Saturday, February 7, 2009

Food Commodity Prices Rising

Agri-Food commodity prices are not falling. They have fallen, and are now rising. Reality is that the world continues to move over time into an era of global Agri-Food shortages. And since Agri-Food cannot be produced in a factory, neither governments nor charismatic leaders can change that situation.

The growth in the underlying demand for Agri-Food varies little with short-term economic cycles. Rather, longer term trends will dominate the future prices for Agri-Foods. Each year for the foreseeable future about 15 million people will move into the middle class in China. That will happen regardless of what happens to Chinese exports to the U.S. in the coming week. Of course, the actual number might be less in one year and more in other.

Over time the compounding effect of their demand for Agri-Food will place a considerable strain on the global Agri-Food balance. At times the question dealt with how China would feed itself. With the changing income demographics in the next decade, the question will change. How will the rest of the world afford to eat? Is your portfolio ready to ride this Agri-Food Super Cycle?

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