Food inflation is gaining strength:

A combination of factors is driving the price of basic foods up and this trend is not a reaction to seasonal factors or changes in crop yields due to drought as has been the case in the past. In the past food prices tended to move up due to crop failures from droughts and other weather related factors. The current trend is partially a reaction to lower crop yields in Australia and Brazil, with a considerable influence from the ridiculous push to produce ethanol as an alternative to gasoline in the US. But these factors can only account for a portion of the increase in prices, the main force behind the increase in basic foods such as wheat, corn, soybeans, sugar, coffee etc. is the added demand for these commodities from an expanding middle class in Asia.

In Asia millions of middle class families are being created annually as the average income increases so does the ability to diversify their diet from the previous subsistence diet of rice, fish and poultry to start to include beef, pork and additional meals over poultry. All of this additional meat is creating a huge demand for feed grains such as corn and soybeans. One thing is certain once the diet is diversified it is highly unlikely that those consumers will go back to the old subsistence diet regardless of the additional cost, it has been proven that a diversified well rounded diet can increase the size, strength and mental ability of children it also adds to the longevity of a population so going back is not going to happen.

As Asia continues to create new middle class families by the millions the upward pressure on the price of food will continue, likely for decades. This new trend will create opportunities for companies supplying to this sector such as fertilizer companies, seed suppliers, transportation and equipment suppliers.