FSO Editorials: "Agri-Food Thoughts" by Ned Schmidt 09/05/2007

FSO Editorials

AGRI-FOOD THOUGHTS
by Ned W. Schmidt, CFA, CEBS
Schmidt Management Company
September 5, 2007

Will Russian wheat embargo happen, causing global hoarding of wheat? Will wheat price double from already record prices? A fluke of weather along with economic miracle of China is creating first food supply squeeze of modern times. Much has been written on China's massive production engine. Not given sufficient coverage is consumption miracle taking place there. Every worker in every one of those factories is earning an income, an income that is rising. Those workers are spending that income. One of the beneficiaries of that spending is the Agri-Food sector. For example, per capita consumption of rice has fallen and stagnated while that of beef is rising. Agri-Food prices are reflecting such shifts.

Expanding Agri-Food consumption is influencing demand, prices and prosperity for investors. Above chart shows performance of basic food prices with green triangles. That superior price performance is feeding companies serving Agri-Food sector. Adding to Agri-Food demand from China is need to supply the biofuels industry. Rising demand is bumping into stubborn supply. Agri-Foods are not produced in a factory, but on the land. Productive agricultural land is in short supply. That supply is shrinking each year. China, for example, loses agricultural land each year. Messages from markets are quite clear. Financial sector is crumbling under weight of mortgage loans, while Agri-Food sector is prospering. Investors are now seeking more reliable investment themes for future. Agri-Foods is one of those themes. Structural nature of expanding demand, built on economic growth of China and Eco-energy, means Agri-Food investments will become a large part of portfolios.

AGRI-FOOD THOUGHTS are from Ned W. Schmidt,CFA,CEBS, publisher of Agri-Food Value View, a monthly exploration of the Agri-Food grand cycle being created by China, India, and Eco-energy. To review a recent issue write to agrifoodvalueview@earthlink.net. Ned will be exploring the Agri-Food cycle at The Wealth Expo in NYC, 19-21 October. For information go to www.wealthexpo.net

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All estimated returns are for the model portfolio and do not reflect those earned on actual portfolios.