7 BILLIONTH Birthday: Three Food ETFs To Play The New Population Boom (MOO, DBA, DAG, MON, POT, MOS)
Tony Sagami: Happy 7 BILLIONTH birthday! I may be getting gray and old, but I’m not that old! Those birthday wishes go to everyone on the planet, actually, as the United Nations Population Fund estimated that the global population hit 7 billion on Halloween night.
It’s hard to put a number that big into perspective. But let’s try by looking at when the Earth previously hit billion-person milestones …
|1 billion||2 billion||3 billion||4 billion||5 billion||6 billion||7 billion|
Clearly, the global population has been exploding in the last few decades. A big chunk of that can be attributed to medical advances and longer life expectancies. However, it’s the pace of population growth that’s accelerating. In fact, it is estimated that the world’s population is growing by 200,000 PER DAY.
Not surprisingly, most of the recent population gain isn’t coming from the U.S. (The birth rate in the U.S. has fallen from 3.6 births per woman in 1960 to only 2 today.) The modern-day baby boom, which is coming from emerging markets, will ultimately help bring about the next billion-citizen addition in just a little under two decades, as you can see from the chart below.
This type of growth begs the question of how many people Earth can comfortably sustain. While I don’t have that answer readily available, one thing I can assure you is that there will be plenty of investment returns to go around as both our numbers and, yes, our waistlines, continue to expand.
As the Population Grows, So Do Our Appetites
All those new people will need a lot of natural resources. The most important question is how will we keep everyone fed, watered and healthy?
More people consuming more resources, plus in many cases living longer, raises even more questions: How can we dispose of all the waste and trash? Where will we house them? Will we have enough energy and electricity? In other words, this can either be a long-term problem or an opportunity, however you want to look at it.
Not only are there more mouths to feed, but the amount of food each mouth is eating is also increasing. The average human currently consumes about 2,600 calories a day, a number the United Nations expects to climb to 3,000 by 2030 (by which time we’ll have added our next billion people).
That may not sound like much. But it becomes mammoth when multiplied by billions of people. The world’s daily caloric intake is going to surge from 17.1 trillion calories to 24.6 trillion per day. So, where’s it all going to come from?
The ‘Silent Tsunami’ That’s Already Making Landfall
Food shortages have plagued the world since the dawn of man. Even today, a large number of the world’s population goes to bed hungry each night. Josette Sheeran, the executive director of the United Nations World Food Programme, calls it the “silent tsunami.”
What’s more disturbing is the problem is getting worse. The Worldwatch Institute estimates that 1.02 billion people were “undernourished” in 2009, a 12% increase over the previous year. (That’s one out of every six people.)
Longtime readers know that I was raised on a vegetable farm — our main crops were radishes and green onions — in western Washington, so I know a few things about the agriculture industry.
Our family farm was small and my parents worked like the devil to scratch a living out of its soil. Life wasn’t easy. But we never went hungry, and my parents found a way to send all three of their children to college thanks to hard work and frugal spending.
I don’t know what it is like to go to sleep on an empty stomach. But I can imagine how desperate I would be to feed my children if we ever faced a food emergency.
NOTE: Hunger isn’t just a problem for impoverished countries. According to the U.S. Department of Agriculture, there are more than 44 million Americans on food stamps, an all-time high.
What that tells me is that the food supply itself isn’t in immediate danger. But that may not be for too long, because prices are rising right along with the population.
Soaring Food Prices Set to Enter ‘Dangerous’ Territory
While the production of an adequate supply of food is an issue in the future, an immediate problem is the rising prices of food. According to the Food & Agricultural (FAO) division of the United Nations, food prices have jumped to an all-time high. In fact, the FAO food index, which is comprised of 55 various food products, is higher today than it was when food riots broke out all over the globe in 2008.
“We are entering a danger territory. There is still room for prices to go up much higher,” said Abdolreza Abbassian, the chief economist at the FAO.
Feeding that growing number of mouths is already big business. But it is going to get much bigger as the demand for better diets and more protein increases. I believe that you’ve only seen the early stages of an agricultural boom, and that it will be one of the most profitable sectors you can invest in.
There are lots of food/agricultural stocks you could invest in. But one of the easiest ways to get exposure is with exchange-traded funds (ETFs). In fact, there are three ETFs to consider right here and now, to ensure that your portfolio is well-stocked with healthy “growers.”
Your Personal Shopping List of Food ETFs
First up is the Global X Farming ETF (NYSEARCA: BARN), which launched earlier this year and has some special appeal to me because of its heavy Asian weighting. BARN gives investors a solid choice because it only has 31% of its assets in U.S. stocks.
Here’s a geographical breakdown of the fund:
- United States, 31.6%
- Singapore, 15%
- Malaysia, 12%
- China, 7%
- United Kingdom, 5.9%
- Japan, 5.3%
- Canada, 4.7%
- Netherlands, 3.3%
- Brazil, 3.3%
Another option is more of a pure food commodity play, the PowerShares DB Agriculture Fund (NYSEARCA: DBA). It invests in a basket of agricultural futures such as corn, soybeans, sugar, cattle, cocoa, coffee, cotton, lean hogs and wheat.
This is a great ETF if you have an appetite for risk, as the price of agricultural commodities can be very volatile. Natural disasters — i.e., floods, droughts, unexpected freezes, earthquakes, tsunamis and hurricanes — can have huge effects on food prices, so you should be prepared for volatility.
If you are a super, super, super food bull, you could take a look at PowerShares DB Agriculture Double Long (NYSEARCA: DAG), which is a 200% leveraged long fund that invests in wheat, corn, soybeans and sugar.
On the other hand, nobody seems to mind volatility when it pushes a stock, fund or ETF suddenly higher. And that is often the case for agricultural commodities so DAG will certainly give you a lot of agricultural bang — good and bad — for your buck.
Market Vectors Agribusiness (NYSEARCA: MOO) invests in agricultural commodity producers such as Deere & Co., Potash and Archer Daniels Midland.
As always, you need to do your homework and decide whether any of these securities are appropriate for your personal situation and financial goals. Make no mistake, investing in food could be one of the most profitable long-term investments you can make.
Timing is everything when it comes to investing, so you should wait for these ETFs to go on sale or wait for my buy signal in Asia Stock Alert.
I’d be pleased if you’d join my Asia Stock Alert family, and get my hot-off-the-press recommendation from my research trip to Malaysia and Singapore. Just click here now.
Uncommon Wisdom (UWD) is published by Weiss Research, Inc. and written by Sean Brodrick, Larry Edelson, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in UWD, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in UWD are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Andrea Baumwald, John Burke, Marci Campbell, Selene Ceballo, Amber Dakar, Roberto McGrath, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Marty Sleva, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.
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