China has a hearty appetite for protein but has little clue on what constitutes sustainable and appropriate agricultural practices that won’t result in unhealthy, unsaleable livestock, and must learn from the United States. Rather than American farmers establishing presence overseas, Chinese companies would rather acquire assets within the United States, learn proper methods and sell food to the world and themselves—we saw this firsthand with the recent acquisition of Smithfield Foods (SFD) to learn the raising techniques of swine and other livestock. Just how bad are its current practices? Consider the appalling discovery of nearly 60,000 diseased pig carcasses dumped in the Huangpu River— a prominent water supply for surrounding cities. The government’s equivalent of the FDA prohibits the butchering and distributing of diseased animals, but in a country with a vast black market, farmers were able to bribe butchers into processing bad meat anyway. Several of these black market butchers were recently given life-in-prison sentences and with nowhere for farmers to dispose of diseased animals … well … the details aren’t pretty.

The point is clear: the developing world depends on the US far more for survival than many investors actually understand. While agricultural stocks may appear to rise and fall all over the place, long-term, these companies face very real issues and fortunately already have solutions in the pipeline. The question is do you have enough agricultural exposure in your portfolio to take advantage of this kind of future?