians are out of work.  Rather than creating jobs, the Obama Regime and a dysfunctional Congress have focused on nationalizing the U.S. health care system. The articles on the health care nationalization have tended to miss the obvious. Given the higher expenses and write offs being announced by major U.S. businesses, the first to feel the impact of Obamacare will be those being laid off because of it.     


When Scotty beams us to the other side of the world, we find a far different situation.  In China, businesses are facing a shortage of workers and have been raising wages. “Defying Global Slump, China Has Labor Shortage" by K. Bradsher from New York Times, 26 February 2010, reports,  

“Just a year after laying off millions of factory workers, China is facing an increasingly acute labor shortage. As American workers struggle with near double-digit unemployment, unskilled factory workers here in China’s industrial heartland are being offered signing bonuses.”

And more recently we read, “Guangdong raises minimum wage by 20% amid inflation fears" by E. Tsui from Financial Times, 19 March 2010,

“Factories struggle to attract enough workers. The Chinese province of Guangdong(near Hong Kong), the country's biggest export centre, announced yesterday that it would raise the minimum wage by an average of more than 20 per cent.”

Text Box:

Chinese government, at least for the moment, seems to have got economic policy working in the right direction. At the same time, the Obama Regime continues to prefer destroying wealth rather than creating jobs. Despite the latter’s best effort, our first chart below shows some in the U.S. are benefitting from economic developments in China.

With more Chinese working and earning higher wages, they are responding as expected. Those workers are eating better. To satisfy that hunger, China has turned to world markets for the Agri-Foods necessary to satisfy that consumer demand. U.S. export tonnage of major grains, as shown in the chart, has risen by more than 6% in the latest crop year. That, remember, is the real growth rate, excluding prices.

Text Box:

As chart above shows, Agri-Food prices have responded to higher global demand. On average, Agri-Food prices are up almost 20% from a year ago. Over the past three years Agri-Food Price Index has risen at more than a 10% compound annual rate.

Text Box:

Agri-Food companies and investors have certainly benefitted from this combination of real growth and higher prices. The above chart portrays the approximate returns on a basket of Agri-Food stocks.

Who would have thought that people eating could be so rewarding?

We can practically guarantee that the return in the coming year on Agri-Food stocks will not be as good as that of the past year. However, that is likely to be true for most stock market sectors and the stock market in general. That possible bump aside, the future harvest in Agri-Food for investors seems to be well grounded. Agri-Food fundamentals for the years ahead are well supported by the economic growth benefitting the 2.4 billion people in China and India. Few stock market sectors have such positive prospects.

Economic growth in China and India will be moving millions into the middle class in the decade ahead. That development contrasts with the Western economies where millions are being eliminated from the middle class. Your Gold should protect your wealth from the economic lethargy ahead in the Western economies brought on by the Keynesians. Agri-Food investments may, as we have written before, add some offense to your wealth game.

The higher demand for Agri-Food being created by Chinese and Indian economic growth is being magnified by the shape of the long-run Agri-Food supply curve. Globally, Agri-Food demand is now facing the inelastic portion of that long-run supply curve. That means, for example, a 1% increase in Agri-Food demand causes prices to rise by more than 1%. The percentage change of Agri-Food prices will be greater than the percentage increase in demand. To understand this all important concept read “The Joy of Agri-Food Price Inelasticity,” which is available for free at  www.agrifoodvalueview.com

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