The Global Food Shortage

Robert Hsu, June 03, 2008

An area that is being plagued by higher costs is global food supplies, and it has created a worldwide food shortage. Accelerating global food inflation has already sparked riots from Haiti to Egypt. In the U.S., food prices will jump 5.5% this year, the fastest pace since 1989, according to the U.S. Department of Agriculture. Consumers are already feeling the pop in prices, though, as milk prices have gained over 50% in the last two years, and egg prices have almost doubled in the same period.

Why? Food production has failed to keep pace with surging demand in emerging markets, like China, India, Russia and other Southeast Asian countries. Take China, example. The country is the world's biggest soybean buyer, is planning to increase imports of the oilseed, and it already accounts for more than half of global soybean purchases within the past 10 years. Imports of soybeans into China were worth $11.5 billion last year.

In addition to soybeans, an expanding economy and further urbanization in the country will also bolster imports of corn, wheat and meats. China was a net importer of corn, used in feed, at 900,000 metric tons in 2007 to 2008. As a result, corn more than doubled in price in the past two years. Corn soared to a record $6.39 a bushel on May 9 from $3.6625 a year earlier. And with larger salaries, the Chinese are also eating more meat, so that means corn is also in great demand for feeding livestock. The growth in livestock feed demand means that China will become a consistent net importer of 2.6 million tons of corn by the end of the decade.

As you can see, China has already had a big impact on world agricultural markets, and I think that it can only become stronger over the years. But keep in mind that China is only one more factor to add to the many that are causing the recent spike in food prices. Other contributors include the food demand in other emerging markets, as well as the rising use of crops like corn to make biofuels (a increasingly popular form of energy).

These issues have become such a problem that they are being addressed in the World Food Summit that is taking place right now in Rome. Leaders from all over the world have gathered to discuss the worsening global food crisis and how to improve the situation.

While I am sure some valuable information and plans will come out of the meeting, unfortunately, I expect the global food shortage to last for a while. This is because the forces that are driving the crisis, like demand from emerging countries and the development of biofuels, aren't going away any time soon.

However, there are a few ways to profit from this situation. In fact, my Asia Edge subscribers are making money right now off of two of my recommended companies that are profiting from rising food demand.

To find out more about these two companies, as well as my specific buy-below prices, become a Asia Edge member today.

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