It may be the twenty-first century, but this planet still faces some major food issues.  We could be in for some tough times.

I am hungry, but I cannot afford to eat.  Sure, I say that now because I am scrimping for a wedding, and more importantly, a honeymoon in 31 days, but I may not be able to use that excuse for long.  Soon, all of us could feel the pain.  And I am not talking about the pain of married life (I have been hearing a lot about that).

Over the last month, food-related riots have broken out all across the globe.  Because of soaring demand and a lowered supply, food prices are sky-high and folks are fed up (pardon the pun).  It looks like the problem is about to get worse.

No soup for you

Just yesterday, one of the nation’s largest grain producers announced it is forced to cut off its exports to the rest of the world.  With food prices soaring within its borders, Kazakhstan (the fifth largest wheat exporter) wants to ensure its people can afford to eat before it feeds the rest of the world. 

By propping up local wheat supply, Kazakhstan hopes to lower the prices its citizens have to pay.  Unfortunately, the reduced global supply will push wheat prices even higher for the rest of us.

The story is even worse in the rice markets.  Indonesia was the latest country to ban rice exports.  It joins India, China, Vietnam, Egypt, and Cambodia.  It is no wonder rice prices soared to set new records.  Instead of getting the global expansion so desperately needed, the world’s markets are contracting.

Unfortunately, the United States and its import-everything mentality will feel the brunt of the pain.  Need proof?  How about a dollar that is weaker than a five-year-old Girl Scout. 

Over the past year, the nation’s food prices are up by 4.4%.  Unfortunately, the inflation is just beginning.  With export bands, soaring demand thanks to bogus alternative energy political agendas, and a burgeoning population, the price you pay for a loaf of bread today may look like a fantastic deal this time next year.

Oh, ship!

So how can you profit from this global crisis?  Unless you are willing to plant wheat in your front yard and turn your swimming pool into a rice pond, you will have to turn to the equities market.  Right now, your best bet is to take a short position on the nation’s dry-bulk shippers.

Over the last month or so, the share price for many of these carriers has gained a few extra points.  Wall StreetWall-Street-Layoffs was excited about a few analyst upgrades and the return of growth in the steel and coal industries.  But a reduction in wheat and rice exports is going to put an end to the party. 

The bans may be temporary, but they cast an unforeseen shadow over future earnings.  Wall Street hates anything that was not predicted. 

Two of the most popular dry-bulk investments are DryShips (DRYS:NASDAQ) and Eagle Bulk Shipping (EGLE:NASDAQ).   Take a close look at September 2008 Calls that are close to being in-the-money.  Thanks to the recent bullishness, they are selling at a discount.  It won’t stay that way for long.

It may be the twenty-first century, but this planet still faces some major food issues.  We could be in for some tough times.