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How to Profit from the Worlds Vanishing Seafood- "Live Gold!"

Commodities / Resources Investing Apr 19, 2008 - 12:42 PM GMT

By: Money_and_Markets


Best Financial Markets Analysis ArticleAll the Johnny-come-latelies are finally waking up to some of the things I've been warning you about — and helping you profit from — for years now ...

For example, the world's deepening water crisis, which I brought to the surface way back in August 2005, even being one of the first, if not the first analyst to coin the term "blue gold."

Since then, investments in the water sector have gained over 30% on average, beating the Dow and S&P 500 by nearly 4 to 1!

Or what about the world's inevitable food crisis, which I also forecast years ahead of almost everyone else, in my January 2005 issue of Real Wealth Report ?

Since that issue, the UN Food and Agriculture World Food Price Index has gained a whopping 88%. Investors in the food sector have racked up huge gains!

And all this doesn't even begin to cover the edge I've given my readers in the gold market (calling the bottom in 2001 at $255 an ounce) ... in oil (calling the bottom in 2001 at $13 a barrel) ... in the bear market in the dollar (first forecast way back in 2002) ... in inflation ... and more.

But right now, while there are still huge gains ahead in all natural resources, I want to focus on one area of the resource markets that is STILL being largely neglected, yet is as attractive as the rest of the resource markets!

I am talking about what I call ...

"Live Gold": The World's Natural Seafood Supply Is Vanishing

Seafood supplies are dwindling, while demand is soaring.

As a result, I think seafood prices — and the companies in the industry trying to help solve the shortage problem — will soar in value in the years ahead.

The problem: According to a report by a team of well-respected scientists, ecologists and economists in the journal Science , the populations of just about every kind of seafood will collapse in the next 40 years if current trends of overfishing and pollution continue at the same rate.

Already, at least 29% of the world's fish and seafood species have disappeared from the oceans. If current consumption trends continue, without accelerating, and no new methods to increase supplies are found or implemented, just 40 years from now all fish and seafood supplies would virtually vanish from the planet.

Biological risk assessment has determined the oyster population in Maryland's Chesapeake Bay is being suffocated by pollution.
Biological risk assessment has determined the oyster population in Maryland's Chesapeake Bay is being suffocated by pollution.

And it's not just the world's oceans where this is happening. Seafood stocks in lakes, rivers, bays and marshlands are also quickly vanishing.

For instance, ecologists have estimated that in 1880, there were enough oysters — which actually filter the water much like mangroves do in Florida — in Maryland's Chesapeake Bay to filter all the water in the bay in just three days time. Today, the oyster population in the bay has fallen to a point where it takes them over a year to filter the bay's water.

The Five Threats to Seafood Supplies ...

The fragile ecosystems of the world's oceans are being stressed by five major threats that are reducing marine stocks and impairing the sustainability of aquatic life.

Threat #1: Fisheries Operations

In the last 20 years, the world's fishing countries have greatly boosted their seafood harvesting ... to a level 30% greater than what is needed to harvest the world catch.

And that overcapacity to harvest seafood has not been curtailed. Indeed, to the contrary, the seafood industry has been overharvesting the world's seafood for nearly all of that 20 years, quickly depleting stocks.

Threat #2: Chemical Pollution and Eutrophication

Three-fourths of ocean pollution originates from land sources — factories, farms, homes. I know it doesn't seem logical since many of these sources are often hundreds of miles away from the sea. But the pollution reaches the ocean as runoff or discharge into streams and rivers, or through the air.

Pollution kills marine life, stunts growth, impairs reproduction, and can even effect genetic mutations in sea animals. Pollution also encourages a process called eutrophication, the proliferation of plant life, especially algae. These excess plants and decaying algae reduce the water's oxygen content, killing off marine life.

For example, runoff from farm fertilizers creates a massive "dead zone" at the mouth of the Mississippi River. Shrimp, fish, and other sea life quickly die in the oxygen-starved water. Meanwhile, in the northern Gulf, toxic "Red Tide" infestations of algae contaminate oyster beds and other seafood species, choking them off to the point of extinction.

Threat #3: Alteration of Habitats

More than half of the world's population currently lives within 40 miles of a shoreline. But by 2020, a whopping 75% — three-fourths of all the people in the world — could be living less than an hour's drive from the ocean's edge.

Chinese fishermen encircle a school of fish, and then pull the bottom of the netting closed.
Chinese fishermen encircle a school of fish, and then pull the bottom of the netting closed.

That means more erosion, more destruction, and more pollution of the natural habitats of many ocean species.

Coastal salt marshes are destroyed by dredging and filling to make room for new housing projects. Mining further alters marine habitats.

And in some areas, mangroves are removed wholesale to make way for shrimp aquaculture. All this coastal development interferes with Mother Nature's age-old natural patterns of erosion and sedimentation.

