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
Silver Notches Best Month Since 1979 - 12th Aug 20
Silver Shorts Get Squeezed Hard… What’s Next? - 12th Aug 20
A Tale of Two Precious Metal Bulls - 12th Aug 20
Stock Market Melt-Up Continues While Precious Metals Warn of Risks - 12th Aug 20
How Does the Gold Fit the Corona World? - 12th Aug 20
3 (free) ways to ride next big wave in EURUSD, USDJPY, gold, silver and more - 12th Aug 20
A Simple Way to Preserve Your Wealth Amid Uncertainty - 11th Aug 20
Precious Metals Complex Impulse Move : Where Is next Resistance? - 11th Aug 20
Gold Miners Junior Stcks Buying Spree - 11th Aug 20
Has the Fed Let the Inflation Genie Out of the Bottle? - 10th Aug 20
The Strange Food Trend That’s Making Investors Rich - 10th Aug 20
Supply & Demand For Money – The End of Inflation? - 10th Aug 20
Revisiting Our Silver and Gold Predictions – Get Ready For Higher Prices - 10th Aug 20
Storm Clouds Are Gathering for a Major Stock and Commodity Markets Downturn - 10th Aug 20
A 90-Year-Old Stock Market Investment Insight That's Relevant in 2020 - 10th Aug 20
Debt and Dollar Collapse Leading to Potential Stock Market Melt-Up, - 10th Aug 20
Coronavirus: UK Parents Demand ALL Schools OPEN September, 7 Million Children Abandoned by Teachers - 9th Aug 20
Computer GPU Fans Not Spinning Quick FIX - Sticky Fans Solution - 9th Aug 20
Find the Best Speech Converter for You - 9th Aug 20
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Russian Wildfires Highlight the Global Population Growth-Food Supply Crisis

Commodities / Food Crisis Aug 15, 2010 - 06:50 AM GMT

By: Investment_U

Commodities

Diamond Rated - Best Financial Markets Analysis ArticleMatthew Weinschenk writes: … And a great fire shall consume the land. The crops shall fail. Many acres will lay fallow – and hunger will spread.

That’s not a 2012 end-of-days prophecy. It’s the situation in Russia right now, as the country faces a crisis of biblical proportions.


In the wake of record high temperatures and drought, over 1,000 square miles of wildfires are currently raging. At least 50 people have died.

The disaster comes at a particularly bad time. Canada has already lost an estimated $3 billion worth of crops to flooding, while Australia is expecting a troublesome plague of locusts to hatch soon.

And for Russia’s agriculture sector, the fires are crippling wheat production, with the crop yield expected to plummet by over 80%. As a result, Prime Minister Putin has banned all exports of Russian grain through the end of the year to protect the country’s food supply. And that poses a serious global problem, as Russia is the world’s third-largest wheat exporter…

Wheat prices have already jumped 55% since June – the biggest rise in 37 years, with the price now sitting at a 22-month high. Corn and soybean prices have also risen by 16% and 14%, respectively.

This latest disaster has underlined a larger trend: a global crisis where we won’t be able to provide enough food for a growing population.

That mammoth problem will obviously have ramifications across the global economy and investing world. Let me explain what I mean – and how you can position yourself…

The Global Population Explosion and The Malthusian Trap

Over the first 200,000 years of man’s existence, the global population remained relatively stable… as did the standard of living.

This relates to an economic theory called the “Malthusian Trap,” which Gregory Clark describes best in A Farewell to Alms…

The Malthusian Trap

Whenever man made a technological breakthrough – the wheel, fire, agricultural innovation, etc – it had the domino effect of creating more resources to go around. In turn, we had more children, which meant those resources had to be divided among a greater number of people. That kept our standard of living at subsistence levels.

Man finally broke out of the “trap,” thanks to the Industrial Revolution, which spurred greater efficiency and speed in manufacturing. Technology progressed so quickly that population growth couldn’t immediately keep up.

But with the Industrial Revolution, the numbers started to climb with greater speed from the 1600s onwards. For example…

  • It took 123 years for the world to go from one billion people to two billion (achieved in 1930).
  • It took only 12 years to go from five billion to six billion people (in 1999).
  • It’s expected that by 2050, the global population will hit nine billion.

The following chart illustrates the global population explosion…

With more people, it means we’ll need to produce more food in the next 50 years than we’ve produced in the past 10,000 years combined.

This wouldn’t be a problem if we could actually keep producing more food. But there is a limit…

Land Limitations Trigger Global Food Shortage?

