There will never be a better commodities buying opportunity than there is right now… read on to discover where I think your money should be.

World leaders have gathered in Rome this week to try and sort out the global food crisis amid claims of an imminent Malthusian catastrophe. But is this just another old chestnut or are these claims right this time?

When the pessimistic clergyman published “An Essay on the Principle of Population” in 1798, he argued that populations would continue to grow and grow – but land itself was finite. He predicted starvation, death and societal breakdown as the amount of mouths exceed the supply of food.

It turns out he was wrong…

The industrial revolution allowed greater efficiency in food production and a catastrophe was averted. Then in the 1940s and 1950s there was the so-called “green revolution,” where new farming methods significantly boosted food production.

The green revolution allowed food production to keep pace with worldwide population growth… but even this was not enough. As food prices shot up in the 1970s, the work of Thomas Robert Malthus became popular once again.

The worries about overpopulation proved mistaken… history repeated itself. The green revolution continued and agricultural yields improved… but population growth continued and continued. Today we are faced with accelerating food prices yet again. The good Reverend Dr’s name is once again being seen in newspaper leader columns.

Biofuels changed the equation

The main complication this time is the fact that we are burning food for fuel. This implied to me that there is a way back from the brink of starvation – and that involved convincing the Americans to cut their (immoral) subsidies to produce ethanol.

This policy is responsible for taking food off the plates of the poorest people in the world. I do not think a Malthusian catastrophe is imminent in food… but there might be one area where Malthus’ predictions can be applied… and it relates to the most vital commodity of them all.

I have always argued that water is more precious than oil or gold – and this will be proven in the coming decades. Yesterday, Governator Arnold Schwarzenegger declared a drought in California. The Middle East is in real trouble and central Asia is suffering from acute shortages.

Speaking at a Goldman Sachs conference on the top risks facing the world, Lord Stern (author of the Stern Review on the economics of climate change) said that we should be applying the theories of the good Reverend Dr, to water.

The Goldman panel concluded that a catastrophic water shortage could prove an even bigger threat to mankind this century than soaring food prices and the relentless exhaustion of energy reserves. Stern warned that underground aquifers could run dry at the same time as melting glaciers play havoc with fresh supplies of usable water.

“The glaciers on the Himalayas are retreating, and they are the sponge that holds the water back in the rainy season. We’re facing the risk of extreme run-off, with water running straight into the Bay of Bengal and taking a lot of topsoil with it.”

“A few hundred square miles of the Himalayas are the source for all the major rivers of Asia – the Ganges, the Yellow River, the Yangtze – where 3bn people live. That’s almost half the world’s population,” he said.

Goldman’s said it thought the best way to play the sector was to buy a basket of small “potential takeout candidates” such as Badger Meter, Calgon Carbon, Clarcor, Pentair, Pall, Instituform, Hyflux, Tetra Tech, Acqua America and Watts Water.

Population growth fuels commodity demand

The problem is not the growth in population per se, but the fact the population is getting more affluent. As standards of living rise across the Earth and human footprints grow, the number of people the planet can support will diminish.

According to UN research, the world population is expected to increase from around 6.5bn today to 9.1bn in 2050. Almost all of this growth is expected to occur in the less developed regions, whilst the population of the more developed regions will remain mostly unchanged, at 1.2bn.

All of this new demand will have to be supplied with “stuff”. That means food, materials and energy. Demand is soaring for all finite resource and that’s why the commodities supercycle will run for years.

Commodities are sliding at the moment as the rising US dollar takes centre stage. I do not expect that this will continue for long. The long-term argument for investing in commodities is still intact.

As the dollar rises buying opportunities will be created all across the sector… discover what I think the pick of the bunch are right now…

Regards,

Garry White
Editor
Smart Commodities UK

Source: Malthusian Catastrophe Coming Soon