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post #1 of 30 (permalink) Old 01-04-2008, 09:47 AM Thread Starter
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Forget oil, the new global crisis is food

Forget oil, the new global crisis is food

BMO strategist Donald Coxe warns credit crunch and soaring oil prices will pale in comparison to looming catastrophe

A new crisis is emerging, a global food catastrophe that will reach further and be more crippling than anything the world has ever seen. The credit crunch and the reverberations of soaring oil prices around the world will pale in comparison to what is about to transpire, Donald Coxe, global portfolio strategist at BMO Financial Group said at the Empire Club's 14th annual investment outlook in Toronto on Thursday.

"It's not a matter of if, but when," he warned investors. "It's going to hit this year hard."

Mr. Coxe said the sharp rise in raw food prices in the past year will intensify in the next few years amid increased demand for meat and dairy products from the growing middle classes of countries such as China and India as well as heavy demand from the biofuels industry.

"The greatest challenge to the world is not US$100 oil; it's getting enough food so that the new middle class can eat the way our middle class does, and that means we've got to expand food output dramatically," he said.

The impact of tighter food supply is already evident in raw food prices, which have risen 22% in the past year.

Mr. Coxe said in an interview that this surge would begin to show in the prices of consumer foods in the next six months. Consumers already paid 6.5% more for food in the past year.

Wheat prices alone have risen 92% in the past year, and yesterday closed at US$9.45 a bushel on the Chicago Board of Trade.

At the centre of the imminent food catastrophe is corn - the main staple of the ethanol industry. The price of corn has risen about 44% over the past 15 months, closing at US$4.66 a bushel on the CBOT yesterday - its best finish since June 1996.

This not only impacts the price of food products made using grains, but also the price of meat, with feed prices for livestock also increasing.

"You're going to have real problems in countries that are food short, because we're already getting embargoes on food exports from countries, who were trying desperately to sell their stuff before, but now they're embargoing exports," he said, citing Russia and India as examples.

"Those who have food are going to have a big edge."

With 54% of the world's corn supply grown in America's mid-west, the U.S. is one of those countries with an edge.

But Mr. Coxe warned U.S. corn exports were in danger of seizing up in about three years if the country continues to subsidize ethanol production. Biofuels are expected to eat up about a third of America's grain harvest in 2007.

The amount of U.S. grain currently stored for following seasons was the lowest on record, relative to consumption, he said.

"You should be there for it fully-hedged by having access to those stocks that benefit from rising food prices."

He said there are about two dozen stocks in the world that are going to redefine the world's food supplies, and "those stocks will have a precious value as we move forward."

Mr. Coxe said crop yields around the world need to increase to something close to what is achieved in the state of Illinois, which produces over 200 corn bushes an acre compared with an average 30 bushes an acre in the rest of the world.

"That will be done with more fertilizer, with genetically modified seeds, and with advanced machinery and technology," he said.

Forget oil, the new global crisis is food
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post #2 of 30 (permalink) Old 01-04-2008, 12:19 PM
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IMO, the failure of our food production began when we failed to use it as a barter for oil (grain for oil program). No one wanted to hold people's hunger hostage over oil. What about what OPEC is doing now? How many families are doing without needs because they have to spend $50.00 a week to fill their gas tank just to get to work?
Then, our very wise government paid people not to grow. That's right! Farmers are actually sitting on their asses (and most subsidy recipients are NOT farmers, but land owners) and being paid $XXX per acre not to grow a crop.
Now, to make matters worse, the estate tax goes back into full force in 2011, unless it's renewed. Does anyone have any idea how many more farms will be split up and sold when the patriarch dies? No use in telling me it doesn't happen because I watched that trend for years around where I live. The family couldn't afford to pay the taxes owed on several thousand acres of land inherited along with all that farm equipment, so they parceled it up and sold most of it. I've personally watched the demise of 2 dairy farms and many large grain/soy farms because of the death tax.
There is definitely going to be a problem with food in the near future because we are losing the people who grow it at a rapid rate.

