>From the Daily Reckoning. The looming problem may only partly be energy, but >mostly it may be food if agricultural lands are moved into large-scale biofuel >production. But hey! According to the author, there's an opportunity to make >some money if things go that way.
Ed -------------------------------------------------------------------------------- While shortages of key industrial and energy commodities are frightening, no other sector will threaten global stability more than agriculture. It seems ironic that as global population is reaching an all-time high, we are turning at least half of our crops into ethanol or biofuel. This is a questionable, if not idiotic, alternative that clearly does as much damage as good. While the short-term impact is obvious, the longer-term ramifications for agriculture on a global scale could be devastating. The idea of food inflation is new to many Americans, who are used to prices for food being only about 13-16% of income. Back when my grandmother got off the boat in 1912, they were more like 45%. The facts of life are not always pleasant, but the truth must be told without all the politically correct, wish-upon-a-star answers. The U.S. is blessed to be one of the nations with some of the best agricultural land on the planet. From sea to shining sea, we have cropland as far as the eye can see. For years, the bounty of the land has been a supermarket for the world; now it’s a fuel station, too. China, which has hundreds of millions more hungry mouths than we have, has far less arable farmland. And worse, China has far fewer controls in place to regulate farming methods. In recent years in the United States, the number of immigrants has swollen. The porous borders continue to attract newcomers as if it were still 1912. Here in the U.S., a lot of people still think that America can still absorb a massive influx of immigrants from all over the planet who are poor, tired and hungry. And while that is nice, romantic thinking, the fact of the matter is we cannot. As investors, we must look at this situation as an opportunity for our portfolio. First of all, I suggest if you have some extra land (condo developers and house flippers, listen closely), grow a vegetable garden, and if you are ambitious, raise some sheep and cows, because they will come in handy. A little more practical and with less bunker mentality is to add stocks of some of the key agricultural companies that help support the industry, like those dealing with equipment making, fertilizer, irrigation and transport. These are the names you always hear, like John Deere, Monsanto, Caterpillar, etc. These companies will do well for the same reasons drillers and equipment maker stocks do so well when the energy markets are surging. The same thing applies to these agricultural-related companies. Agriculture is in a serious bull market right now, one that is not likely to end anytime soon. Now, none of these is an official Outstanding Investments recommendation, but take a long look at this sector. I think you will see the picture is clear why this is a smart sector in which to have at least some exposure. Regards, Kevin Kerr for The Daily Reckoning
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