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
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Agri-Foods Prices Advancing in the Face of Strong Mega-trend Fundamentals

Commodities / Agricultural Commodities Feb 10, 2009 - 08:53 AM GMT

By: Ned_W_Schmidt

Commodities Best Financial Markets Analysis ArticleStructural investments are perhaps the most powerful. Gold has, for example, been in a structural bull market for more than a decade. Those political and economic trends that have propelled Gold from $250 were simply a “carnival” ride that had only one way to go, up. The structural deficits of the U.S., which stem from an intellectual deficit in government, meant that Gold had could only go up. All one had to do was identify the structural bull, and remain seated for the entire ride.


Agri-Food investments are shaping up as another structural investment theme. The Chinese economy has expanded in amazing fashion for more years than any expected. Naysayers have been plentiful over time, and wrong repeatedly. More people have been lifted out of poverty in China in the past decade than in any period of history. That growth will continue in meaningful fashion for another decade. As that growth continues about 15 million people will move into the middle class each year. As they do, they change their preferences for Agri-Foods. The question has often been in the past 100 years about how China will feed itself. With the shifting economic and income tides in China, the question changes form. How will the rest of the world afford to eat?

Source: “Urban growth in China: Challenges and prospects.” by K.C. Seto, Stanford University, Undated.

Through time, measuring the prosperity or poverty, of a nation has been fairly simple. The percentage of the population living in an urban setting has been a measure of prosperity. In contrast, percentage of the population in the agricultural sector is a measure of prosperity. For example, in the U.S. and other Western nations less than 5% of the population are involved in the production of Agri-Food. Remainder of the population earns an income sufficient to buy their needed Agri-Foods.

As the first graph shows, about 40% of China's population lives in urban centers. That level of urbanization is about that of the U.S. in 1900. As more of the population of a nation shifts from the agricultural setting to living in urban centers, the impact on productivity, economic activity, and incomes is dramatic. Almost any job these new urban workers take dramatically increases that individual's contribution to economic growth. That worker's income also takes a dramatic jump upwards. And as that happens a multiplier effect is felt throughout the economy. This shift to an urban population is a structural change in the Chinese economy. That shift translates into a structural shift in the global Agri-Food system. The bounty of Agri-Food in the 1960s in now no more than a history lesson. The next decade will be one of increasing global shortages of Agri-Food unlike anything seen in modern times.

Some today talk of a slow down in the growth rate of the Chinese economy due to the Obama Depression in the U.S. Yes, but their growth rate is still positive. That achievement is something the economic advisors in the Western nations have not been able to produce. And go back to that level of urbanization in the Chinese population, which compares to that of the U.S. in 1900. Imagine the wealth one would have amassed by buying the U.S. stock market in that year. And today the outlook for Chinese manufacturers is somewhat better. The $800+ billion spending in the Obama Pork Plan will benefit Chinese exporters to a large extent as that money is spent, much of it on goods imported from China.

The second chart this week is the percentage price move from the lows for a group of important Agri-Food stocks. The average increase, as indicated by the green squares, has been slightly more than 60%. That compares to about 9% for the S&P 500 and 24% for oil. While these results do not guarantee any particular future returns, they are encouraging.

Agr-Food stocks, like some other groups, are acting as if their bottom has been found. Markets may appear on charts to form “V” bottoms, but that is rarely the case. Individual groups with both good future fundamentals and an over sold condition bottom and begin to move first. While the business media continues to dwell on bank stocks of dubious merit and little interest, some groups of stocks are already in a new, or their own, cycle.

Agri-Food seems to be a timely structural investment. With more than 2 billion people in China and India striving for a better life, consumption of Agri-Foods will continue to move up the value chain. Why spend time dwelling on those stocks that may or may not recover under the dubious economic policies of the government of the U.S. and other nations? Perhaps the time has arrived to reposition your portfolio to the structural impact of China and India on Agri-Food demand. Is your portfolio ready for the future of Agri-Food, or is it still mired in the despair of the Obama Depression?

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_AgriValueRECENT.html

Copyright © 2009 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