Dean Barber

Learn to Drive the Tractor First and Then the Lamborghini

In Uncategorized on May 16, 2011 at 8:43 am

Most of us have been wincing at the gas pumps lately. After filling up your tank, you probably have a better understanding how the cost of fuel eats into your household budget and erodes your ability to buy other things.

 And for the unemployed – hey, don’t forget our nation’s unemployment rate stands at 9 percent — high gas prices can actually inhibit their ability to move about and seek work.

 But there might be another equally important story that is looming on the world stage, one you don’t hear much about. I’m talking about food inflation and ultimately food shortages.

 Compared to other parts in the world, food inflation has not been so bad in theUnited States, where food prices are expected to climb about 3 percent this year.  But in the developing world — home to more than three quarters of the globe’s 6.9 billion people – soaring food prices have been a huge concern.

 The U.N. Food and Agriculture Office’s index of global prices for meat, cereals and dairy foods has surged 37 percent in the first three months of 2011. Just this past weekend, U.S. Secretary of State Hillary Rodham Clinton addressed a meeting of the United Nations Food and Agriculture Organization (FAO), warning that global food shortages and spiraling prices could lead to widespread social unrest and political and economic destabilization.

 Food prices were up 20.7 percent in April in Egypt, compared to the same month last year. Surging food prices were widely seen as a key trigger for the mass uprisings that ousted Mubarak in February.

 The Old Blueberry Factor

 In China, the second largest economy in the world, prosperity and a fast-growing middle class have cultivated more sophisticated and exotic tastes. Luxuries such as blueberries, avocado, and asparagus, recently unattainable to all but the wealthiest, are now widely available in China’s big cities. And it is the big cities, particularly the coastal cities, where farm workers have flocked by the millions to seek factory and service jobs.

 This rising affluence and dwindling rural labor poor has resulted in a supply pinch that sent food prices up 11.7 percent in March in China from the year before, adding to months of steep increases.

 A host of other factors are also blamed for food prices hikes worldwide, including rising oil prices and shrinking land for cultivation because of pollution and encroachment by industry.

 Now what does this mean to me?

 So why does this matter to you in Philadelphia or to you in Atlanta, or to me in Red Oak, Texas? What it means to you is always a good question. And it just wouldn’t be right to leave you hanging.

 So let me answer that question by quoting veteran investor Jim Rogers, who made some very interesting comments last week to CNBC.  Mr. Rogers predicts that in the long term rising commodity prices are about to make a group of people in the United States very wealthy.

 “If I were you I would think about becoming a farmer. You buy land and learn how to farm,” said Rogers. “In my view it’s going to be a spectacular way to make money … This is where the great fortunes are going to be made in the future.”

 Rogers said the world may experience gigantic food crises in the next few years, because we are facing shortages of everything, including farmers.

  “The average age of the farmers in state “X” is 58. In 10 years, they’re going to be 68 if they’re still there. This is happening all over the world. In Japan, there are vast fields that cannot be farmed. The Japanese government has just started to go, “What are we going to do?”  They started to even bring in Chinese farmers as an experiment to farm the fields,” said Rogers.

“So farmland worldwide is going to go up in price, certainly inAmerica. And agriculture is going to be one of the most exciting professions in the next 10, 20 years. It’s going to be the farmers driving the Lamborghinis going forward, not the stock brokers.”

 Lamborghinis in Red Oak. Now that will be a sight to see. Maybe I should learn how to drive a tractor. And here’s why:

 The FAO projects of an increase of 2.3 billion in the world population by 2050 – to more than 9 billion. Nearly all of that growth is expected to come from developing countries. This population growth will require a 70 percent increase in global food production, with needs in developing nations nearly doubling.

Given the dwindling availability of arable land, meeting this exploding food demand will require new farming techniques, new crop technologies, new types of seeds and fertilizers, a whole new approach to agriculture. The FAO estimates private investment of $209 billion a year will be needed just to keep the percentage of the world population that goes hungry at current levels.

Get Your Story Straight, Dean

 In my last two blogs, based on an interview by Bruce Katz with the Brookings Institution and a February study by that same group, I have subscribed to the belief that it is the metropolitan areas of this country that hold economic sway over this nation. Without going into the numbers yet again, which absolutely substantiate this, I still believe that is true.

 Some readers couldn’t wrap their heads around the fact this is not an either/or proposition and that I am not talking about quality of life. You see, I am quite optimistic that economic growth can and will take place outside the metro areas, especially now with rising commodity food prices. It’s just that metro areas have more varied investment resources and opportunities. In short, it’s where most of the marbles are and will be.

 This whole notion of metro areas has confused some of my friendly readers, and for that I should take much of the blame. I am not just talking about big cities (there are 366 metro areas in the U.S.) These metro areas encompass small towns, suburbs and rural areas.

 Red Oak, population 6,200, is a perfect example. I could take you to nearby working farm and point to Dallas skyscrapers 25 miles away. Whether I like or not (I don’t know why I wouldn’t), I am part of that Dallas-Fort Worth metro engine. And yet if I don’t watch where I step, I might have cowpie on my boots. (You shouldn’t have worn those penny loafers out here.)

But again, economic growth can and should take place both in and outside metro areas. So in essence, you can get thee to the city and you can get thee to the farm (which may or may not be within a metro area) and seek thy fortune.

 There are ways to invest in agricultural commodities markets, but I don’t even play a financial adviser on TV, so we are not going to go there. Leave it to say, there are people who are eager to take your money and tell you how to invest in agricultural commodities markets. Just be careful.

 I still prefer the idea of learning to drive a tractor … and then maybe later that Lamborghini.

 Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm in Red Oak, Texas —

  1. Interesting. Maybe I’ll hold on to the family farm in Tennessee for my retirement.

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