The central banks have all pumped capital into the global financial system, and the U.S. central bank has since Sept. 18 been waging a rate-cutting campaign as aggressive as any we’ve seen in decades.

Unfortunately for all the starving folks abroad, these rate reductions are highly inflationary: They continue to force the greenback ever lower, while at the same time helping send commodity prices higher and higher.

When the U.S. central bank first cut rates in mid-September, it took the benchmark Federal Funds rate from 5.25% to 4.75%. According to Money Morning Contributing Editor Martin Hutchinson, oil closed that day at $82 per barrel, gold at $770 per ounce, and the CCI Commodity Price Index at 435.

“The flood of money that has been poured into the world’s financial system by the Fed and the world’s other central banks in the last seven months has had the anticipated impact,” Hutchinson said recently. Now, “oil is trading at $119, gold is at $936 and the CCI Index is at 545. While Americans consume only moderate quantities of raw commodities as a percentage of [their] total consumption (there is little, if any, iron ore in an IPod, for example), for poor people in the Third World, commodities still form the bulk of their budget. It’s no wonder, then, that we’d heard justified calls from the World Bank and others to devote more money to fighting starvation.”

Here’s the problem: To keep the U.S. economy out of a protracted recession, additional rate cuts may be needed. Indeed, many housing-sector observers are clamoring for the reductions in interest rates as a way of reviving that critical part of the U.S. economy.

And it would jump-start the housing market - directly by reducing mortgage costs and indirectly by causing inflation to accelerate. If inflation in 2009 is 15%, and people get pay rises of about that level, houses won’t look so expensive by the end of that year, Hutchinson says.

Unfortunately, the most vicious inflation would come in the form of higher energy and commodity prices. And that would cause already-high food prices to surge even higher.

Clearly, the U.S. dollar, the U.S. economy, and its housing market will remain as challenges for quite some time.

But the reality is that the solution to the food problem is going to be a long-term deal anyway. Fortunately, the solution dovetails in perfectly with another powerful global trend - this one quite positive in nature, and potentially quite profitable.

I’m talking about the “Global Ag Boom.”

When Agriculture Meets Science

When most people think about biotechnology, they only consider such things as stem-cell research, genetic engineering and curing cancer.

But there’s another aspect of biotech, and it’s just as powerful a concept. I’m talking, of course, about the genetic engineering of crops and seeds, and the scientific tweaking of fertilizers and herbicides - either to maximize their effectiveness, or to customize them so that they will flourish in very specific climates.

Long-term, that global “Ag Boom” is the answer to the current food crisis. It’s also how you can offset the rising costs on the consumer side of your personal ledger by ramping up profits from this very same trend on the investment side of your own ledger.

Interestingly, British Prime Minister Gordon Brown appears to be one of the enlightened ones involved in this search for a food-crisis fix. While noting that there was a “world food crisis” under way that threatens to “roll back progress made in recent years to lift millions out of poverty,” Brown then called for an “agricultural revolution” for farmers to produce higher-yielding crops.

Ag Boom Plays to Make Now

First of all, you have to hedge your expenses and position yourself to profit from the worldwide surge in commodities prices. Investment guru Jim Rogers - one of the first to correctly predict this trend several years ago - says it’s a long-term play with plenty of room to run.

In a recent interview in Singapore with Money Morning Investment Director Keith Fitz-Gerald, Rogers said he’s continuing to tell investors to buy commodities - including agricultural commodities.

“We’ve advised our readers to be long oil, long resources and long commodities in general,” Rogers said. “The equation was very simple: The world is depleting resources roughly four times faster than they’re being replaced. And, with oil in particular, unless you’ve got a few million years to wait, Mother Nature’s not making [any more] any time soon.”

To invest in the commodities boom, look at these two exchange-traded funds (ETFs):

• Van Eck recently launched its Market Vectors Agribusiness ETF (MOO), a fund that really reflects the breadth of the agriculture sector, apportioning its holdings across such sectors as chemicals (34%), agri-product operations (33%), equipment (24%), livestock operations (6%), and ethanol/bio-diesel (2%).

• The Deutsche Bank AG (DB) managed Power Shares Agricultural Fund (DBA) is intended to reflect the performance of commodities in the agricultural sector - soybeans (31%), wheat (28%), corn (23%), and sugar (16%).

For several direct plays, consider these three stocks:

• Take a close look at Potash Corp. of Saskatchewan Inc. (POT), a Canada-based integrated fertilizer and related industrial and feed products company. The stock has had a very strong run, but two weeks ago the company and a rival both said that Chinese customers had agreed to pay $576 per ton for potash this year, a massive jump from the $176 per ton rate of 2007. The accord was for 1 million tons of fertilizer.

• E.I. du Pont de Nemours & Co. (DD) - commonly known as DuPont - produces crop-protection chemicals and seed hybrids, which are in huge demand globally as countries work to accommodate soaring incomes and growing populations in emerging markets such as China. Earlier this year, the firm received approval for two new herbicides that are designed to protect soybeans and wheat - two commodity crops whose prices have soared to record levels. DuPont is very well positioned - because of its products, and because it’s serving customers in more than 70 countries.

• The other such player to consider is the St. Louis-based Monsanto Co. (MON), who recently reported fiscal-second-quarter earnings doubled from the previous year on the strength of its corn seed and herbicide sales. Once highly controversial, Monsanto’s genetically engineered products have established a strong market position in agricultural markets throughout the world. Farmers in China and India planted more than 17 million acres of biotech crops last year, according to BusinessWeek. Approximately 7% of the world’s farmland acreage is planted with genetically modified crops. While some pockets of controversy remain - and likely always will - Monsanto’s financial performance indicates that acceptance of these necessary products is growing.

Finally, if you believe that biofuels - and other forms of alternative energy sources - will be an inevitable part of the global future, consider the following “green” ETF: The PowerShares WilderHill Clean Energy (PBW), one of the better-quality funds that focus on “clean” technology as determined by the WilderHill Clean Energy Index.

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