#7. Food inflation
Food has been cheap in many countries for a long time and people now view ingredients that were once considered luxuries as necessities. But this situation is about to change. The primary problem is population. There are simply more mouths to feed. However, the real issue is not so much demand per se but changing consumption habits. Put simply, more people – especially people in developing markets – are changing eating habits in line with rapidly rising incomes. Hence people that used to live on subsistence diets of rice or vegetables are now demanding meat or fish. Call it calorie inflation if you like but whatever you call it the consequence is rapidly rising prices for basic staples.
According to Nomura, the investment bank, “the surge in commodity prices in 2003-8 was the largest, longest and most broad-based of any commodity boom since 1980.” Nomura goes on” “The prices of energy and metals surged the most but it was the agricultural market that saw the most fundamental change.”
Higher food prices and price spikes are one consequence, but also look out for changing eating habits. In Western markets there will be new interest in cheaper cuts of meat and in new species of fish. More people will be cooking at home to save money too. On the nasty side, watch-out for a return of food riots. In some countries this could boil over into something very nasty indeed (i.e. watch China and Russia but also places like Mozambique). In terms of opportunities, fish farming and fish ranching in open waters look like winners over the longer term.