FSO Editorials: "Agri-Food Thoughts" by Ned Schmidt 09/19/2007

FSO Editorials

AGRI-FOOD THOUGHTS
by Ned W. Schmidt, CFA, CEBS
Schmidt Management Company
September 19, 2007

As incomes rise in China and India, their consumers will dictate prices for oil and food. Their preferences are setting relative prices of nearly all commodities. These preferences have shifted to reflect their higher incomes, and will continue to do so. Chart below portrays per capita consumption of beef and rice by Chinese consumers, per UN FAO. Beef is now a preferred item on the menu at Chinese homes. Magnifying this shift is number of consumers in China and India. Such preference shifts have caused prices of grains and meats around world to rise. Higher beef consumption means raising more beef. Raising more beef means using more grain. More grain is consumed to feed the beef than is freed up from eating less rice. Agri-Food growth cycle that has emerged is really that simple.

To the rising demand for food by consumers in India and China is added incremental demand for grains in order to produce biofuels. Total demand for Agri-Foods is on track to rise materially over next 10-15 years, pushing food prices dramatically higher. Growing real demand and higher prices will �feed� companies and investments associated with Agri-Food. Few investment sectors can expect such structurally positive economic fundamentals for next 10-15 years. In years ahead, morning business shows will likely report crop conditions in Black Sea region or Australia before giving roundup of day's economic trivia. How many companies in your portfolio have consumers in Chinaand India shifting in such a massive way to consuming their products? Any?

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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