Food prices are at an all time high in most places around the globe. We have been reading news on Wheat, Edible Oil, Corn etc reaching their multi year highs. A report on the same topic reads
“Rising Food prices can be good news for the food companies who are attempting to pass along those higher food input prices to the consumer. They are maintaining or expanding margins and they are hopeful that the constraints on food supply and the changing and expanding global demand for food products will continue to put upward pressure on prices. “
Doesn’t this provide an obvious opportunity to invest in Food Companies & Farming ?Â
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From:
http://www.commodityonline.com/news/topstory/newsdetails.php?id=8110
“India on Wednesday banned futures trading in rubber, chana, potato and soya oil in an attempt to contain the price rise in essential commodities and curb the spiralling inflation rate in the country.
According to officials in the Ministry of Finance, futures trading in these commodities have been suspended with immediate effect because the government has been receiving a number of complaints against speculative trading in agri futures trading.”
Good fun, huh. I don’t even know what happens to people who have open contracts.
It’s going to get worse before it gets better.
Oops, wouldnt banning the FUTURES on agri items send the whole stock market into tailspin ?
Seconding Deepak Pse read only this….
“The Financial Times above-the-fold headline today screams India considers ban on trading in food futures.
It reports, “India’s finance minister said on Monday he was considering a blanket ban on trading in food futures, underlying growing concerns in Asia over the role of hedge funds and financial market traders in the recent surge in commodities prices. If India imposes a ban, it would come only five years after the country introduced such futures trading as part of a broader push to develop India as a leading financial centre.—
Food Commodities hedging is allowed in the USA and I saw an article couple of days back in NY times where it was suggested that the US too should follow India.
Rgds
Vyaas
Navin: “I would expect all these to be managed by hedging ?”
Hedging is tough. There are no rupee futures on an Indian exchange and banks won’t even talk to you unless you have a fairly large exposure. There are some rupee futures traded in dubai but the volumes are thin.
We have never encouraged investment in farming, really. If we did we wouldn’t have the land acts on agricultural land, the concept of APMC, restrictions on corporate direct buying and such. Fertilizers, farm produce, and seeds are exposed to a lot of abuse by archaic laws.
The FM is already making ominous statements on commodity trading, so it’s getting scarier by the day.
Rising food prices have a far reaching consequences on this planet. Australia has witnessed nine consequent droughts, Europe has reported decerase in farm production. In Haiti food riots are reported and in India farmer suicides continue unabated and irrigated land over last year has not increased. There is serious water table reduction in many states in India. China has faced severe floods and loss of crop. There are new pest attacks reported and even to this day millions are dying of hunger in Africa and sub Sahara and Myanmar. In the US the biofuels have replaced food crops and serious food shortages are predicted over next decade.
Looking at it purely from the point of investment in commodoties as prices soar is foolish as nations worldwide are capable of enforcing ban on food/ commodities trading and exports. It is not only in India that you have laws like ESMA, there are many other developed and developing countries that feel that feeding their own people is first priority than feeding rest of the world. Going ahead be prepared to witness more food riots. I am not sounding alarmist but whatever limited information I have gathered over last one year across countries (46 countries across continents) do not indicate great news for mankind.
Be prepared for another 30% rise in food prices by the year end alone.
Srini