What is your (food) stock investment strategy?

In this installment of the C+C News we look at food. This article originally published in the Wall Street Journal can also be found here. Hold onto that can of beans-it’s appreciating faster than pretty much any low risk savings options in the market. To quote:

Reality: Food prices are already rising here much faster than the returns you are likely to get from keeping your money in a bank or money-market fund. And there are very good reasons to believe prices on the shelves are about to start rising a lot faster.

Do the math. If you keep your standby cash in a money-market fund you’ll be lucky to get a 2.5% interest rate. Even the best one-year certificate of deposit you can find is only going to pay you about 4.1%.

The latest data show cereal prices rising by more than 8% a year. Both flour and rice are up more than 13%. Milk, cheese, bananas and even peanut butter: They’re all up by more than 10%. Eggs have rocketed up 30% in a year. Ground beef prices are up 4.8% and chicken by 5.4%.

What’s causing this chaotic rise? Commodity prices are on the rise because staples like corn (and the arable land used for other crops) are being diverted to fuel. However, the cost of making biofuels is still high, making them expensive. Oil prices continue to skyrocket making the shipping of just about everything exorbitant. The market responds by re-orienting itself around these price spikes (and the potentially big profits to be gleaned from the turbulence). Demand continues to rise (population increases, we all gotta eat) so prices follow suit. 

Conventional linear thinking is not going to get us out of this wicked mess.

Tags: capacity evolution, complexity, food prices