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Re: DXCTX for "New Era" erryl  07-06-2008, 11:10  | Post #2536010
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I guess I don't necessarily agree that the price of food must go up...

There have been hungry people in this world from the beginning of time.  It is questionable that there has ever been enough to feed them all.  The key is energy...

Energy is working on food prices in many ways... here are some of the factors affecting food prices 

  • energy commodities are putting more money in the hands of emerging market countries so that they have the money to buy more food on the global market
  • biofuels are being used as a source of energy driving up the demand for grains (and the land to grow those "fuel" grains)
  • the more the consumer spends on fuel, the less they have to spend on everything else, including food
  • food requires energy (chemical herbicides and pesticides, fertilizers, tractor fuel, etc) to produce and rising costs will increase the price of food
  • greater farm efficiency will lower the cost of food over time... most of the world has plenty of room to increase efficiency (though I hope that they all don't choose to do it with genetically modified food, like the US)
  • availability of fresh vegetables and fruits depends on the availability of cheap labor... that cheap labor is becoming less available in all countries and especially in the US due to immigration policies.

[and I have probably forgotten a few] 

I think that if you "tamper with" or change any of these factors, the price of food will be affected.  I am not smart enough to tell you how much.  Ultimately, the price of food is determined by an auction market, and all markets are inefficient and sometimes mis-price the securities they auction. 

I don't, however, believe that the centuries long trend toward more efficient agriculture and food being a smaller portion of our expenses (a pretty good sign of prosperity) has necessarily been reversed or that the recent change to rapid inflation in food prices has to be inevitable.  It may happen, but it doesn't have to be that way...  To me, it is much like arguing that the world's standard of living must decline... I disagree.

erryl

Topics cheap commodities emerging market food grain View Complete Thread
 
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