(i) It requires roughly 1,000 litres of water to produce one kilogram of bread. It takes roughly 260 m3 of water to feed one vegetarian person for a year. The more meat in a person’s diet, the higher the water usage.

(ii) Arable farmland is shrinking and as a result, per-capita cropland available has dropped from 0.45 to 0.25 hectares in the past 40 years.

(iii) In order to increase crop yields, farmers have been using more fertilizers, pesticides and genetically modified seeds (wonderful).

(iv)Water shortages are becoming a serious problem for increasing food output throughout the world as widespread urbanization is competing for the same water.

(v) Supply of water is declining as the once mighty rivers now carry only a fraction of their former water volume and the groundwater table is steadily falling. Eleven countries accommodating almost half the world’s population currently have a negative groundwater balance.

So, you can see how water shortages are not helping our cause and may prevent us from increasing food output in a significant manner. Also, not helping us at all is the crazy “let’s burn food to produce fuel” policy being adopted in the West. Figure 2 highlights how rapidly U.S. ethanol production has surged in the past decade and worryingly, it is only going to rise in the years ahead. In my opinion, this policy of burning energy-inefficient corn to produce fuel is a disaster and will cause serious problems in the future.

Source: FAO

Whichever way you look at it, food prices are going to stay high for years to come. And any weather disruptions will only add to the problems by causing price spikes to unbelievable levels. From an investment perspective, I suggest that you consider allocating a portion of your funds to companies involved in agribusiness (seed, fertilizer, specialty chemicals and farm equipment manufacturers). Although, they have risen a lot in the past 2 years, I suspect they will continue to produce stellar returns in the future.

Metals - A few months ago, most analysts and investors prematurely called the end of the copper bull-market. According to these folks, such high prices were unsustainable and the copper “bubble” had popped! You may remember that I disagreed with this view and maintained my position regarding a multi-year primary bull-market for all types of commodities. Furthermore, towards the end of last year, I even highlighted copper as a great buying opportunity. Since then, the price of copper has risen significantly.

Furthermore, it seems to me as though copper is currently consolidating prior to launching higher.