Food Inflation: Buy Ag on any dip

Chart of the Food Price Index from the Food and Agricultural Organization (FAO). The Food Price index measures the monthly change in international prices based on a basket of food commodities.

It sounds crazy to someone living in the U.S. Our supermarkets are always packed with meats, eggs, and vegetables. And we have one of the highest obesity rates in the world.

But the trend is clear when we take a look at what's happening in places like Egypt, Haiti, and Cameroon. Families in these countries are now paying 35%-40% of their monthly income on food. In China and India, sugar and meat prices are near all-time highs due to rising populations and lack of supply. Prices for corn and rice are at their highest levels since the 2008 food crisis ($CCI hit a all time high yesterday).

According to the United Nations, the world's population is expected to grow 35% over the next 40 years. To put this in perspective, that's about 2.5 billion more people than we have living on Earth today.


And that's just half the problem. These people will need a place to live. That means more industrialization. Most of these homes (Materials XLB), power plants (Buy URA), and schools will be built on areas where crops are produced today. The only solution to our food crisis comes from fertilizer companies. 


Fertilizer increases production from existing crops. In other words, it helps increase the size and improve overall quality in fruits and vegetables. In farmer's lingo, this is called an increase in crop yields. (Potash, Monsanto, Agurium and CF Industries are my favorites, stay away from Mosaic due to the unwind from Cargill) or just but the ETF MOO.