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
If You Don’t Understand Bonds, You Don’t Understand Investing - 25th Aug 19
Gold's Next Move - 25th Aug 19
Fresh Water Crisis Unfolding - 25th Aug 19
Newbie Guide to Currency Pairs in Forex Trading – Review - 25th Aug 19
When A 16-Year-Old Earns $3 Million, You Know It's Not A 'Silly Fad' - 24th Aug 19
The Central Bank Time Machine - 23rd Aug 19
Stock Market August Breakdown Prediction and Analysis - 23rd Aug 19
U.S. To “Drown The World” In Oil - 23rd Aug 19
Modern Monetary Theory Could Destroy America - 23rd Aug 19
Seven Key Words That Explain "Stupidly High" Bond Market Prices - 23rd Aug 19
Is the Fed Too Late Prevent A US Housing Bear Market? - 23rd Aug 19
Manchester Airport FREE Drop Off Area Service at JetParks 1 - Video - 23rd Aug 19
Gold Price Trend Validation - 22nd Aug 19
Economist Lays Out the Next Step to Wonderland for the Fed - 22nd Aug 19
GCSE Exam Results Day Shock! How to Get 9 A*'s Grade 9's in England and Maths - 22nd Aug 19
KEY WEEK FOR US MARKETS, GOLD, AND OIL - Audio Analysis - 22nd Aug 19
USD/JPY, USD/CHF, GBP/USD Currency Pairs to Watch Prior to FOMC Minutes and Jackson Hole - 22nd Aug 19
Fed Too Late To Prevent US Real Estate Market Crash? - 22nd Aug 19
Retail Sector Isn’t Dead. It’s Growing and Pays 6%+ Dividends - 22nd Aug 19
FREE Access EWI's Financial Market Forecasting Service - 22nd Aug 19
Benefits of Acrobits Softphone - 22nd Aug 19
How to Protect Your Site from Bots & Spam? - 21st Aug 19
Fed Too Late To Prevent A US Housing Market Crash? - 21st Aug 19
Gold and the Cracks in the U.S., Japan and Germany’s Economic Data - 21st Aug 19
The Gold Rush of 2019 - 21st Aug 19
How to Play Interest Rates in US Real Estate - 21st Aug 19
Stocks Likely to Breakout Instead of Gold - 21st Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 21st Aug 19
Holiday Nightmares - Your Caravan is Missing! - 21st Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19

Market Oracle FREE Newsletter

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

Agri-Foods Prices Advancing in the Face of Strong Mega-trend Fundamentals

Commodities / Agricultural Commodities Feb 10, 2009 - 08:53 AM GMT

By: Ned_W_Schmidt

Commodities Best Financial Markets Analysis ArticleStructural investments are perhaps the most powerful. Gold has, for example, been in a structural bull market for more than a decade. Those political and economic trends that have propelled Gold from $250 were simply a “carnival” ride that had only one way to go, up. The structural deficits of the U.S., which stem from an intellectual deficit in government, meant that Gold had could only go up. All one had to do was identify the structural bull, and remain seated for the entire ride.

Agri-Food investments are shaping up as another structural investment theme. The Chinese economy has expanded in amazing fashion for more years than any expected. Naysayers have been plentiful over time, and wrong repeatedly. More people have been lifted out of poverty in China in the past decade than in any period of history. That growth will continue in meaningful fashion for another decade. As that growth continues about 15 million people will move into the middle class each year. As they do, they change their preferences for Agri-Foods. The question has often been in the past 100 years about how China will feed itself. With the shifting economic and income tides in China, the question changes form. How will the rest of the world afford to eat?

Source: “Urban growth in China: Challenges and prospects.” by K.C. Seto, Stanford University, Undated.

Through time, measuring the prosperity or poverty, of a nation has been fairly simple. The percentage of the population living in an urban setting has been a measure of prosperity. In contrast, percentage of the population in the agricultural sector is a measure of prosperity. For example, in the U.S. and other Western nations less than 5% of the population are involved in the production of Agri-Food. Remainder of the population earns an income sufficient to buy their needed Agri-Foods.

As the first graph shows, about 40% of China's population lives in urban centers. That level of urbanization is about that of the U.S. in 1900. As more of the population of a nation shifts from the agricultural setting to living in urban centers, the impact on productivity, economic activity, and incomes is dramatic. Almost any job these new urban workers take dramatically increases that individual's contribution to economic growth. That worker's income also takes a dramatic jump upwards. And as that happens a multiplier effect is felt throughout the economy. This shift to an urban population is a structural change in the Chinese economy. That shift translates into a structural shift in the global Agri-Food system. The bounty of Agri-Food in the 1960s in now no more than a history lesson. The next decade will be one of increasing global shortages of Agri-Food unlike anything seen in modern times.

Some today talk of a slow down in the growth rate of the Chinese economy due to the Obama Depression in the U.S. Yes, but their growth rate is still positive. That achievement is something the economic advisors in the Western nations have not been able to produce. And go back to that level of urbanization in the Chinese population, which compares to that of the U.S. in 1900. Imagine the wealth one would have amassed by buying the U.S. stock market in that year. And today the outlook for Chinese manufacturers is somewhat better. The $800+ billion spending in the Obama Pork Plan will benefit Chinese exporters to a large extent as that money is spent, much of it on goods imported from China.

The second chart this week is the percentage price move from the lows for a group of important Agri-Food stocks. The average increase, as indicated by the green squares, has been slightly more than 60%. That compares to about 9% for the S&P 500 and 24% for oil. While these results do not guarantee any particular future returns, they are encouraging.

Agr-Food stocks, like some other groups, are acting as if their bottom has been found. Markets may appear on charts to form “V” bottoms, but that is rarely the case. Individual groups with both good future fundamentals and an over sold condition bottom and begin to move first. While the business media continues to dwell on bank stocks of dubious merit and little interest, some groups of stocks are already in a new, or their own, cycle.

Agri-Food seems to be a timely structural investment. With more than 2 billion people in China and India striving for a better life, consumption of Agri-Foods will continue to move up the value chain. Why spend time dwelling on those stocks that may or may not recover under the dubious economic policies of the government of the U.S. and other nations? Perhaps the time has arrived to reposition your portfolio to the structural impact of China and India on Agri-Food demand. Is your portfolio ready for the future of Agri-Food, or is it still mired in the despair of the Obama Depression?

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