The Frantic Food Trade

by Laura Ehrenberg-Chesler on January 13, 2011

in Commodities,Investment Strategies

The past few days have seen the stock price of any company related to food, soar.   Between the floods in Australia, the freeze in Florida and the heavy rains in India causing an onion shortage, companies that produce seeds, farming equipment, and fertilizer have become the trade du jour.

What we are trying to parse out is whether this is simply a short term trade, as we have seen in the past, or whether the aforementioned issues, coupled with a secular shift in the growth of the middle class in emerging economies, is creating a fundamental investment opportunity in these companies.

More than likely it is a little bit of both.  As the weather improves and the frantic mood subsides, the long term winners and losers will begin to emerge.  There will be companies that profit long term from the growth of the middle class overseas.  And of course, not all companies benefit from food shortages and rising prices.  Restaurant stocks and those producing baked goods may be in for a rough ride.

Leave a Comment

Previous post:

Next post: