Food is getting rarer while demand rises from enormous emerging markets like China, and these two companies stand to profit from boosting world agricultural production, says Neil George in this exclusive interview with MoneyShow.com.

Neil George has some thoughts about drought, food, and investing. Neil, thanks for being here.

Thank you very much for giving me the opportunity.

Let’s put them all together.

OK. What we’ve got throughout North America are a lot of erratic weather patterns. Whether you’re looking at very specific ocean conditions that have lead to some of the extremes, the bottom line is we’ve seen that a lot of the breadbasket conditions throughout North America, including Canada and the US, have seen major droughts.

In addition, we have also seen other areas that have seen sort of an overabundance of rain conditions, which again have led to very difficult and challenging conditions for producing a lot of foodstuffs and so forth. As a result, we have seen very erratic pricing and tremendous surges in particular markets.

One example in the Canadian market: a lot of livestock producers are seeing their hay costs basically soar, from about $114 to as much as $250 a ton in just the last few months. Therefore, we are seeing a major sort of cost surge, as well as a lot of potential good yield for those that are producing.

Then we look at some of the corn production, wheat, and so forth throughout the US and Canada, we’re seeing major conditions which would lean toward some very significant price gains. And for those that can produce and overcome some of the elements, you’re seeing some major paydays.

More importantly, what this is really sort of setting up is one of the longer-term trends, which has been a major resurgence in the overall price of food worldwide.

Foodstuff as measured by the United Nations Food Authority, which basically sort of tracks overall food production, consumption, and pricing conditions, has been seeing that over the past five years alone, we’ve seen overall price gains running by about one-third to as much as more than half, which is obviously multiples of underlying consumer inflation conditions.

Therefore, what this is basically pointing out to is that we are seeing a lot of opportunities for companies to be able to step in and increase production and help the farmer produce more and therefore add more profitability.

How does the investor take advantage of that? Any specific companies?

Yes, I think what you want to look at is a lot of people tend to focus on some of the generic fertilizers—the potash companies and so forth—which is really more of a commodity-based play. That has provided for some opportunity, but also it can work with some of the vagrancy in that particular market.

I like to look at some of the technology-based, higher-value part of the contributions for higher production. In other words, I want to look at some of the genetically modified (GMO) seed producers. Those are developing, have patent protection, as well as those that are in the very high-tech, high-value-added specialty chemical areas, particularly those that can deal with very hostile growing environments.

There are two companies in particular I would like to draw investors’ attention to. One is a long-time favorite, in which I’ve invested in for a long time. It is Monsanto (MON). Again, accessible for Canadians and US investors.

This company has gone through a major transformation, going from sort of its lower-value-added bulk chemical business to very specific GMO seed production, as well as the higher-value-added chemicals to go along with those seeds. Therefore, you’ve seen sort of a major change-up in their earnings.

During this change-up, the share price has been beaten up because people haven’t necessarily understood the story. Now that they’re actually getting it and showing this overall production, we’re starting to see this major resurgence.

You’re able to buy this company, which really has a tremendous amount of growth, not just in North America, but globally some fairly good rates. Monsanto would be one I’d look at.

A second company is maybe a little more esoteric. It’s Makhteshim-Agan (MAIXF). It’s an Israeli-based company.

This company does specialty high-tech chemicals that help the production of crops in very hostile environments, particularly throughout the Middle East where you have a lot of arid conditions—you have very heavy drought conditions. They have been very successful with this.

This has basically caught the eye of the Chinese. One of the major Chinese chemical producers is in the process of taking a major stake in this company so they can expand production as well as expand distribution in China’s major agricultural areas, which again have very similar, very arid conditions to the north, and also have some more threatening conditions as far as water overabundance in the south.

Therefore, I look at this particular Israeli company as being able to capitalize not just on its own local markets and regional markets, but very much so in what I see as one of the major agricultural growth themes, which is the Chinese marketplace.

Neil, do you own any of these personally or professionally?

Yes, I’ve owned Monsanto for a long time, and then the same thing with Makhteshim-Agan. It has been a recent readdition I have owned in the past as well.

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