Few things are more important for human survival than food, yet this essential commodity rarely receives as much attention as oil and energy when discussion turns to the new demand created by emerging markets.

Truth is, members of the newly minted middle class from Sao Paolo to Xiamen want more than just a new car in the driveway— they also want a burger and fries.

In China, the trend is already well established: as rural populations urbanize, they consume more meat and less grain. Already, China’s urban dwellers are said to consume roughly three times as much meat as their rural counterparts.

However, that doesn’t mean the demand for gain is falling, because it takes up to seven pounds of grain to produce a single pound of pork.

Meanwhile, western economies are also hungry for more grains. The ethanol and biodiesel industries are devouring corn
and soybeans at a rate that could grow significantly as governments offer incentives and apply pressure to develop alternative energy sources.

If, as many believe, food is set to become a long-term growth industry, we’re all going to start experiencing higher prices. Fortunately, there may be an opportunity to offset your rising grocery bill by investing in the prosperity of the food business. Here are some ideas:

Futures
Futures contracts let you tap into the price performance of a whole range of agricultural commodities. The Chicago Board of Trade groups its agricultural commodity products under three main categories: grains and oilseeds, livestock, and dairy. The downside? Futures trading is not for amateurs, and because the contracts are highly leveraged, the potential for quick gains is matched by the possibility of steep losses.

Stocks
The stock market lets you approach the food boom from a couple of angles. You can invest in companies that are directly
involved in agriculture, such as food processors, biotechnology firms, and seed and fertilizer manufacturers. You can also
gain indirect exposure through companies that supply agricultural equipment and machinery, or those that are involved in shipping foodstuffs.

Exchange Traded Funds
For many investors, a sensible approach is to consider buying an Exchange Traded Fund (ETF) or two. Some types of agriculturebased ETFs hold a diversified pool of commodity futures contracts, and others invest in a basket of agricultural stocks. Owning one of each type may offer exposure that is both well balanced and cost effective.

Our view
We believe that once global economic growth resumes, it’s just a matter of time before rising food demand is recognized as one of the world’s most important investment trends. We note a distinct lack of actively managed agriculture funds available in today’s marketplace, and this may indicate an area of untapped opportunity. //