Today, modern science has taken us almost as far as it can. For example, if a theoretical corn plant were to perfectly capture each photon from the sun and turn it into energy, it would produce 23,200 pounds of corn per acre.

And farmers have already pushed corn plants to produce 19,376 pounds per acre, as the winner of the 2009 National Corn Yield Contest did. So as you can see, there isn’t much room for improvement.

Don’t look for new land to plant, either. Of the total land covering the globe, 81.98% is of no use for growing, while 4.71% currently has crops.

In fact, just 13.31% is considered arable land. But even that’s optimistic, as 40% is rated “seriously degraded,” due to over-harvesting, erosion and climate change.

So with less land and more mouths to feed, what’s the solution?

The Answer to the Imminent Food Shortage Problem

It may seem crass to profit from what may be a major global crisis, but the truth is this: Innovative businesses offer the only answer to the food shortage problems.

The hottest commodity right now is farmland itself. Virtually all institutions, from investment banks to hedge funds, have opened agriculture divisions to snatch up all available land.

You can’t blame them. Research firm Agcapita claims that U.S. farmland investments have returned 11.2% a year since 1992 – with no down years.

For example, Blackrock raised over $500 million to invest in farmland. And wealthy investors in the Middle East and East Asia control nearly eight million hectares of overseas land.

Now imagine the returns on even cheaper, more fertile, African farmland that hasn’t had modern farming techniques applied to it.

That’s why most purchases are taking place in Africa. For instance, hedge fund Jarch Capital has amassed a collection of African farmland the size of Dubai.

Fortunately, you don’t have to strike a deal with an African warlord to earn your share…

Taking Advantage of the Jim Rogers’ Prophecy

Legendary investor and commodity guru Jim Rogers recently stated: “The fundamentals [for agriculture] have gotten better. The inventories are now at the lowest they’ve been in decades, not years. Sometime in the next few years, we’re going to have very serious shortages of food everywhere in the world and prices are going to go through the roof.”

To take advantage of Jim Rogers’ prophecy, you can take a couple of different approaches…

  • Broad Commodity Diversification

If you’re looking for a simple short-term play on agricultural commodities directly, the PowerShares DB Agriculture Fund (NYSE: DBA) could be one of the best.

The ETF tracks 11 different commodities through the futures market, including wheat, corn, soybeans, coffee, live cattle and hogs. It passively tracks the Deutsche Bank Liquid Commodity Index and charges only 0.85% in expense fees.

  • Direct Agriculture Investments

Over the long-term, businesses that can increase farm yields should attract more and more attention.

In this regard, consider Lindsay Corporation (NYSE: LNN). The firm makes movable, computer-controlled irrigation systems that can selectively irrigate the areas that need it most. The company’s growth opportunities are widespread – both from farmland that has no irrigation, farmland with inferior drip-irrigation systems, plus upkeep on existing farms that already have center-pivot irrigation systems.

Over the past five years, Lindsay has doubled its sales and more than tripled its earnings. Most of the growth comes from its fledgling international divisions like Europe, Africa, Australia, and the Middle East division, which has grown by an average of 33% over two years. It’s Mexico and Latin American division has also swelled by 41%. Yet Lindsay shares are still available at 9.7 times free cash flow.

Also, check out Potash Corporation of Saskatchewan (NYSE: POT). Based in Saskatoon, Canada, Potash produces fertilizers and feed equipment. In times when food supply is struggling to keep pace with demand, the easiest way to increase crop yields is to load them with fertilizer. If fertilizer prices surge in response to this need, Potash shares could reap the benefit.

While a global food shortage certainly isn’t welcome, current trends suggest it could become a widespread problem, so it’s not a bad idea to position yourself accordingly.

Good investing,

Matthew Weinschenk

P.S: By the way, if you’re interested in more about the world’s over-population problem – and ways to combat it – Hans Rosling addresses it very well in this TED Talk video. Born in Sweden, Rosling is Professor of International Health at Stockholm’s world-renowned Karolinska Institute.

P.P.S: And if you’d like to find out how to profit from innovative companies and businesses on a regular basis, take a look at The White Cap Report. In it, my colleagues Louis Basenese, Robert Williams and I profile the dynamic, under-the-radar firms that are breaking new ground by making unique, in-demand products/services. Often, these companies have markets all to themselves, which opens the door to extraordinary profits for early investors.

http://www.investmentu.com

Copyright © 1999 - 2010 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U 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