Investing in the Future of Our Food (Part 1)
A while back, I wrote a special edition piece for WSS to highlight my ability to research stock sectors beyond my area of expertise (which was transportation companies, aerospace and industrial firms). I chose to write about agriculture and food-related stocks since a) it fascinated me, and b) it is an incredibly important industry shrouded in controversy and deceit. This was a springboard for my interest in Socially Responsible Investing (SRI), and I thought I would reiterate the details of my initial report. While some of the data is a little dated, the underlying message is still the same: the US is both a power and a curse for the global food supply, and how we choose to invest (with our wallets or with our actions) will determine the fate of a great many nations.
If you’re like most Americans, odds are good that you ate something for breakfast this morning: a bowl of cereal, an omelet, a piece of toast, or maybe just a cup of coffee. Many of us notice (and probably grumble) when the price of our food increases by a few cents and/or changes in quality. However, very few sit and consider the long-term implications of our demand for food, where it comes from, who harvested it, where it goes and will it even exist 40 years from now at a price we can afford. When you take a deeper look at the world of agricultural science, you may be disturbed by the uncertainty of the future but at the same time feel optimistic that agricultural corporations (especially in the United States) are strong and capable of handling the food crisis at hand coming decades.
Many folks in the stock market haven’t pondered the future of food, and it shows. Within the past few months, volatility among potash, fertilizer, agricultural machinery and commodity-related stocks have driven many investors away based on unsubstantiated rumors and not on long-term fundamentals. Potash Corp. of Saskatchewan (POT) and the Mosaic Company (MOS) recently faced volatility over banter between Russian and Belorussian bureaucracies. Caterpillar (CAT) and John Deere (DE) noted slightly decelerating sales growth among developing countries, and commodity prices remain volatile.
Remember of course, that the primary purpose of agriculture is food, and the simple truth is that food isn’t going anywhere. As long as there are people on Earth, there will be mouths to feed. As long as there is demand for food, there will be demand for companies that manufacture farm equipment, engineer bio-technologies, develop fertilizers, perfect harvests with minimal environmental impact and price-out the final product we buy in the supermarket. So while agriculture stocks may fluctuate, the population of the Earth is exponentially increasing and the necessity for innovative agricultural corporations is crucial to anyone planning for the future.
The status quo sets the stage for this future, and the trends point to a shocking future unless the farming minds of today come up with solutions for tomorrow – China will serve as the case study demonstrating how this future is upon us. The American farmer faces a far heavier burden in the next 40 years than ever before in human history, and agricultural stocks have the resources and ability to lighten that load.
Stay tuned for the next edition of "Investing in the Future of Food"! In the meantime, please send any questions or comments my way.