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Guest Post: Two No-Brainer Ways To Play Rising Food Prices
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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Escaping the food riots, moving to a farm, growing your own food, protecting the family, survival, etc., are continued themes on ZH and other alternate media sources. However there are a few facts that I think are in short supply. First, most people have only 3 days of food at home. When a panic occurs (for whatever reason), people will empty the local WM grocery dept faster than you can say Rumpelstiltskin. Most of the people inclined to riot & pillage at this point will be out of food within a couple days. Three days into “no food” (maybe 5-6 days later) will make the body move into starvation mode, then lethargy sets in, and then rioting is greatly diminished….. & then death sets in. When this happens in too many places our beloved “Just-In-Time” manufacturing/delivery system seriously breaks down, and is not easily re-started. We will see unexpected shortages everywhere. At some point you will need to replenish your food supply by growing your own. Many folks think they can just throw some seeds out in the backyard, or move to the country and “START” farming, etc. I would like to respectively point out that farming (successfully) is not an easy endeavor, it is damn hard, even with the best of luck. Bugs, weather, timing, & other unknowns are always fighting against you. If you’re are backyard gardener (or 5 acre gardener with a new rototiller, wheelbarrow, etc) you need a few seasons to figure out what grows, when to plant what, how to combat the environmental conditions, etc etc etc….. the list can feel endless, and before the casual survivalist gardener can get enough food for himself, starvation will probably result in death. If you live in a big city, or suburb, and have no provisions (mormon like/type provisions that no neighbors/friends know about), when calamity strikes, you’ll probably die….. just look at what has happened in Greece…. It can happen elsewhere in europe, & here too…..
Just FYI, almost anyone can go 2+ weeks without food before actually hitting starvation mode. The generally accepted rules of thumb for fatality are based on threes. Three weeks without food, three days without water, three minutes without air.
Yeah you're right there. Farming is hard work. Left out of the list above is the cost of fuel, maintenance and repairs. And it seems the more shit you have, the more shit you have to fix. And you have to do it yourself. Fact is, if farming was easy, everybody would be doing it. That they are not should provide some indication of the lifestyle change that one must necessarily embrace should you decide to go down this path of economic self sufficiency.
I happen to have compiled an exhaustive survival gardening book "Going Galt: Survival Gardening". I used to work at the Nevada Cooperative Extension, so while I'm a modest gardener I had access to tons of info and my book covers it all. I've seen the food shortage coming for quite a while.
http://www.futurnamics.com/garden.php
Tomatoes don't do as well here in the Puget Sound basin, so other ZH'ers are lucky in that respect -- all but one of my plants got a late blight and went poof within a week. Potatoes did awesome, though -- I prolly have about 400lbs in the ground, perhaps more. More than the family needs, but we're trading for milk from up the street. Onions did okay. Corn did really well too (it's cut and in the freezer now), though I lucked out on planting time. My neighbors, who all planted later, had poor emergence with a bout of cold and wet in June. The freezers stuffed with raspberries and blackberries, all from pickings around the neighborhood. Also pole beans. Apples are coming on. Chickens haven't slowed down on egg production, though they will and we'll all benefit. Froze a bunch of quiche and fritattas, though, for this winter. Several salmon in the freezer, and I have one more rooster to liquidate. Carrots and beets are holding steady in the ground, waiting for me to rapture them. As is kale. Too much kale. And cabbage. We've got a bumper crop of hubbard squash in the works, too.
I robbed about 6.5 gallons from the honeybees, which we'll bake with and trade with -- liquid gold.
I plan on planting a bunch of winter wheat or rye for harvest neaxt year. I've done this once before, harvesting and then threshing in old pillowcases and winnowing with a box fan. Works great, and it's so much grain!
All of this, plus a 'real' 40hr/week engineering job.
What happens when the kleptocrats jack up the real estate taxes on your farmland like they've done in every other category of real estate? Fast forward to the future: will farmland real estate go the way of today's strip malls and foreclosed houses? Nobody goes near 'em in many cases because of the huge tax burden. In some counties, the real estate taxes often rival the mortgage for houses; and the taxes exceed rents in many cases for retail and industrial. This is outright confiscation.
But it's not just in the big cities . . . can anyone name a single jourisdiction in America where the long term trend has been a lowering of the arbitrary real estate ad valorem taxes? But in the case of farmland, it won't just lay fallow - it will be owned lock stock and barrel by the government, because while people can live without Blockbuster, they can't go without eating.
So, is the glimpse of the future a look back at China or Russia in the 1960s? All land will owned by the State, and run like the DMV, so periods of mass starvation will occur?
YOU CANNOT BE FREE AND SELF-SUFFICIENT UNTIL YOU CAN GET ALLODIAL TITLE TO YOUR LAND (if you don't believe the Government is 1st in line on your land's title, try not paying your taxes). That, and ending the Fed would do more for freedom than all the wars fought over the last 100 years.
Allodial Title? Hmm, had to pull up the Wikipedia on that one. In the end, though, if it's real it can still be 'confiscated' under one pretense or another (recently invented or otherwise).
Yep, we're in a pickle. Outright ownership is the premium you pay to not need someone else's permission to be there. Renting is the premium you pay for someone else's land to be de-valued and confiscated.
You're writing under the assumption that rule of law and contract law exist under social unrest. You're investment in land could be taken away by a mob of starving civilians.
Oil and modern agriculture married at the hip. The demand for petroleum to plant, plow, package, and ship food, not to mention fertilizers and chemicals is immense.
You just knew this article would wake up some of the preppers. I'm going long on food, it sure seems like money in the bank to me.
In the last depression my father remembers vividly searching for oranges in huge piles with oil poured over them. There was no market for agricultural products because no one had any money. How will the coming depression be different from that?
Until the SHTF, and we all go barbarian, most states still have game populations sufficient to survive hunting seasons and regenerate the next year. Some other posters said how great it was to eat food you have grown yourself, but it is also a pretty good feeling when bring some wild protein to go with all the veggies. While many of the city slickers may not get it, there is a lot more to hunting than all the macho bullshit most people conjure up when hunting is brought up in polite conversations in the burbs. But hunting the game and rendering your kill into healthy nutrient-dense food is an amazing process that brings immense satisfaction when all the work is done and your family has been fed. Deer are plentiful in almost every state and in many areas they are a nuisance. But man, does that nuisance taste good.
Go organic bitchez! Get out and hunt for your food!
Agreed. Good hunting means learning how the game moves around and why, and when, and where. Good hunting is about the patience, concentration, and observation needed for a good shot, not about spraying bullets with the latest super-high tech bullshit from Cabelas.
IMPENDING SELL OFF.
Longs please be careful.
Due to recent central bank intervention and short covering spikes, these daily charts are extremely overextended and significant correction expected very soon:
SPX, DOW, NASDAQ, NZDUSD, GBPUSD, AUDUSD, COPPER, CRUDE, GOLD, SILVER. [USD strength will return]
http://www.zerohedge.com/news/2012-12-24/market-analysis
http://trader618.com