Guest Post: Two No-Brainer Ways To Play Rising Food Prices

Tyler Durden's picture

Submitted by Simon Black of Sovereign Man blog,

Last summer, two researchers from the New England Complex Systems Institute published a short paper examining the correlation between rising food prices and civil unrest. It was a timely analysis, to say the least. A number of food riots were occurring throughout the world, not to mention waves of revolution sparked by the high cost of food.

This is nothing new; throughout history whenever people have struggled to put food on the table for their families, social unrest has been a common consequence.

The French Revolution is a classic example; after decades of unsustainable fiscal and monetary practices that wrecked the French economy, the harvest season and subsequent winter of 1788 were particularly harsh. People went hungry, and it ultimately started the revolution.

The researchers' analysis went a step further, though; they modeled the relationship between food prices and social unrest to reach a simple conclusion-- whenever the UN Food and Agricultural Organization (FAO)'s global food price index climbs above 210, conditions ripen for social unrest.

Today, the FAO's food index is at 213... and rising. Netherlands-based Rabobank recently published its own analysis, forecasting further rises in food prices well into the 3rd quarter of 2013.

There are so many factors driving food prices higher. From a demand perspective, world population is growing at an extraordinary rate... plus the rise of billions of people from developing countries (especially in Asia) into the middle class is quickening demand for resource-intensive foods like beef.

From a supply perspective, drought, soil erosion, and reduction of available farmland all put significant pressure on global agricultural output. And finally, from a monetary perspective, the enormous amount of paper currency being printed in the world is finding its way into agricultural commodities.

I cannot envision a slowdown in any of these factors anytime soon. Central bankers will continue printing, people will continue procreating, developing countries will continue becoming wealthier, etc. So we should absolutely expect rising food prices for quite some time.

Long-term, technology will ultimately solve these problems... but large-scale implementation is a long way off, and it may certainly be a bumpy ride ahead.

Individuals can hedge their exposure in a number of different ways. The simple option is to invest in agricultural ETFs or long-term futures contracts. But I can hardly recommend this as a course of action given the massive systemic risk in the financial system.

Just as we often recommend holding physical gold and silver rather than owning a gold ETF, it's much better to own physical agricultural assets.

If you're on a budget, small gardens can be planted for a pittance as long as you're willing to roll up your sleeves. Even if you live in an urban area surrounded by a sea of concrete, tabletop hydroponic and aquaponic systems can be set up on the cheap... and they're easy to maintain.

If you have more capital to deploy, consider buying agricultural property, preferably overseas. Buying foreign real estate is a great way to move money overseas, plus it gives you a place to go if you really need to escape.

As I survey farmland prices around the world, the best region to buy is South America, particularly Chile, Paraguay, or Uruguay. I'll have more detail on those locations in a future letter.

Bottom line, if the analysis is correct and food prices continue to rise, agriculture will be one of the best investments of the decade. As Jim Rogers has said so many times before, it will be farmers driving Maseratis, not stock brokers.  Plus, you will have secured yourself a steady, reliable supply of food.

Even if the analysis is wrong and all the world's food challenges are magically solved, it's hard to imagine being worse off for having your own food supply... or owning beautiful, well-located land in a rapidly developing foreign country.

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LawsofPhysics's picture

Good time to be in agriculture.  ;-)

BaBaBouy's picture

Buy Calls On COSTCO Warehouse Stocks ...

Raymond Reason's picture

The collective farm, coming soon to a field near you. 

CommunityStandard's picture

Google search farm prices.  Farmland has only gone up, even through the housing collapse and this drought.

camaro68ss's picture

The bernake can just print food right?????

Raymond Reason's picture

This after decades of being flat.  It's about time. 

CrashisOptimistic's picture

It's actually a huge opportunity.

The New Normal person wants to sit at his computer and click his mouse and make money.  There are no farmland vehicles for that, because people in farmland have thought that through.

