Why food and food-inflation are the new oil
Last August, Warren Buffet, considered the greatest investor of all time, occupied the pages of all business newspapers for initiating with his Berkshire Hathaway, 6 billion in stock investments in Japan’s top five sogo shosha companies . These are widespread conglomerate trading companies in Japan that sell a wide variety of products and materials. Sogo sosha also have interests in commodities, transportation, machinery and consumer products. It is precisely the latter that represent the fundamental meander of the current market with attractive earnings expectations.
Why the strange-looking investment?
Simply because good Warren saw ahead and was able to read market trends in advance. Warren understood that especially in this particularly troubled historical era due to the coronavirus epidemic that is shaking the world, the new investment frontier will shift to food and food-inflation. Food-inflation refers to rising food prices, which will be particularly high in Asian lands.
In fact, Asian bond yields show a rise in food prices that will cause bond yields themselves to rise. Therefore, Chinese rates are expected to remain high and the yuan to continue to appreciate. It is no coincidence that food-related equities perform much better than energy-related equities. So goodbye to oil and gas as vehicles of inflation and green light to food.
But back to Warren Buffet’s choice. Why specifically invest in Japanese sogo shosha?
Because they are the number one beneficiary companies of food inflation in Asia. Already at this time there are foods that are experiencing substantial price increases, such as pork that travels at prices 6 times higher in China than in the US. Also lending support to the choice were some simulations done by Food Chain Reaction and presented at WWF’s Washington offices that predict as much as a 400 percent increase in food prices by 2030. Of course, the people, especially those living in poverty, will pay the heaviest price. So for those investing during this period, it may be performant to choose to include long investments in the food sector in their portfolios. How to invest in it? Well-selected stocks and ETFs. If you’d like, you can talk about it with us in our Telegram group