Financial engineering has now demonstrated that the destruction of investment wealth can be accomplished for faster and more efficiently using computers. Monoline insurance companies are latest tool in the eradication of wealth. Some way must exist for investors to escape these financially destructive experiences. That escape route may be to seek out and move to trends of future. Agri-Food stocks, as shown by this week's chart, have in past year done quite nicely, and likely will in future. Of course, they will have corrections for such events are natural and healthy events for markets. Corrections provide an opportunity to acquire positions. Why have Agi-Food investments done well?
The answer to that question is actually fairly easy. Global demand for Agri-Foods continues strong. Cash prices for most Agri-Foods have hit new highs in the past year. Those prices have moved so strongly that some nations are banning the export of grains. Is this the beginning of governments hoarding Agri-Foods? This supply situation is likely to only worsen as economies of China and India continue to expand. China is not yet a net importer of grains. But, in less than two years it will be one!
Global competition for Agri-Food is further heightened by the move to biofuels. China is probably the only government actually discouraging ethanol production from grain. Malaysia is deeply concerned that the move to biodiesel will put palm oil in short supply. Palm oil represents about half of the world's consumption of vegetable oils. This list of shortages goes on as the world moves to a short supply situation in Agri-Food that could last a decade or more. Will the family pet and the hobby horse become rare due to the expense of feeding them?
AGRI-FOOD THOUGHTS are from Ned W. Schmidt,CFA,CEBS, publisher of Agri-Food Value View, a monthly exploration of the Agri-Food grand cycle being created by China, India, and Eco-energy. To review a recent issue, write to firstname.lastname@example.org.