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post #3 of 30 (permalink) Old 01-04-2008, 12:48 PM
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Originally Posted by Jakarta Expat View Post
Forget oil, the new global crisis is food

BMO strategist Donald Coxe warns credit crunch and soaring oil prices will pale in comparison to looming catastrophe

He said there are about two dozen stocks in the world that are going to redefine the world's food supplies, and "those stocks will have a precious value as we move forward."

Forget oil, the new global crisis is food
Anyone know what are these two dozen stocks? Let's pile in and get rich!
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post #4 of 30 (permalink) Old 01-04-2008, 01:34 PM
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Originally Posted by cmitch View Post
IMO, the failure of our food production began when we failed to use it as a barter for oil (grain for oil program). No one wanted to hold people's hunger hostage over oil. What about what OPEC is doing now? How many families are doing without needs because they have to spend $50.00 a week to fill their gas tank just to get to work?
Then, our very wise government paid people not to grow. That's right! Farmers are actually sitting on their asses (and most subsidy recipients are NOT farmers, but land owners) and being paid $XXX per acre not to grow a crop.
Now, to make matters worse, the estate tax goes back into full force in 2011, unless it's renewed. Does anyone have any idea how many more farms will be split up and sold when the patriarch dies? No use in telling me it doesn't happen because I watched that trend for years around where I live. The family couldn't afford to pay the taxes owed on several thousand acres of land inherited along with all that farm equipment, so they parceled it up and sold most of it. I've personally watched the demise of 2 dairy farms and many large grain/soy farms because of the death tax.
There is definitely going to be a problem with food in the near future because we are losing the people who grow it at a rapid rate.
Very true, that is one sad and ongoing chapter that is encouraging sprawl and shifting resources all in the wrong places. I also have seen what this can do to farmland specially near large metropolitan areas. I can cite examples like the Kings Farm in Montgomery county (Rockville) and many places like North Potomac. What used to be the bounies a couple of decades ago is simply a concrete jungle with brick and vinyl facades
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post #5 of 30 (permalink) Old 01-04-2008, 02:21 PM
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Anyone know what are these two dozen stocks? Let's pile in and get rich!
You can start with ADM and MON. There are also going to be a couple of Brazilian stocks [damn that a lot of stocks] to watch but it is better to catch them on an index [like EWZ] rather than individually.

Also look at who is partnering hard with India.

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post #6 of 30 (permalink) Old 01-04-2008, 02:23 PM
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By the way, good to see the media getting back around to this one. It does dovetail with Climate Change issues but it is its own 600 pound gorilla.

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post #7 of 30 (permalink) Old 01-04-2008, 03:40 PM
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Forget fuel and food. Fresh water is the real crisis. For example, what will the plains states do when the Ogallala Aquifer is depleted? Ogallala Aquifer - Wikipedia, the free encyclopedia

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post #8 of 30 (permalink) Old 01-04-2008, 04:10 PM
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Forget fuel and food. Fresh water is the real crisis. For example, what will the plains states do when the Ogallala Aquifer is depleted? Ogallala Aquifer - Wikipedia, the free encyclopedia

It's your breadbasket, gringo.

B
I think you hit the big one right on the head. Even here on the East Coast water is beginning to get to be a problem. Maryland has had water limits in place twice in the last three years, not good.
Anyone know how Georgia is doing with their water shortage?

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post #9 of 30 (permalink) Old 01-04-2008, 04:15 PM
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I think you hit the big one right on the head. Even here on the East Coast water is beginning to get to be a problem. Maryland has had water limits in place twice in the last three years, not good.
Anyone know how Georgia is doing with their water shortage?
for your sake, let's hope it has nothing to do with Global Warming otherwise God let us down for a reason, what do you think?
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post #10 of 30 (permalink) Old 01-04-2008, 04:17 PM
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for your sake, let's hope it has nothing to do with Global Warming otherwise God let us down for a reason, what do you think?
God is getting even with us because of your table dancing... Cut it out already...........

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