{"id":33239,"date":"2012-10-31T22:12:06","date_gmt":"2012-11-01T02:12:06","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/10\/how-to-profit-from-smart-farming-and-global-food-supplies\/"},"modified":"2012-10-31T22:12:06","modified_gmt":"2012-11-01T02:12:06","slug":"how-to-profit-from-smart-farming-and-global-food-supplies","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/10\/31\/how-to-profit-from-smart-farming-and-global-food-supplies\/","title":{"rendered":"How to Profit from \u2018Smart Farming\u2019 and Global Food Supplies"},"content":{"rendered":"

By MoneyMorning.com.au<\/a><\/strong><\/p>\n

Here\u2019s a good statistic for you: there are more obese people<\/a> in the world than there are malnourished people \u2013 1.5 billion versus 925 million\u00a0according to the International Federation of Red Cross and Red Crescent Societies\u00a0(IFRC).<\/p>\n

Why is it good? It is interesting in itself but it also tells us that malnutrition isn\u2019t necessary \u2013 the world produces enough food for everyone to have the calories they need to get by.<\/p>\n

<\/span><\/p>\n

The problem is just that we haven\u2019t got the political and logistical skills to distribute it properly.<\/p>\n

The resulting pressure on food supplies<\/strong> is creating some interesting developments in global agriculture<\/a>. And also some opportunities for investors.<\/p>\n

\u00a0Where Does all the Food Go?<\/h2>\n

\u00a0<\/strong>We waste vast amounts of food \u2013 much of India\u2019s grain is stored outside for example, so it spoils long before it gets to market.<\/p>\n

We also distort the prices of food with silly initiatives such as price caps (which encourage farmers to horde, not sell) and the US Renewable Fuel Standard rules that require all petrol to be blended with corn ethanol<\/a>.<\/p>\n

Some 40% of US corn (more than the total combined output of India and Africa) is now used as fuel, which, given that the price of corn hit a high in June, surely doesn\u2019t seem as good an idea as it once did. Why should the biofuel industry effectively get to eat before the global population?<\/p>\n

As we get richer, we also insist on having more of it \u2013 both in volume and variety. And of course our governments refuse to recognise the problem.
\nThat\u2019s why food prices<\/a> are so vulnerable to the weather – according to the United Nations, the three years in the past\u00a0two decades in which food prices have been highest have coincided with droughts (as an aside, I might point out that they\u2019ve also coincided with\u00a0quantitative easing (QE),\u00a0but that is another subject).<\/p>\n

It is also why, as the global population grows, there is likely to be ongoing pressure on food supplies despite the apparent plenty.<\/p>\n

The World Bank estimates that total demand for food will rise<\/a> by 50% by 2030, partly thanks to the rising population and partly thanks to what analysts at Fidelity call the \u201cmeat multiplier\u201d.<\/p>\n

As people get richer, they want to eat more meat and meat is one of the biggest resource gobblers there is: for every 1kg of beef you want to produce, you have to feed a cow around 7kg of grain.<\/p>\n

I suspect that food supply won\u2019t have to rise the full 50% \u2013 some logistical improvement has to be possible and the World Bank\u2019s population forecasts aren\u2019t exactly infallible. But it is still a big ask for the agricultural industry<\/a>.<\/p>\n

\u00a0Four Ways to Improve Food Production<\/h2>\n

\u00a0<\/strong>Producing more food isn\u2019t as easy as it should be. Industrialisation, urbanisation and desertification have all combined to reduce the amount of land available to farmers. And the failure of the Chinese to properly reform land ownership rules have prevented the rise of the kinds of agribusinesses that can create leaps in yield in their hungry country.<\/p>\n

The key point is that more food from less land means that yields will have to go up. And what makes yields go up? The obvious answer is fertiliser \u2013 the prices of the likes of potash<\/a> rose ten-fold during the 2007\/8 food crisis.<\/p>\n

But Fidelity also points to other areas of interest. There is also machinery \u2013 rising farm incomes and farm sizes mean that mechanisation rates will keep rising \u2013 and so will tractor sales.<\/p>\n

There is \u2018precision agriculture\u2019 \u2013 the \u2018integration of satellite observations, on the ground instruments and sophisticated farm machinery to apply the optimum amounts of seed, fertiliser and water for maximum efficiency\u2019.<\/p>\n

Then there are GM advances and biotechnology \u2013 think \u2018metabolically engineered fish that mature more quickly\u2019 (this isn\u2019t as an attractive idea as precision agriculture, but you get the idea) and artificial meat advances which offer \u2018the potential to feed millions of people in the future in a resource efficient manner\u2019.\u00a0 And without killing any pigs.<\/p>\n

\u00a0The Best ‘Smart Farming’ Stocks<\/h2>\n

\u00a0<\/strong>The good news at the moment is that it looks like this year isn\u2019t going to produce the food crisis<\/a> many have been worrying about.<\/p>\n

According to Capital Economics, the US Department of Agriculture numbers tell us that global harvests of wheat and corn will be \u2018ample\u2019, while the soybean harvest is on course to \u2018recover to the high seen in the 2010\/11 season\u2019.<\/p>\n

Browning Newsletter also suggests that we might be about to go through a period of relatively benign weather. Many models are pointing to a weaker El Ni\u00f1o than expected.<\/p>\n

Winter in the US is unlikely to be colder than usual. Meanwhile, although north-eastern Brazil might be going to get more rain than it would like, \u2018Argentina and southern Brazil should have good growing conditions\u2019, something that should \u2018provide a good enough grain and oilseed harvest to help bring down prices in the coming season\u2019.<\/p>\n

That would be nice \u2013 but it might also provide a good opportunity for investors to get into what Mirabaud calls \u2018smart farming stocks\u2019 \u2013 companies that capture \u2018the drive towards higher crop yields in the emerging world and the growing food safety paranoia of consumers and regulators worldwide\u2019.<\/p>\n

Merryn Somerset-Webb<\/strong><\/p>\n

Contributing Editor, Money Morning<\/em><\/strong><\/p>\n

Publisher\u2019s Note: This article originally appeared in MoneyWeek<\/em><\/a><\/p>\n

From the Archives…<\/strong><\/em><\/p>\n

Does Excessive Government Spending Make You the World’s Best Treasurer?<\/a>
\n26-10-2012 – Kris Sayce <\/p>\n

Why a Return to the Gold Standard Could Actually Be Bad<\/a>
\n25-10-2012 – Kris Sayce <\/p>\n

A Safer Than Super Investment?<\/a>
\n24-10-2012 – Nick Hubble <\/p>\n

Agricultural Commodities – The Best Way to Play Rising Food Prices<\/a>
\n23-10-2012 – Merryn Somerset Webb <\/p>\n

Stock Market ‘Barometer’ Speaks: The Bulls Won’t Like it…<\/a>
\n22-10-2012 – Kris Sayce <\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n


\nHow to Profit from \u2018Smart Farming\u2019 and Global Food Supplies <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au Here\u2019s a good statistic for you: there are more obese people in the world than there are malnourished people \u2013 1.5 billion versus 925 million\u00a0according to the International Federation of Red Cross and Red Crescent Societies\u00a0(IFRC). Why is it good? It is interesting in itself but it also tells us that malnutrition isn\u2019t … <\/p>\n

Continue reading “How to Profit from \u2018Smart Farming\u2019 and Global Food Supplies”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-33239","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/33239","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/comments?post=33239"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/33239\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/media?parent=33239"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/categories?post=33239"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/tags?post=33239"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}