On UN projections between 2015 and 2050, the world population will grow by nearly 2.38 billion people, from 7.35 billion to 9.73 billion. Although this 32% growth is a big increase, it marks a slowdown from the 66% growth rate recorded in the preceding 35 years (1980-2015). Total Fertility Rates (TFRs) have come down all over the world and are expected to continue falling.
About half of the 2.38 billion increase will take place in sub-Saharan Africa and nearly 40% in Asia. India is the biggest contributor with a net addition of 394 million, followed by Nigeria (216m), Pakistan (120m), DR Congo (118m) and Ethiopia (89m). By 2050, all of these countries will feature in the top 10 populations by size, a list that will include the United States (expected to rank fourth) but not one European country. Outside of Africa and Asia ex-China, regional populations will be growing slowly (the Americas), stagnating (China, Europe), or receding (Japan, Eastern Europe). Read more →
To slow mass migration, stop the illicit capital flight from poor to rich countries.
An asset manager called ____ Capital recently sent out this email seeking referrals:
The US Investor visa program allows one to invest $500,000 U.S. in a government licensed fund for a period of about five years and in around 18 months, a conditional green card is attained for the investor and their immediate family. The investor and their family can live, work and study anywhere in the United States and there are no educational, age or English language requirements.
Most experts report that on September 30th the investment amount will increase from $500k to $1.3m, a significant jump that will price out many potential investors.
There is still time to file before September 30th if you start your process with ____ Capital now.
Others can comment on the practice of selling green cards (and ultimately US citizenships) to wealthy foreigners while millions of other applicants, some of whom would be greater contributors to the United States, continue to wait in line for years. Our concern is one step removed and has to do with the legality of this money. Read more →
Large declines in fertility will depend on raising female literacy above 80%.
Every few years, the United Nations Population Division releases demographic projections for the entire world and for every country, region and continent. Although the UN’s database is the most used source on demographics, the data is not equally reliable for all countries.
Countries in the developed world conduct regular censuses and produce detailed numbers that are considered reliable. Less developed countries conduct censuses on an irregular basis or are completely unable to conduct them and have instead to rely on demographic sampling. In the poorest countries of the world, most of which are in sub-Saharan Africa, censuses are infrequent or nonexistent and even sampling can be irregular and unreliable. Read more →
“It is really important to have ags in your portfolio. Most people have gold and most people have oil. The fact that they don’t have ags is actually quite a mystery.” Sal Gilbertie, President of Teucrium Funds.
TO HEAR THE PODCAST, CLICK HERE OR ON THE TIMELINE BELOW:
As Sal Gilbertie would have it, CORN is not only the king of agricultural commodities. It is also the ticker symbol for one of Teucrium Funds agricultural ETFs. In addition to CORN, Teucrium offers three other single-commodity ETFs: WEAT, SOYB, CANE, for wheat, soybean and sugar. Each of these ETFs invests in futures and is configured to “mitigate contango and backwardation” and to track the price of its underlying commodity. A fifth ETF, with ticker TAGS, tracks an equally-weighted basket of corn, wheat, soybean and sugar.
I recently had a conversation with Gilbertie who is President of Teucrium. Gilbertie cut his teeth in the 1980s as a commodities trader at Cargill and later at other large institutions. His case for investing in agricultural commodities is three-fold:
the long-term: growth in demographic demand in emerging markets.
the timeless: diversification away from the S&P 500 and from gold.
the short-term: agricultural commodities are now significantly undervalued relative to gold.
1- Long-term Demand and Supply
Demand for agricultural commodities is expected to rise steadily in the decades ahead due to 1) the growth of the global population currently from 7 billion people to over 9 billion by 2050 and 2) the rise in living standards and concomitant improvement in diets in emerging markets.
The table below shows future population estimates per the United Nations’ medium variant estimates. It should be noted that this medium variant assumes a big decline in total fertility rates (TFRs, number of children per woman) in India and Sub-Saharan Africa. In the event that TFRs do not decline as fast as expected, the population growth in these countries would be even greater.
Asia and Sub-Saharan Africa will show the biggest jump in population and in demand for basic food stuffs. Note in the table that Sub-Saharan Africa is forecast to contribute half the population growth between today and 2050, and as much as 81% of the growth between today and 2100.
It is not difficult to conclude from these figures therefore that Sub-Saharan Africa will require more than a doubling of food supplies in the next 35 years, a significant challenge at a time when it is still trying to eliminate hunger in many countries.
Of course, supply is also growing but it is generally more volatile than demand due to periodic crop failures (from floods, droughts etc.) in one or another region of the world. Supply is also constrained by two factors: lower yields from farms in emerging markets and poor infrastructure in the regions of the world which have the largest unused acreages of arable land.
In 2012, the African Union Commission (AUC), the United Nations’ Food and Agriculture Organization (FAO) and the Brazil-based Lula Institute joined forces to “eradicate hunger” in Africa. At the time, the Chairperson of the AUC stated the following [my emphasis]:
“Food security is one of the key priorities of the African Union. Africa has the potential to increase its agricultural production given that almost 60 percent of the arable land in the continent is still not utilized. This enormous potential can make a real difference to improve our agricultural production and food security. It is time to move beyond subsistence agricultural production and consider ways of eventually embarking on agro-industrial production.”
