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Invest in Food

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At first glance, the title to this commentary seems facile, especially to those readers in higher income brackets. The reality, however, is that “investing in food” is a risk-free means of generating an annual return on one’s investment that would likely exceed the return one could earn on almost any other investment – despite the fact that nearly all other asset classes carry significant risks.

Indeed, with many asset classes currently at extreme “bubble” levels in their valuations (notably stocks, bonds, and real estate), the term “risk” is gross understatement. Putting any new money into any such assets (or simply keeping one’s wealth exposed to these sectors) is nothing less than financial suicide. In comparison to financial suicide; the opportunity for a risk-free return on one’s investing today obviously merits further scrutiny.

It is in this environment of extreme financial risk and perpetually spiraling food prices where we consider the proposition of food as an investment asset class. We begin by looking at the “fundamentals” of this market/investment class. And what we see (from this perspective) is extremely encouraging: food prices consistently soaring by roughly 20% per year, and significantly more for some categories of food (notably meat products).

With soaring food costs being a serious drain on the budgets of most families, our challenge is to find some way of turning this financial drain into a means of preserving/protecting our wealth: by investing in food. Regardless of one’s economic bracket; this is an investment opportunity which can be pursued by all of us.

Even those living in small apartments almost certainly have at least one closet whose space can be ‘sacrificed’ in order to capitalize on this risk-free opportunity. For those with more expansive residences; perhaps they have an entire room (rooms?) which can be devoted to “food investment”.

The proposition behind investing in food is simple. With all of us being food-consumers; we would greatly benefit by being able to pay “today’s prices” for particular food products, rather than the inflated prices of next month, six months from now, a year from now, etc. The longer we were/are able to continue paying today’s price, the greater the future savings.

It is this “future savings” which represents the risk-free return on our investment. At that point; the total, potential return on our investment is the product of four factors:

1)  The total amount of space available for food storage (along with the types/categories of food one is capable of storing).

2)  The total “shelf life” of particular categories of food products.

3)  The annual “food inflation” rate.

4)  Our own monthly/annual food consumption.

With the majority of people now living in multi-unit housing of some sort, where the total living space is relatively modest; the first factor may be the greatest limitation on the potential return from this investment. For those (more fortunate) individuals able to devote entire rooms (or perhaps a garage) to such investing; the earning/savings potential will be significantly greater.

There is also the issue of what specific types of food products one is capable of storing. Obviously “non-perishable goods” is the general category of food product which immediately comes to mind. However, for those individuals ready/willing/able to devote freezer-space to their food investing, suddenly the opportunity for savings and earnings is considerably expanded.



Source: http://bullionbullscanada.com/canadian-commentary/26605-invest-in-food


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