Jim Rogers has spoken repeatedly of the need to invest in anything related to China. As they have continued to grow, along with the rest of the continent, the Chinese have consumed massive amounts of copper, zinc, oil, and many other commodities. This increased worldwide demand has caused prices to reach all time highs for many of these items. But as fears of an economic slowdown in China are becoming more pervasive, the risk of a sharp decline in energy and metals is very real.
But perhaps this possibility is masking a true opportunity in the China-commodities play. Unlike metals, which are highly cyclical, many agricultural products have a steady demand regardless of the position of the business cycle. With the Asian continent consuming 90% of the rice grown in the world, their emergence has caused a strain on rice supplies. In the past few years, stocks of rice have dropped below the 70 day mark, the traditional measure for stability in that market.
Unlike many metal or energy products, international trade in rice is a mere drop in the bucket of the entire industry. Most countries use whatever is grown on their land, with Thailand, Vietnam, and India, having some excess capacity for export. Remarkably, the United States, which produces less than 2% of the rice grown in the world, is the 4th largest exporter of the crop.
As Asia continues to grow, it will certainly go through boom and bust periods where metals such as tin and lead will come under severe price pressures in both directions. Rice, on the other hand, while having performed well, has been hiding in the shadows of more glamorous commodities, waiting its time. And as more and more Asian households reach middle class status, their staple crop will undoubtedly become a large part of their daily diets. This stable, but increasing demand has continuously outpaced supply for the past few years, and will likely continue to do so even in the event of a recession. For those looking for the next China play, rice may be the best bet
The Commodity Investor