Threat #4: Competition from Exotic Species

Sometimes an exotic (non-native) species is introduced into an area on purpose. Other times, it happens by accident, such as in the exchange of ballast water from ships.

But regardless of how it happens, interjecting a non-native species can have disastrous consequences on the delicate ecological balance. Often, the "local" species is not equipped to defend against or compete with the strange interlopers. Consequently, the native populations decline.

Need proof? Just look at the red tide outbreaks in Australia. Or the advance of American comb jellyfish into the Black Sea, which has devastated the anchovy fishery. Or the invasion of the Eurasian zebra and quagga mussels into the Great Lakes, which has wreaked economic havoc on the waterways.

Threat #5: Global Climate Change

Global warming is a red-hot buzz word, so I won't rehash the problem.

But scientists are now starting to study its impact on world seafood production.

The warming pattern, if it continues its present course and rate, is likely to aggravate shore and habitat erosion. It could also increase the salinity of estuaries and freshwater aquifers. And it could alter tidal patterns in rivers and bays, causing increased coastal flooding.

All of these upheavals and dislocations in the natural order add up to bad news for marine life. Particularly at risk will be saltwater marshes, mangrove ecosystems, coastal wetlands, coral reefs, coral atolls, and river deltas ... and, of course, the marine species they support.

Moreover ...

All this decline in supply is occurring — just like in other natural resources — at a time when seafood demand is soaring!

Health-conscious Americans, for instance, are eating more seafood than ever. In just four years, our per-capita consumption jumped 9% — from 15.2 pounds per person in 2000 to 16.5 pounds in 2006 (the latest year for which figures are available from the NOAA).

What's more, it's estimated that when the 2007 official numbers are released later this year, the U.S. per capita seafood consumption will have hit a record 16.8 pounds per person.

Meanwhile, worldwide fish consumption rose from 40 million tons in 1970 to more than 86 million tons in 1998. Experts predict that by 2030, we'll have a global seafood shortage of 20 million tons per year.

Seafood prices, expected to rise 10% this year, could more than double next year, and eventually more than quintuple, just like the prices are doing now in many other natural resources.

The " ONLY" Solution: Massive Investment in Aquaculture

The "fish and seafood deficit" can only be alleviated through dramatic increases in aquaculture — fish farming.

Prime cuts of Coho salmon - once the rallying cry of the environmental movement in the western United States - have been restored to the menus of fancy restaurants because of fish farming in Latin America.
Prime cuts of Coho salmon — once the rallying cry of the environmental movement in the western United States — have been restored to the menus of fancy restaurants because of fish farming in Latin America.

Aquaculture, as a means of seafood production, took off during the last half of the 20th century. Now it's the fastest growing segment of the world's food economy.

According to the Food and Agriculture Organization of the United Nations, nearly 50% of the fish consumed as food worldwide are raised on fish farms rather than caught in the wild.

It has a long way to go. Seafood is one of the most rapidly growing ingredients in the global diet. And by 2030, another two billion people will be on the planet, eating more and more seafood, requiring an additional 37 million metric tons of seafood supplies.

By far, the world leaders in aquaculture are the developing countries of Asia — China, Thailand and Vietnam, to name a few.

But much more must be done in this area, or the world is going to face the very real possibility that fish and seafood — now considered cheap — will instead become delicacies.

I'm optimistic. Aquaculture can easily handle the problem. And those who get in on this trend early stand to reap the profits.

Three companies I suggest you look at for investment in aquaculture ...

#1. HQ Sustainable Maritime Industries, Inc. (HQS) , produces farmed and ocean-harvested products raging from tilapia and shrimp, to squid and red snapper. Based in Seattle, Washington, the company's operations are mostly located in China's South Sea.

Fourth-quarter 2007 revenues smashed all records, soaring 46% over the prior year to $17.7 million, while gross profit roared 61.4% higher to $8.7 million. This is a small company, but I think it has tremendous potential. The shares currently trade just under $10.

#2. Tassal Group, Ltd. (TSLLF): An Australia-based producer and marketer of Atlantic salmon and ocean trout. The company's products are marketed under the Royal Tasman Salmon brand, which is distributed in Australia, Japan and other international markets.

Revenues rose 13% in the second half of 2007 vs. the same period in 2006. Earnings were down a tad, but this company has a niche market in salmon.

#3. Chareon Pokphand Foods is one of Asia's largest agri-industrial corporations and the world's largest supplier of black tiger shrimp. The company also farms 8,000 hectares of tilapia in Thailand and Burma.

CP is a huge Thailand-based company, with operations in everything from pal oil to aquaculture and feedstocks. You can buy its shares on the OTC market in the U.S. under the symbol "CHPFF," but the stock is traded with very little volume. So if you decide to buy it, I recommend using limit orders and accumulating a position over time.

Best wishes,


P.S. For all my specific buy/sell signals and recommendations, subscribe to Real Wealth Report for a modest $99 a year.

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