If you want to own farmland, you had to get out of your chair, find owners and talk to them and buy from them.  You have an advantage in that because the New Normal humans are still sitting at their computer.  You have no competition in your bid for the land.  The internet is not involved.  This somewhat insulates you if the internet ever shuts down because the maintainers have no food.

Then after you have it, as part of the buy, you get a users manual from the owner listing the phone numbers of the seed maker, the tractor leasor, the irrigation company, the crop duster, etc.  You hit the ground running, which provides you time to arrange phone numbers for the oxen owners and well water for irrigation.  When the end hits, you'll be the prominent citizen of your community of 200, which will be the largest in the world.

mkhs's picture

"seed maker"...You're one of the new normals, right?

ncdirtdigger's picture

It would seem that you are one of the new normals. Never heard of GMOs I suppose?

mkhs's picture

Right.  Everyone who is interested in growing their own food will prefer GMO seeds.  As an aside, the M stands for modified, not made.

auric1234's picture

But you can still buy DOLE stock, or the likes?

I wouldn't buy DOLE myself, as I heard they cut deals with Monsanto, but you get the point (btw, I'm interested in hearing alternatives)

 

Acorn10012's picture

I'm a seed maker...don't get this in your eye.

flattrader's picture

This is fucking stupid comment:

>>>Long-term, technology will ultimately solve these problems...<<<<

BWAHAHAHA!!!

>>>...but large-scale implementation is a long way off, and it may certainly be a bumpy ride ahead.<<<

You be your ass it will be a bumpy ride.

Citxmech's picture

Hmm.  I wonder which "technology" they are talking about. . .

 Centerally planned population reduction, or trying to eek out a living using a sharp stick in hard dirt while trying to keep your starving neighbors away?

Nehweh Gahnin's picture

Had to scan down to see if someone beat me to this point.  You did.  Let's add the "farmers driving Maseratis" comment from Rogers to that.  (Hopefully that was tongue in cheek.)

 

PEAK OIL, BITCHEZ!  Oh, and peak fiat.  Um, and peak pollution.  Peak population.  Peak right here...

 

Harbanger's picture

Some people don't consider the need for income to cover property taxes which is the Govts. main source of revenue.   If the farm is your only source of income, you will need to produce much more than you consume just to keep your property.  In most states, the taxing authority will seize the property and offer it for sale at a public auction.  That's another good place to look for land.

samcontrol's picture

International land prices not Tylers' best theme.
Paraguay and Uruguay over Argentina ? Really ?

I have suggestions in Argentina and Chile for anyone interested.

A Lunatic's picture

The previously United States of Monsanto............

Navymugsy's picture

Have any of you looked into buying your own farm and hiring a manager? I may be behind the curve but I'd love to hear from someone who has done this or knows a reliable/reputible farm management firm. Realize this is a cash game and I'd like to get some info.

goldfish1's picture

It's a brave new world out there navy mug...farm managers are those running the monsanto game...genetically engineered seed spliced with bacteria, heavy spraying of pre-emergent herbicide, then roundup and ensuing pollution of ground and groundwater...but hey, you got your short term profits, right?

Organic on the other hand has few managers available from what I can see because it is a ton of work and ya gotta love it.

ncdirtdigger's picture

There are a lot of young people who will sharecrop given the opportunity.  The local college with an Ag program would be a good place to look for them. They have little capital, and lots of enthusiasm.

Papasmurf's picture

That'll work great is your tractor runs on Playstation or an iPhone app.  Check resumes for high scores on Farmville.

AGuy's picture

"Good time to be in agriculture. "

For Big-Agra company, yes, as a family farmer, not so much. Gov't regulations are putting the gov't boot on the neck of the family farmer.  Big Agra is using lobbyists to crush small farmers so they can gobble up the market share, and use there monopoly to raise consumer prices.

Oracle of Kypseli's picture

Houses should have flat roofs and grow stuff. It costs more to build a flat roof and design for snow loads, but still it works.

Raymond Reason's picture

Food, it's what's for dinner. 

PUD's picture

Double lock the dumptser bitchez

A Lunatic's picture

Global food fight, bitchez..............

kaiserhoff's picture

I'd love to play, but for the first time in 20 years my accounts are flat.  Why?

