Surge in Food Prices

Today read this interesting article on Wall Street Journal titled "Historic Surge In Grain Prices Roils Markets", which essentially is predicting that the food prices are going up. I hadn't thought that the growth in emerging markets will have an impact on food prices in North America. It's a well known fact that there had been strong demand in metals and related commodity due to tremendous growth in infrastructure in countries like China and India. As a result energy and metal stocks have rallied for several years around the world including North America, but who would think that the food industry is about to get touched as well.

A new middle class society is being created in these developing countries, where people are willing to consume any thing coming on the way, you name it, they buy it. Things like slick mobile phone, branded shoes or clothing, watches, TV, cars, etc. As evident from Indian newspapers Indian youth are spending a lot on movies, restaurants, travel and other non-essential leisure activities. The WSJ articles makes a subtle observation, which seems obvious after reading it, that this new class now has a larger appetite too, yes, they like to eat more and indulge, specially milk and meat. But, how does it affect grain prices? Well, milk and meat comes from livestock, which feed on grains. Basic grains as corn, soya bean and wheat have been in great demand, countries are importing them to keep up with demand. As a result food prices are increasing.

May be it's time to buy some stocks from the food sector :)