Will We Still Eat in a Recession?
All signs point to yes--but it's not that simple.
Given the recent sharp decline in the prices of agricultural commodities and agriculture-related stocks, one might think that the answer is no. If you are reading this article, odds are that the actual makeup of your diet hasn't changed much--even if you are eating out less or buying private-label foods--despite the fact that the U.S. economy has been shrinking. So the short answer is yes. But let's not oversimplify what is an extremely complex topic. We would like to use this space to discuss the many moving parts affecting the outlook for global agricultural markets. So let's dig a bit deeper before taking a look at a few stocks that not only fit with our theme, but that appear to be attractively priced at the moment.
More Mouths = More Food
With history as our guide, we're confident in saying, "Yes, we will eat in a recession." Global food consumption has grown steadily for decades, through recessions, wars, bubbles, and many a fad diet. This is because food demand is first and foremost a factor of the size of the global population. As long as the global population grows there will be more mouths to feed, and we will need to continue to increase agricultural output to feed them. But it is not just the quantity of calories we need to fuel the world that we are concerned with. The type of food we consume is of equal--if not greater--importance in gauging future demand.
Ben Johnson has a position in the following securities mentioned above: CMP. Find out about Morningstar’s editorial policies.