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Global Food Riots

Written By Brian Hicks

Posted April 14, 2008

Publisher’s Note:

By now you’ve heard us tell the Bakken story numerous times.

But I just want to reiterate that the Bakken – as an oil play – is still in its infancy. In fact, I consider it where the Canadian oil sands were in 2000-2001, before the boom began.

Last week, the US Geological Survey released a report on the Bakken formation. In it, they confirmed the region contains billions of barrels in light, sweet oil. BILLIONS!

Others are catching on to the story. Friday, industry letter Rigzone asked the question, "Is the Bakken area the new Saudi Arabia?"

Nobody really knows.

But one thing is for sure – the Bakken is becoming the hottest oil play in North America .

We’ve identified 3 ways to play it. One company has already delivered our readers 43% gains just in the past month. The other is up 66%. Both are making 52-wk highs today… and each trade is just shy of $10 a share.

Each could easily double or triple in the coming months as the full potential of the Bakken is understood by the market. This report explains the 3 opportunities we’ve identified.

– Brian Hicks

Now on to today’s Wealth Daily…

How to Play the Food Price Crisis

It’s time to put your money where their mouths are.

When World Bank head Robert Zoellick sounded the alarm Sunday about global food riots, he also confirmed one of the biggest bull rallies of our age.

Zoellick told reporters Sunday that we as an international community have to "put our money where our mouth is."

He was referring mainly to aid organizations, but investors have a key role to play.

Best case scenario, you make a boatload. Worst case scenario, hungry mobs topple weak governments around the world, throwing the most fragile countries into chaos at a time where order is already scarce.

Or, as we’ve seen in recent months, these two possibilities can flow together.

Food Prices Stoke Crisis Conditions

We’ve felt the rumblings of this food price earthquake for over a year, but the media managed to convince most of the public that it was just a passing big-rig truck.

In February, 2007, some 75,000 Mexican citizens took to the streets over the soaring price of corn tortillas. That was in the midst of an ethanol frenzy that pulled corn prices up by around 90% in just four months, as we see in the Chicago-traded corn price chart below.

corn price chart

Maize got the yellow light in late spring last year, but another run-up was close behind, and 2008 brought another jump of 23% on bad weather and biofuel demand.

From March 2007 to March 2008, we saw jaw-dropping price increases in other basic food stocks:

  • Rice is up by 74%

  • Soy has shot to an 87% gain

  • Wheat skyrocketed by 130%

That’s enough to make the most comfortable rich-country consumers loosen their collars a little bit. Throw it in the mix with widespread poverty in Mexico or this past weekend’s stark example of commodity-fueled rage, Haiti, and you get full-scale mayhem.

More Food Riots Like Haiti to Come?

Haiti is already a ward of the United Nations. As the Western Hemisphere’s most dysfunctional country, Haiti’s government has been tossed to and fro like a ship at sea for much of its two centuries of independence from France.

As spring sprung, food riots led to the brutal execution of a UN peacekeeper from Nigeria and the dismissal of the country’s number-two elected official, the prime minister.

The president responded with a 15% cut in the price of rice, a staple food in the small island nation of nearly 8 million.

But in Haiti, Mexico, or even the United States, artificial price cuts or subsidies won’t change the supply and demand equation that new fuel needs and worldwide inflation bring.

Even an emergency aid request from the UN’s World Food Program for half a billion dollars in relief money will only act as a buttress against a persistent tide of price-pushing factors.

These include cold, rainy weather, increasing prosperity in formerly impoverished nations like China, and the momentous influence of crop-based fuels.

So, what’s the solution, and where should you put your money?

Seed Your Portfolio

In this food market, you need to sow your profit seeds with diversified commodity ETF investments and fertilizer stocks.

Don’t get me wrong, I think we’re in for some more ebbs and flows in food and fuel prices. The world’s central bankers and international organization heads are turning the global economy into a Three Stooges movie, running into each other while they muck up the outlook more with each passing day.

But there will be pullbacks with seasonal weather advantages and oil price lulls, in which case I encourage buying commodity ETFs like PowerShares DB Multi-Sector Commodity Trust (AMEX:DBA) on dips.

DBA gained 50% over the past year with a broad-based backing of energy, precious metals, and agriculture, and it’s traded between $36 and $39 a share for the past month or so.

Do you think after moving sideways this commodity fund will plummet? I doubt it… All signs point to another rally, and energy has set the nervous tone for commodities in recent years with every bit of bad news sending prices higher. The same is true of food prices as Chicago traders snap up supply for security.

But the future has yet to be planted, and for that we’ll need the best fertilizer company out there, Potash Corporation of Saskatchewan (NYSE:POT).

Potash is based in Canada, but its reach is worldwide. Over the past year, POT has gained an outstanding 198% as growers try to maximize yields and bring in top-dollar amid the worldwide squeeze.

Also take a look at Origin Agritech (NASDAQ:SEED), which is trading down but remains an attractive investment as it is a China-based corn seed stock.

However you look at it and however you play it, you can’t afford to ignore today’s food price crisis.



Sam Hopkins