There are how many people in China? Current estimate put that somewhat incomprehensible total at 1,321,851,888. What has always haunted me is the thought of pork and fowl. Here my dilemma: With that many people, you would assuredly agree that they are eating daily. (for the most part). It is also well known that the regions diet is rich in protein and starch.
Let’s go out on a limb here…Can we estimate that for each person in China, we assume that they eat one chicken a week? If so, WHERE DO THEY PUT ALL OF THOSE CHICKENS? We are talking about consumption at a rate approaching 52,000,000,000 a year! That is just unbelievable.
This is a growing concern as can be seen by the latest economic report:
(UPI) China’s Consumer Price Index rose 6.5 percent in October from year-ago level, equaling August’s 11-year high of 6.5 percent.
The National Bureau of Statistics said the October increase came after easing to 6.2 percent in September. Analysts blamed the increase largely on higher prices for food, including pork, the Xinhua news agency reported.
The CPI, the main gauge of inflation in China, increased 4.4 percent in the first 10 months of the year compared to the same period in 2006, the bureau reported.
The report said food prices jumped 17.6 percent in October and pork prices were up 54.9 percent.
Now, we can look beyond this and realize that there are a vast amount consumables the Chinese people need daily. It is obvious (not a new revelation here) that they require a great deal of materials to satisfy their ravenous appetite. This is not only constrained to food, mind you. Materials and goods such as steel, spices, oil, coal and food are seeing a tremendous supply problem on a global scale due to the population explosion we have seen over the past two decades.
This will continue to benefit U.S. companies that export, especially as we maintain our “unofficial” weak-dollar policy. The main beneficiaries continue to be the raw materials suppliers as well as many retailers. We are maintaining a bullish stance on these sectors as long as there is a seriously overpopulated planet. Rest assures, this is not something that will change anytime soon.
A few stocks that could benefit from this thesis: ZUES, WMT, PEP, ADM, SYY, AA, EP and don’t forget about SAFM (100% CHICKEN)
Horowitz & Company clients may be long and/or short companies mentioned in this post.