Sean Brodrick takes a closer look at the economic forces affecting commodity prices in the U.S. Mr. Brodrick discusses how the world is now consuming more food than it produces.
The price of orange juice is up 19% in 12 months. It's only going to get worse, as the incoming Florida harvest is way too small. Florida growers will collect 168 million boxes of oranges this season while analysts were expecting a crop of 177 million to 183 million boxes.
Corn costs 15% more than it did last year, and 40% more than it did four years ago. It looks ready to go even higher because corn is now used as a substitute for wheat in feed grain. Why?
Wheat is up a whopping 61.7% since last year. Plus, there's plenty more upside because Russia is likely to limit exports by increasing a tax on overseas shipments. Why would the Russians do that? Because their citizens are also grumbling over high wheat prices.
And other breakfast prices are soaring across the board:
- The price of eggs is up a brain-scrambling 33.7% in the past 12 months.
- Milk is up 21% over the same period.
- And higher grain prices should jack up the price of meats, including bacon and ham.
And, even though American farmers just harvested a record 13.3 billion bushels of corn, the reserve supply of feed grains probably fell 18% through October 1, according to government figures. Meaning supplies would be the lowest since 1979.
As the U.S. dollar falls, the prices of U.S.-produced staples like wheat, corn, and milk skyrocket. But for people buying them in other currencies, prices don't go up nearly as much.
The people in India and China, 40% of the world's population, have traditionally eaten simple, vegetarian breakfasts, but they're learning to love American food.
End result: Meat demand in China has quadrupled since 1980. In India, milk and egg products are becoming increasingly popular.
Booming economic growth in both of these countries is only fueling their appetites. China's economy is expanding at 11% or so, and India's per-capita income has the potential to double within ten years. In other words, more and more people can afford good, hearty breakfasts.
Another weighty matter to consider:
- Americans consume an average of 3,900 calories per day. Compare that to people in India, who, according to the latest data from the UN's Food and Agriculture Organization, consume an average of just 2,440 calories per day. That means, the average American eats 59% more than a person in India does.
"As commodities guru Jim Rogers points out: For the first time in recorded history, the world is now consuming more food than it produces. Rogers has also said that soft commodities are where the biggest gains will be made over the next five to 10 years. And there are plenty of great beaten-down investments out there right now. So please take a look at the agriculture sector right now. After all, a little seed money invested now could lead to a bushel of profits come harvest time," Mr. Brodrick advises.
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About SEAN BRODRICK & MONEY AND MARKETS
Sean Brodrick, the editor of Red-Hot Canadian Small-Caps, has more than 25 years experience as a professional journalist and financial analyst. Previously, Mr. Brodrick was the investment director of The Sovereign Society, the world's leading publisher of offshore asset protection strategies and global investment opportunities.
Mr. Brodrick is also a contributing columnist to MarketWatch.com and a frequent commentator on one of Canada's premiere financial websites, HoweStreet.com. His report, "70 Days to Empty," has garnered acclaim for its analysis of the forces pushing America toward its next oil crisis and was described by The Daily Reckoning as "the most important report you're likely to read this year." He has also been featured on several financial talk shows including CNBC Squawk Box and Bloomberg Market Line.
Mr. Brodrick holds a B.A. degree from the University of Maine.
Money and Markets (www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit www.moneyandmarkets.com.