Food Will Never be So Cheap Again
Biofuel refineries in
have set fresh records for grain use every month since May. Almost a third of the US corn harvest
will be diverted into ethanol for motors this year, or 12pc
of the global crop. The man-made American and EU famine continues
to deepen, by the liberal environmental lobby shamelessly vacuuming up
seemingly limitless amounts of corn to create Ethenol and Bio Deisel. Which according to every study that has come out in the past 12
months says uses more energy and makes more pollution to create and then burns
far less efficiently than Gasoline and Deisel fuel.
results are the stealing of food from untold billions of the poorest in the
world. The cost is to
permanantly and artificially drive up all food prices
internationally. Not just grains, but
all farm animals that are grain fed, it also drives up milk, eggs, cheese,
cooking oil (Corn Oil). If the
environmental cabal in the US government so desired this program need not even
have any impact on the poor, – as the millions of acres of idle farm land across
the US could be tilled to grow corn to offset this criminal waste of corn. But
in all reality Extremist Liberal Environmentalists care not a whit for the poor
and the hungry of the world, but rather their repeatedly expressed desire is to
lower the world population by seemingly any means possible including this engineered
coming famine and death by disease and starvation.
By Ambrose Evans-Pritchard
Published: 7:53PM GMT 25 Oct 2009
The world's grain stocks have
dropped from four to 2.6 months cover since 2000, despite two bumper harvests
in North America. China's inventories are at a
30-year low. Asian rice stocks are near danger level.
Yet farm commodities have largely
missed out on Bernanke's reflation rally in metals, oil, and everything else.
Dylan Grice from Société Générale sees "bargain basement" prices.
Wheat has crashed 70pc from early
2008. Corn has halved. The "Ags" have mostly drifted sideways over
the last six months. This divergence within the commodity family is untenable,
given the bio-ethanol linkage to oil.
For investors wishing to rotate
out of overstretched rallies – Wall Street's Transport index and the Russell
2000 broke down last week – this is a rare chance to buy cheap into a story
that will dominate the rest of our lives.
Barack Obama has not reversed the
Bush policy on biofuels, despite food riots in a string of poor countries last
year and calls for a moratorium. The subsidy of 45 cents per gallon remains.
The motive is strategic. America is
weaning itself off imported energy at breakneck speed. It will not again be
held hostage by oil demagogues, or humiliated by states that cannot feed
themselves. Those Beijing
students who laughed at US Treasury Secretary Tim Geithner may not enjoy the
last laugh. The US
is the agricultural superpower. Foes will discover why that matters.
The world population is adding
every year. This will continue until mid-century. By then we will have an extra
2.4bn mouths to feed.
China and Southeast Asia
are switching to animal-protein diets as they grow wealthy, as the Koreans did
before them. It takes roughly 3-5kgs of animal feed from grains to produce 1kg
A report by Standard Chartered, The
End of Cheap Food, said North Africa and the Middle
East have already hit the buffers. The region imports 71pc of its
rice and 58pc of its corn. It lacks water to boost output. The population is
growing fast. It will have to import, and cross fingers.
The UN says global farm yields
must rise 77pc, which means redoubling Norman
Borlaug's "green revolution". It will not be easy. China's trend
growth in crops yields has slipped from 3.1pc a year in the early 1960s to
0.9pc over the last decade
"We've all heard the stark
anecdotes: precious topsoil weakened by over-farming, dust clouds darkening the
Asian skies, parched land becoming desert and rivers running dry," said Mr
Since 2000, China has lost
nearly 1,400 square miles each year to desert. Urban sprawl is paving over
fertile land in the East. Water supply from Himalayan glaciers is ebbing. The Yellow River has been reduced to "an agonising
tickle". It no longer reaches the sea for 200 days a year.
Farmers are draining the
aquifers. Environmentalist Ma Jun says in China's Water Crisis that they
are drilling as deep as 1,000 metres into non-replenishable reserves. The grain
region of the Hai
River Basin relies on
groundwater for 70pc of irrigation.
China's water troubles are not unique. North India
lives off Himalayan snows as well. Nor can we take fertiliser supply for
granted any longer since "peak phosphates" threatens.
One can be Malthusian about this.
Grizzled commodity guru Jim Rogers certainly is. "The world is going to
have a period when we cannot get food at any price, in some parts." He
advises youth to opt for a farm degree rather than an MBA, if they want to make
Mr Grice remains an optimist,
believing that human ingenuity will rescue us. You can trade the "Ag"
rally by investing in exchange traded funds (ETFs), but this amounts to
speculation on food. There are ancient taboos against this practice.
Or you can invest in the
bio-tech, fertiliser, and land services companies that will both make money and
help to solve the problem. Monsanto, Syngenta, and Potash are popular, but
trade at high price to book values. Golden Agri-Resources, Yara, Agrium, and
Bunge are at better multiples.
Kingsmill Bond at Moscow's Troika Dialog
suggests the Baltic company Trigon Agri as a way to play the catch-up story in
the Eurasian steppe. He likes sunflower processor Kernel, grain group Razgulay,
and fertiliser firm Uralkali.
Strictly speaking, the world has
enough land to feed everybody. The Soviet Union
farmed 240m hectares in Khrushchev's era. The same territory now farms 207m
hectares. Troika says crop yields could be doubled in Russia, and tripled in the Ukraine using
modern know-how. Africa's farms could come
alive with land registers, allowing villagers to use property as collateral for
None of this can be done with a
flick of the fingers. What seems certain is that the terms of trade between
country and city will revert to the norms of the Middle Ages. Landowners will
be barons again.