Prospects of a global food crisis are intensifying and could hurt worldwide stock markets, said Donald G.M. Coxe, global portfolio strategist at BMO Financial Group. “We have run down the cupboard,” Mr. Coxe said in a teleconference last week with clients. The U.S. “has seven weeks of supply of wheat on hand. That is the lowest in 60 years. … So we have the potential for a crisis in something as fundamental as bread and bagels coming up.”
Prices for feed grains have been “off the charts,” and wheat is “at a level scary for U.S. inflation,” Mr. Coxe said. Global “trading patterns where you could equalize supply around the world” are breaking down, Mr. Coxe said. “This is simply supply being inadequate for demand. A crop failure this year in the U.S. Midwest would be a global catastrophe,” he added.
“These price increases are beyond anything we’ve ever seen before,” Mr. Coxe said. “It’s impossible to say how it will play out in a positive way. And yet these is no demand from anyone running for political office to stop the ethanol programs” that consume corn and other agricultural products. “We just can’t afford these things.”
Mr. Coxe recommends increasing exposure to agriculture-related stocks. Food supply problems will help raise the weighting of commodity stocks in the market.
