Take a look at the drought monitor below, and you’ll see that it looks exactly like the one we saw a year ago. Yes, that’s the one right before we saw prices double for corn (CORN) and most other agricultural products.
The global warming trade may be about to return with a vengeance. If the weather so far this year is any indication, the trading pits in Chicago could break out in riots at any time. This winter, hurricane Sandy ravaged the east coast, tornadoes decimated Kansas, and California suffered its driest winter in 20 years. Water rationing on the west coast is now almost a certainty. Extreme weather is breaking out everywhere.
Regular readers are well aware of my predictions of major global food shortages in the years ahead (click here for “Is Food the New Distressed Asset?”).
The basic problem is that the world is making people faster than the food to feed them. Rising emerging market standards of living are increasing their food consumption at the expense of poorer countries. If everyone in China eats one extra egg a day, the entire continent of Africa has to starve.
The global population is expected to rise from 7 billion to 9 billion over the next 40 years, and half of that increase will occur in countries that can’t feed themselves today, largely in the Middle East.
Global fresh water supplies are shrinking fast. Throw global warming into the mix, and a crisis will unfold sooner than later. These are all arguments to use a major dips in the food ETF’s, (CORN), (SOYB), (DBA), and (WEAT), to pick up long positions. And we have just witnessed a nine month long sell off in the sector. In addition, my technical trading pro, Jim Parker, The Mad Day Trader, loves the charts. It’s time to go shopping in the cereal section of your local stock exchange.