“Best turkey ever!” said my cousin John.
We usually like to stay home for Thanksgiving.
But this year, my uncle invited his siblings’ children and their
children to turkey day in Virginia. Not everyone could make it, but we
still had a respectable crowd of 18. And everybody was "oohing" and "ahhing"
over the bird.
“What’s your secret, Uncle Dick?” asked my
wife.
“Well,” said my uncle, “this is the first time
we tried it, but this year we deep-fried the turkey. It was good, wasn’t
it?” he said, smiling.
A spontaneous round of applause broke out, and
my uncle took a bow. Later, cleaning up in the kitchen, I asked my uncle
to show me the deep fryer. It was huge.
“Thirty-quart capacity,” said my uncle. “We
injected the bird with marinade and let it sit overnight. We used peanut
oil – and, believe it or not, that 17-pound turkey took just 50 minutes
to cook.”
“Wow, that’s cool!” I said. “I’m going to have
to get one of these things.”
“I got mine at Walmart, and you’ll never guess
where it was made,” said my uncle.
“That’s easy – China. Over half the stuff in
Walmart comes from China,” I said.
“Yup. It’s from China. You think anyone in
China uses these turkey fryers?” asked Uncle Dick.
“Probably very few. The Chinese don’t eat as
much meat as we do. But I suspect that’s going to change,” I said.
China Moves Up the Food Chain
According to Dylan Grice, an analyst at
Societe Generale, as countries become more industrialized their citizens
consume more protein. Rising incomes enable consumers to move up the
food chain and eat more grain-intensive foodstuffs, like milk, meat, and
eggs. That’s exactly what we’re seeing in China.
The Chinese, on average, eat 117 pounds of
meat per person per year. That’s up from just 55 pounds per person in
1995.
Americans consume 210 pounds per capita per
year. So what would happen if the Chinese were to eat as much animal
protein as we do? First, let’s look at some facts:
-
One in five people on the planet are
Chinese.
-
The United States has nine cities with a
population over 1,000,000.
-
China has more than 95 cities with a
population over 1,000,000.
-
It takes 16 pounds of grain to produce one
pound of beef.
Just to supply China with enough meat for them
to eat the same amount as we do would require an increase in worldwide
grain production of 277 million tons! And the Chinese aren’t the only
ones eating more protein. It’s happening all over the developing world.
Grain Supplies Are Tight
Grain supplies are tight for several reasons:
-
Farms worldwide have been turned into
factories and housing projects.
-
More grain is being used for biofuels.
-
As I already mentioned, more meat is being
consumed.
-
Exports of grain have been restricted by
many countries worried about food shortages.
-
Finding more acres worldwide to farm is a
challenge according to agricultural experts.
So what’s the answer to tight supplies? As we
said
last week, the answer is increased production.
What's Next?
Grain prices are already high and vulnerable
to a correction. What hasn’t kept pace with grain prices are the
companies that specialize in enhancing crop yields. That’s where the
opportunity is right now.
We’ll keep you posted on when it makes sense
to buy grain or a grain based ETF. Meantime it’s a cinch that with
prices high, farmers everywhere will endeavor to grow more grain.
Big profits lie ahead for companies that
provide the wherewithal to do just that, like fertilizer companies.
Steve’s latest fertilizer pick is up 14% since he since he recommended
it to his
Sound Profits readers in June.
Powerful long term trends are what make you
money. We'll be talking more about the demand for grain and the best way
to play it in Sound Profits which debuts next month.
Invest Safely,
Bob Irish
Investment Director
Investor's Daily Edge
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