There has been a lot of news coverage, and here, and here, on the increase in the prices for food stuffs across the world. Just this week Wal-Mart, Sam's Club and Costco have put limits in place on how many bags of rice people can buy. Granted the limit is between four to ten bags, but the stores have experienced a run on rice.
This chart compares the futures price of oil (in green) to the futures price of rice, which have moved together over the past three months.
This chart compares the futures price of oil (in green) to the futures price of wheat, which moved together through mid-march but have diverged since then.
The charts above are not meant to be a true technical analysis between these prices, its is just interesting to see them moving in relation to each other.
As the world's population increases, expect to see the prices of food stuffs become a real problematic issue. Some countries are limited in the amount of food that they can grow internally due to climate, governmental policies or state of modernization. How will these countries react when it becomes increasingly expensive to feed their population.
How will the world react? Will countries with a small surplus of crops be willing to export to other countries in need? Will there be an increase in civil unrest and war between countries? Most wars have been started in order to increase a countries access to natural resources.
What are the investment opportunities out there? There will an increased demand for farming equipment, fertilizer, pesticides and seeds. Any one of these, which improves the efficiency of growing crops will be able to charge a premium.
Additional Reading/Listening:
'Soaring World Food Prices', National Public Radio series
'The Silent Tsunami', Economist
Source:
'Rice Shortage Roils San Francisco Stores, Markets, Food Banks', by Ryan Flinn, Bloomberg News
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