Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24
THE GLOBAL WARMING CLIMATE CHANGE MEGA-TREND IS THE INFLATION MEGA-TREND! - 3rd May 24
Banxe Reviews: Revolutionising Financial Transactions with Innovative Solutions - 3rd May 24
MRNA - The beginning of the end of cancer? - 3rd May 24
The Future of Gaming: What's Coming Next? - 3rd May 24
What is A Split Capital Investment Trust? - 3rd May 24
AI Tech Stocks Earnings Season Stock Market Correction Opportunities - 29th Apr 24
The Federal Reserve's $34.5 Trillion Problem - 29th Apr 24
Inflation Still Runs Hot, Gold and Silver Prices Stabilize - 29th Apr 24
GOLD, OIL and WHEAT STOCKS - 29th Apr 24
Is Bitcoin Still an Asymmetric Opportunity? - 29th Apr 24
AI Tech Stocks Earnings Season Opportunities - 28th Apr 24
S&P Stock Market Detailed Trend Forecast Into End 2024 - 25th Apr 24
US Presidential Election Year Equity Performance in the Presence of an Inverted Yield Curve- 25th Apr 24
Stock Market "Bullish Buzz" Reaches Highest Level in 53 Years - 25th Apr 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Agri-Food Stocks Sector Positive Trends Supported by 2.4 Billion China India Consumers

Commodities / Agricultural Commodities Mar 29, 2010 - 12:33 PM GMT

By: Ned_W_Schmidt

Commodities

Best Financial Markets Analysis ArticleFla. jobless rate reaches record 12.2 pct in Feb” is the headline from an Associated Press report of 26 March. In short, one out of eight workers is unemployed. Per the author of this article, M.  Merzer,  in excess of 1.1 million Floridians are out of work.  Rather than creating jobs, the Obama Regime and a dysfunctional Congress have focused on nationalizing the U.S. health care system. The articles on the health care nationalization have tended to miss the obvious. Given the higher expenses and write offs being announced by major U.S. businesses, the first to feel the impact of Obamacare will be those being laid off because of it.     


When Scotty beams us to the other side of the world, we find a far different situation.  In China, businesses are facing a shortage of workers and have been raising wages. “Defying Global Slump, China Has Labor Shortage" by K. Bradsher from New York Times, 26 February 2010, reports,  

“Just a year after laying off millions of factory workers, China is facing an increasingly acute labor shortage. As American workers struggle with near double-digit unemployment, unskilled factory workers here in China’s industrial heartland are being offered signing bonuses.”

And more recently we read, “Guangdong raises minimum wage by 20% amid inflation fears" by E. Tsui from Financial Times, 19 March 2010,

“Factories struggle to attract enough workers. The Chinese province of Guangdong(near Hong Kong), the country's biggest export centre, announced yesterday that it would raise the minimum wage by an average of more than 20 per cent.”

Text Box:

Chinese government, at least for the moment, seems to have got economic policy working in the right direction. At the same time, the Obama Regime continues to prefer destroying wealth rather than creating jobs. Despite the latter’s best effort, our first chart below shows some in the U.S. are benefitting from economic developments in China.

With more Chinese working and earning higher wages, they are responding as expected. Those workers are eating better. To satisfy that hunger, China has turned to world markets for the Agri-Foods necessary to satisfy that consumer demand. U.S. export tonnage of major grains, as shown in the chart, has risen by more than 6% in the latest crop year. That, remember, is the real growth rate, excluding prices.

Text Box:

As chart above shows, Agri-Food prices have responded to higher global demand. On average, Agri-Food prices are up almost 20% from a year ago. Over the past three years Agri-Food Price Index has risen at more than a 10% compound annual rate.

Text Box:

Agri-Food companies and investors have certainly benefitted from this combination of real growth and higher prices. The above chart portrays the approximate returns on a basket of Agri-Food stocks.

Who would have thought that people eating could be so rewarding?

We can practically guarantee that the return in the coming year on Agri-Food stocks will not be as good as that of the past year. However, that is likely to be true for most stock market sectors and the stock market in general. That possible bump aside, the future harvest in Agri-Food for investors seems to be well grounded. Agri-Food fundamentals for the years ahead are well supported by the economic growth benefitting the 2.4 billion people in China and India. Few stock market sectors have such positive prospects.

Economic growth in China and India will be moving millions into the middle class in the decade ahead. That development contrasts with the Western economies where millions are being eliminated from the middle class. Your Gold should protect your wealth from the economic lethargy ahead in the Western economies brought on by the Keynesians. Agri-Food investments may, as we have written before, add some offense to your wealth game.

The higher demand for Agri-Food being created by Chinese and Indian economic growth is being magnified by the shape of the long-run Agri-Food supply curve. Globally, Agri-Food demand is now facing the inelastic portion of that long-run supply curve. That means, for example, a 1% increase in Agri-Food demand causes prices to rise by more than 1%. The percentage change of Agri-Food prices will be greater than the percentage increase in demand. To understand this all important concept read “The Joy of Agri-Food Price Inelasticity,” which is available for free at  www.agrifoodvalueview.com

By Ned W Schmidt CFA, CEBS

AGRI-FOOD THOUGHTS is from Ned W. Schmidt,CFA,CEBS, publisher of The Agri-Food Value View , a monthly exploration of the Agri-Food grand cycle being created by China, India, and Eco-energy. To receive the most recent issue of this publication, use this link: http://home.att.net/~nwschmidt/Order_AgriValue.html

Copyright © 2010 Ned W. Schmidt - All Rights Reserved

Ned W Schmidt Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in