More generally, looking at the global picture, Sub-Saharan Africa is believed to have the largest reserves of untapped arable land. As promising as this may be, massive investments in technology, infrastructure and logistics will be needed before new farm land can yield significant amounts of grain that can be delivered to consumers.
With regards to agricultural yields, an FAO reportreleased in 2002 stated:
“Global cereal yields grew rapidly between 1961 and 1999, averaging 2.1 percent a year. Thanks to the green revolution, they grew even faster in developing countries, at an average rate of 2.5 percent a year. The fastest growth rates were achieved for wheat, rice and maize which, as the world’s most important food staples, have been the major focus of international breeding efforts. Yields of the major cash crops, soybean and cotton, also grew rapidly.”
For example, wheat yields in developing countries have nearly tripled from 1,000 kilograms per hectare in 1968 to over 2,600 now.
To sum up, supply will keep up with demand but only if yields improve at existing farms and if new infrastructure is put in place to service new arable land.
2- Timeless Diversification
Agricultural commodities are less correlated to the stock market than gold and should therefore be considered for diversification at any time. In recent decades, gold has drawn tens of billions in portfolio investments mainly because it was seen as a hedge against possible dislocation in financial markets.
Gold delivered on its promise as an effective diversification asset in 2008-2011, outperforming stock markets by a wide margin during the financial crisis and its aftermath. Although it has retreated from its 2011 highs in recent years, gold is still a significant outperformer of all leading stock indices in the decade and a half since it hit bottom in 1999. See chart above.
Of course, gold grossly underperformed stocks in the 1990s, but the subsequent decade proved that there can be prolonged periods of time when it beats the popular indices by a very significant margin, notwithstanding comments by some market participants who deride it as barbaric or uncivilized. The pragmatic reality is that, barbaric as it may be, gold sometimes outperforms stocks for ten or fifteen years.
Still, if we have shown that diversification into commodities is desirable, the chart above from Teucrium’s web page argues that agricultural commodities are even better diversifiers than gold because they have a lower historical correlation with the S&P 500 than gold does. Through the 20-year period 1995-2014, sugar, corn, wheat and soybean have all had a lower correlation to the S&P 500 than has gold.
3- Short-term Valuation
The ratio of gold to corn was in September 2014 at its highest level since gold started trading freely 38 years ago. It stands today at nearly twice its long-term average. Gilbertie says that, on average since 1976, an ounce of gold has purchased 165 bushels of corn. Last September, an ounce of gold could buy 377 bushels and today it can buy around 300 bushels, still nearly twice the long-term average.
Thank you for reading. My conversation with Gilbertie includes more original insights about the mechanics of trading futures and ETFs and about the supply and demand prospects for agricultural commodities.
You can listen to the full podcast here:
Disclosure: The author has no contractual agreement with Teucrium and receives no compensation from Teucrium. As of the date of this posting and for at least the following 72 hours, the author has no investments in the Teucrium Funds.
Disclaimer: This article represents the author’s best faith efforts at presenting true facts. Nonetheless, despite the author’s best diligence, the article may include unintentional errors. Do your own work, read more research and draw your own conclusions before you decide to trade.
China’s working-age population actually declined in 2012, a trend that concerns the government and that could have a serious longer-term impact on the world’s second largest economy, according to the Financial Times.
China’s population aged 15 to 59 was estimated at 937.27 million at the end of December — a drop of 3.45 million from 2011.
Ma Jiantang, head of China’s National Bureau of Statistics, called the drop “worrying.”
While the decline was less than 1 percent, it reversed a long history of growth, thus is being treated as profound for the nation, the Times reported.
“In 2012 for the first time we saw a drop in the population of people of working age. … We should pay great attention to this fact,” Ma said.
“Family planning is a human right. Yet today some 222 million women in developing countries are unable to exercise that right because they lack access to contraceptives, information and quality services or because social and economic forces prevent them from taking advantage of services even where they are available.”
“The State of World Population 2012 explains why family planning is a right, examines the challenges in ensuring that all women, men and young people are able to exercise that right and suggests actions that governments and international organizations can take to give everyone the power and the means to decide freely and responsibly how many children to have and when to have them.”
The ability to decide on the number and spacing of one’s children is taken for granted by many in the developed world and among elites in developing countries. Yet, for a majority of people in developing countries, especially the poorest ones, the power and means to determine the size of their families are scarce or inadequate. An estimated 222 million women lack access to reliable, high-quality family planning services, information and supplies, putting them at risk of unintended pregnancy. In developed countries too, high levels of unintended pregnancy exist, especially among adolescents, the poor and ethnic minorities.
The huge unmet need for family planning persists, despite international agreements and human rights treaties that promote individuals’ rights to make their own decisions about when and how often to have children.
Today, family planning is almost universally recognized as an intrinsic right, affirmed and upheld by many other human rights. Because it is a right, voluntary family planning should be available to all, not just the wealthy or otherwise privileged. READ MORE OR READ FULL REPORT.