Counter Party Risk.

Jason T's picture

By The Sweat of Your Brow you Will Eat Your Bread

buy a 50 lb bag of flour and make your own bread and pizza doughs!  ..make sure not bromated flour though.. shit is banned in Nigeria and China yet its ok to sell in the USA.

FeralSerf's picture

"What are they putting in your flour?"  Folic acid for one.  Just because women that are in their first three month of gestation need it for their unborn.  It has side effects for the rest of us:

"Folic acid is LIKELY SAFE for most people. Most adults do not experience any side effects when consuming the recommended amount each day, which is 400 mcg.

High doses of folic acid might cause abdominal cramps, diarrhea, rash, sleep disorders, irritability, confusion, nausea, stomach upset, behavior changes, skin reactions, seizures, gas, excitability, and other side effects.

 There is some concern that taking too much folic acid for a long period of time might cause serious side effects. Some research suggests that taking folic acid in doses of 800-1200 mcg might increase the risk of heart attack in people who have heart problems. Other research suggests that taking these high doses might also increase the risk of cancer such as lung or prostate cancer."

http://www.webmd.com/vitamins-supplements/ingredientmono-1017-FOLIC%20AC...

Dwarf wheat's a killer.  It's the reason diabetes is epidemic.   The GMO varieties should be able to kill even quicker.

http://www.proteinpower.com/drmike/saturated-fat/wheat-belly/

http://www.naturalnews.com/036845_wheat_belly_weight_gain_gluten.html

What better way is there to get rid of the useless eaters than fuck with their food?

Acorn10012's picture

Please post more pictures of food...almost as good as the sugar daddy girls.

hedgeless_horseman's picture

 

 

...almost as good as the sugar daddy girls.

lol...I will be sure to pass that on, as she is a year older than me.

Papasmurf's picture

Bread and potatoes = diabetes in the making.

Raymond Reason's picture

Buy the wheat berries and grind your own.  Flour goes rancid quickly, unless one takes all the nutrients out.  Which is why they spray it with vitamins (enriching). 

kaiserhoff's picture

Oats have more protein and fiber, and make a damn fine mash for home made Kickapoo Joy Juice.

hedgeless_horseman's picture

 

 

Stop pellagra, eat more grits! 

Preferably with butter, salt, runny-fried-yard eggs, beef sausage, and a glass of raw milk.

Raymond Reason's picture

What no I Can't Believe It's Not Butter?  Or the overseas version: My God It's Not Butter? 

hedgeless_horseman's picture

 

 

Just butter, using only cream from our cow, churned in our Magimix, rinsed with well water. 

Some visitors have said things like, "Wow...it tastes just like regular butter!"

FeralSerf's picture

GMO corn based grits?  Soon to be outlawed in France and Russia due to health concerns and cancer in rats.

ncdirtdigger's picture

Beef sausage my arse. Livermush is the cat's meow!

goldfish1's picture

Pizza dough is easy and the flavor and texture is amazing:

1 pkg active dry yeast or 2 ish teaspoons

1 tsp white sugar

1 Cup warm not hot water

2 and ½ Cups flour (can be white or half white/half wheat)

2 Tablespoons Olive Oil

1 teaspoon salt

optional -  fresh or dried herbs, olives etc.

a little cornmeal


Preheat oven  to 450

In med bowl dissolve yeast and sugar in warm water. Let stand until thickened, 10 min.

If using herbs, add to oil and mix well

Stir in flour, salt, and oil to yeast mixture. Stir gently until combined. Rest 5 min. (Can be stored up to two days in frig.)

Turn dough onto lightly floured surface and pat or roll into a round.

Transfer to (very lightly greased) pizza pan or oven tray dusted with cornmeal or flour. Spread dough on pan.

Put sauce, toppings, cheese etc. Bake 15 or 20 min until golden brown.

Eat now.

 

irie1029's picture

Ironic how it corresponds to election years... hmm