Will Gluten also Kill Your Portfolio?

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Wheat Blight

What would happen if the world-at-large turned on wheat? What if the small, but growing movement to expunge wheat from our diets was adopted by the mainstream? The trend is recognized in theĀ zeitgeist, but aside from those suffering from celiac disease, it’s passed off as a fad. Still, mountains of anecdotal testimony and scientific literature are beginning to pile up against gluten… and much of it in relation to people without celiac disease. I can’t ignore it. Long-term, i’m bearish on wheat. Extremely.

The following chart was assembled primarily for fun. I don’t really think the events shown caused the correlated drops in wheat prices. However, if gluten was as widely scorned as it is in the realms of celiac disease and the paleo diet world, we’d see headlines like “Worries by Paleo Dieters Cause Fall in Global Wheat Demand”. Such is the nature of financial reportersl

Make no mistake about it, the anti-gluten play has the potential to inflict devastating damage. Should the science and sentiment reach critical mass, the decline of wheat consumption would be a palpable global-macro event. The prices of wheat, and related grains, would suffer dramatically. Farmers would suffer dramatically. Farm equipment manufacturers would suffer dramatically. Agricultural companies would suffer dramatically. Producers of related products would suffer dramatically. Kellog’s essentially be reduced to Rice Krispies and Corn Flakes. Apparently, Nabisco would be left selling empty boxes. Sure, Nabisco is a subsidiary of Kraft, but it’s a high-margin division that would put a huge dent in Kraft’s profit and revenue.

The implications to the rest of the economy are nearly endless. Significant portions of revenues from chemical companies and petroleum companies have a stake in fertilizing and transporting the crops in question.

Is there a trade here I can recommend today? Not really. But in the long-run, investors should keep at least one eye on the rising battle on gluten. It may not mean the complete death of wheat, but the worlds of health and diet trends wield power that is hard for producers to resist. In this case, paleoanthropology is already on their side. The rest of science could easily reach the conclusion that wheat is a poor source of food for humans.