How to Profit from the Changing Chinese Diet

You've Seen Your Rights and Liberties Eroding For decades, former U.S. Congressman Bob Bauman has been researching the best ways for regular Americans to protect and grow their wealth from an overreaching government. From the world's tightest bank secrecy, to the countries with safe and easy paths to citizenship, he's gathered his findings in The Passport Book. Click here to find out how you can get a copy today. How to Profit from the Changing Chinese Diet By Andy Hecht, Senior Commodities Editor Dear Sovereign Investor, I attended a banquet in Beijing in 1989, not long after the Tiananmen Square massacre. It was a strange time to be in China. A senior government official at my table denied the massacre had even taken place. As the subject switched quickly to economics, he also told me of his government's multi-decade plan for slow growth. Well, that wasn't very accurate either. Growth – yes; slow – not even close. Advertisement The Man Who Predicted the Fall of Communism is Now Predicting the Fall of Capitalism He's dined with the Rockefellers…hung out with the Clinton's…banged heads with the Beltway…and meddled with the media monopolies…He was the biggest name of the '80s and '90s investment newsletter world. And he is back once again with his first controversial video presentation in 17 years. In it he reveals news of a landmark development, which he believes will set off the most violent economic reversal in history… one that carries the power to bring down not just the American financial world, but the entire capitalist system… Details here… Chinese economic growth has surpassed the wildest dreams – and fears – of the west. But as China's global power has expanded, so too has their dinner-table sophistication and the investment opportunity… Even back then, I knew China was the demand side of the equation in the commodities markets. Today, the Chinese are driving automobiles instead of riding bicycles. They are using computers. They are drinking fine wines. The Chinese have also changed their diet from basic rice to more complex grains and animal proteins. This dietary transformation lies at the very heart of a very profitable opportunity. As Chinese Wealth Grows, the Price of Grain Rockets In 2001, China joined the World Trade Organization. Since then, the slow and steady march of the Chinese economy has turbo-charged the price of grain. The following chart shows how price in the key grain markets of soybeans, corn and wheat has skyrocketed since 2001: Please click here to view larger image Global demand for crude oil continues to grow. Exxon Mobile predicts that energy consumption will rise by 40% by the year 2040. Much of that demand will come from China. The contrast between the demand for oil in fast-growing China and demand in the rest of world is obvious. But why is this important for grains? Well, it turns out that as prices for crude oil increase, demand for biofuels such as ethanol and fuels made from other grains also increases. And therein lays the logic of another profitable vertex – as China's thirst for fuel increases, so too does the price of both grain and oil. Further Reasons for the Long-Term Surge in Grain Prices There are further reasons for the long-term surge in the price of grain… An Appetite that will Drive Prices Higher: In 2008 droughts, floods and other climate events caused grain prices to soar as crop yields decreased. But based on projected consumption of grains in China, even in a perfect crop year where soybean, corn and wheat yields are at a peak, rising demand from China will support even higher price levels. The World's Top Grain Importer in Less Than a Decade: China is fast becoming the world's largest importer of agricultural products, and within the next five to 10 years it will be there. Thanks to the fact that China's per capita farm land is less than 40% of the world's average, the mass importation of soybeans is inevitable. Demand Keeps Rising: Last year, China used up her strategic stockpiles of soybeans as the price of edible oil skyrocketed. The country supported local manufacturers of edible oils by supplying soybeans from stocks bought at lower prices. China then showed up as a buyer of soybeans when the market moved lower during the third quarter. Soybean prices recently peaked at over $15 a bushel! The Chinese still have an appetite to replace their strategic stockpile.China has also become a net importer of corn this year after 14 years of self-sufficiency. The domestic demand for animal protein has increased China's demand for corn and soybean meal. The U.S. Dollar Has Also Pushed Prices Up: The long-term bear market in the U.S. dollar has also contributed to higher commodity prices across the board. Grain prices have moved higher in part because of the falling greenback. China is competing for finite stocks of food-stuffs: China last year imported 54.8 million metric tons of soybeans – some 80% of its domestic consumption. As the Chinese include more meat in their diets, the country has become a key player in the global corn trade. Meat is an efficient protein source as the animals eat lots of grains. Human consumption of meat requires many times more grain production than an all grain diet would. Current projections are that China will import five million tons of corn this year. It is already the top importer of soybeans and cotton and a major importer of sugar. The Bottom Line China has undergone dramatic changes since 1989. Today it is an advanced nation with advanced desires and appetites, and there is only so much land on the globe suitable for growing staples. We have only seen the beginning of a rally in the grain markets. The increasing sophistication of the Chinese appetite has created an environment for grains to continue to move higher. And you should expect much higher prices in the years to come. Shares in food processing companies such as Bunge (BG) are poised to rise. These types of companies are a good way to play the bull market in grains. Buy these stocks on dips. BG also processes grains into other products like ethanol, soybean meal, soybean oil as well as other processed products. And, for the more adventurous, the grain futures markets offer investors the opportunity to buy futures and options. Make sure that you include long-term exposure to grains in your investment portfolio! Your eyes and ears in the commodities market, Andy Hecht P.S. We have only begun to see the rally in the grain markets. And I see another commodity in particular that's in the perfect position to take a meteoric rise in value in the coming years – natural gas. I see natural gas looking a lot like silver did twenty years ago… before it went on an 800% climb. To find out how you can profit from natural gas's coming boom, click here. Related Reading: Emerging Market Demands Mean Volatile Food Prices Are Here to Stay The Agricultural Stock Set to Feed China's Demands How to Profit from Sanctions on Iran How to Profit from Capitalism's Final Phase RECENT ARTICLES 5/14/2012 Are You Among the 23% Entitled to a Second Passport? There is little doubt that government bureaucrats and tax collectors see dual nationality as a threat to their control over the citizens they profess to serve. 5/11/2012 What My "Air-Route Indicator" Says About the Next Big Investment as a global investor, the knowledge often points me toward investment opportunities – particularly when new routes connect unexpected cities. 5/10/2012 Emerging Market Demands Mean Volatile Food Prices Are Here to Stay So don't be surprised if bread (and other foods) becomes as volatile as gas prices in the future. 5/09/2012 Profiting from Asia's Growing Thirst Increasingly, though, Asian consumers and workers on the go are ducking into convenience stores and grabbing bottled iced tea. 5/08/2012 You Can't Hide Money Unless You Know This "Secret" Johnny Carson once joked, "The difference between a divorce and a legal separation is that the legal separation gives a husband time to hide his money." 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