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Market Insights

Is your food about to get more expensive?

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The price of food is one of the most boring things to talk about. If you were to discuss the price of a meal with friends, you could make it vaguely interesting but it’s FAR more interesting to talk about the quality of that meal (and the experience) than the price of the raw ingredients. Those conversations might take a different turn in 2022…

Take a look at this chart:

Is your food about to get more expensive? Image 1

This is a long term chart of wheat prices with two key points marked:

The 2008 food crisis The 2010/11 food crisis

Over to the right, we can see that price has recently returned to the 2010/11 levels.

Worth noting that this price level triggered the Arab Spring waves of protest that rippled through Tunisia, Libya, Egypt, Yemen & Syria. Food shortages tend to lead to civil unrest.

Over in China, CCP president Xi Jinping has ensured Chinese food security by importing record amounts of grain this year.

According to the U.S. Department of Agriculture, in the first half of crop year 2022 China is expected to have:

  • 69% of the world's maize reserves
  • 60% of its rice
  • 51% of its wheat

China’s obviously a large and populous country, but that seems pretty excessive. Approximately 20% of the global population controls over 50% of those grain reserves…

So why are they doing it?

According to Goro Takahashi, a professor emeritus at Aichi University and expert on Chinese agriculture:

"Agricultural productivity in China is low due to the dispersion of farmland and soil contamination," "The amount of agricultural production will continue to stall as farmers migrate to urban areas."

And it’s not just a problem in China. Chipotle CEO Brian Niccol says America is in a farming crisis:

In the last decade alone, the U.S. has lost more than 20 million acres of farmland, and 400 million acres are expected to need new farmers in coming years.

If young farmers can’t find affordable land, that’s just not going to happen. We want to make sure the government is aware of this, and people are aware because a lot of folks don’t even realize this is happening. Meanwhile, Germany’s new agriculture minister is arguing that food prices should increase:

“There must be no more junk prices for food, they are driving farms into ruin, preventing more animal welfare, promoting species extinction and polluting the climate. I want to change that,” “Food must not become a luxury good. But the price has to express the ecological truth more strongly. ”The price increases are intended to increase farmers' incomes and to strengthen animal welfare, climate protection and environmental protection.”

What does this mean for future prices?

Generally, we’ve all been pretty fortunate that we haven’t needed to worry too much about the price of food.

And if we look at some of the main factors affecting food prices this year such as China stockpiling, fertiliser price increases, high fuel prices etc. all of these could easily subside in the near future.

Over the longer term, changes in developed economies and the green transition could mean that higher food prices become a more permanent feature of society.

The Teucrium Wheat ETF is a great way to follow the price and gain exposure to the price fluctuations:

Is your food about to get more expensive? Image 2

Not investment advice. Past performance does not guarantee or predict future performance.

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