Justin’s note: Beyond Meat (BYND) is soaring.
The plant-based meat producer is up around 500% since the company went public in May. The company is now worth over $9 billion, and is trading at more than 80 times its trailing 12-month sales.
That’s an absurd valuation. But many believe the stock could keep running. That’s because the company is supposed to radically change how people eat.
Personally, I think BYND’s a bubble that will pop any day now. But I was interested in the big trend here of plant-based meat. So, I got Doug Casey on the phone to see what he thinks about BYND and the future of food…
Justin: Doug, there’s a lot of hype around Beyond Meat right now, and for good reason.
Its stock is up around 500% since the company went public in May. Not only that, Whole Foods’ CEO recently described Beyond Meat as the future of food, saying, “You have a business here that is real and that is in the early innings.”
Do you buy that? Is plant-based meat really the future?
Doug: This trend – and I think it is a trend – has been predicted for some time. When I was in high school, Mr. Blue by Myles Connolly was a popular book for a while. I just looked it up – it was written in 1928. It’s been a long time since I read it, but if my memory serves, among other things it posited that people and machines would both run on the same fuel, a petroleum derivative, in a dystopian future. It’s not an unreasonable prediction. Because although there are 92 naturally occurring elements most food consists of carbon, hydrogen, nitrogen, and oxygen. These elements basically compose all carbohydrates, proteins, and fats. Plus traces of others like iron, copper, and sulfur.
Fabricating “food,” or at least something that can fuel the body’s cells, is just practical chemistry. As technology improves it will be possible to create all sorts of foods that look and taste like the real thing. Perhaps better. Science fiction has always been the best predictor of the future, and I have no doubt that “replicators,” like those on Star Trek, will create food. 3-D printing is a major step in that direction.
Right now it’s still at the stage of using plants to transform raw materials into something that tastes like meat. The next question is not just whether we can cut out animals, which transform plants. But cut out the plants, which transform raw chemical compounds. It’s only logical that this trend will accelerate. The question is whether the foods are also economic and tasty. Let’s hope it goes in that direction, rather than towards Soylent Green – which is rather unaesthetic. The creation of foods out of various stages of raw material has lots of implications on political and sociological – not to mention philosophical – levels. But we’re mainly interested on how to turn a buck here…
As far as making money is concerned, I don’t like to invest in science projects. There’s just too much research and development (R&D), experimentation, and uncertainty – it might even be riskier than mining exploration, which is saying something. In addition, projects like this tend to be cultural problems. And it takes generations to change cultures. So, I wouldn’t touch Beyond Meat’s stock with a cattle prod at the moment.
Justin: Why do you think its stock is up so much then?
Doug: Well, since I haven’t personally tried any of their products, I can’t comment on their taste or cost. When I do, perhaps I’ll change my opinion. I have no doubt that as the tech improves – which it will – both will get better. But there’s plenty of time to get involved – when other companies are out there, and there’s not a speculative bubble.
I think the stock’s gone up because interest rates are near record lows and the Federal Reserve is printing money. All that money has got to go somewhere. It’s just part of the great financial bubble. And it’s generally a bad idea to chase after every fashionable idea. Especially late in a bubble.
As far as artificial meat itself is concerned, the Chinese have made many great meat substitutes from mushrooms, soy, and wheat for many decades. When I used to live in Hong Kong, one of my favorite restaurants specialized in Buddhist vegetarian dishes. The menu had lots of pork and beef taste-alikes that were extremely appetizing. I certainly didn’t feel the need for real meat when I ate there. But those products never really made it in the U.S.
But I don’t doubt “faux flesh” is a growing trend.
Justin: What about the green movement? I imagine eco-conscious millennials have played a huge role in bidding up Beyond Meat’s stock.
Doug: This is absolutely part of the green movement. A lot of it is based on people being made to feel guilty for even existing, not to mention eating animals.
I understand the ethical argument. I don’t like killing other creatures. I feel somewhat sheepish going to a store and buying meat products that someone else has killed, despite the fact it’s just a question of specialization and division of labor. It’s certainly more authentic to eat what you’ve actually hunted and killed yourself. But that’s impractical in today’s world.
This is mostly a matter of economics. Most food is based on corn, soybeans, wheat, and rice. All these commodity groups are grown in gigantic monocultures that cover hundreds of thousands of square miles. Any large artificial monoculture is an accident waiting to happen.
The day of the self-sustaining family farm, like the one Joel Salatin runs and writes about, is done. At least for 98% of humanity. I’m not a dedicated farmer like Joel. But I can tell you that at current prices it’s somewhere between hard and impossible to make money growing food at today’s prices.
My main objection to faux foods is personal, and aesthetic. I don’t like the idea of eating manufactured or industrial foods. But perhaps that’s just because I have enough money to allow me to eat whatever I want. Those big four grains are for feeding the masses. Humans didn’t eat that kind of food for the first 99% of our existence.
That sounds elitist, I know. Which is a bit of a contradiction, because it’s well-known I generally despise today’s “elite.” But, on the other hand, every human who’s not a useless mouth should strive to become elite. It’s just a question of how we define that word. And what you do to become elite. Just being no more than a carbon-based life form that has to be fed doesn’t cut it.
If you’re at a certain economic level – as I presume anyone reading this is – you’re not directly affected by whether the corn crop fails, or wheat goes back to $10 a bushel. That’s largely a problem for Third World countries with socialist governments, places where they can’t produce anything but more poor people. But, in that context I’ve got to point out that all the foods, not just wheat, corn, and soybeans, but also cattle, sugar, coffee and orange juice, are at just about historic lows. So, now is the time to get into these things from a speculative point of view.
It’s very dangerous to grow anything in a gigantic monoculture. There are viruses, bacteria, insects, and other pests that can wipe out these crops wholesale. The Chinese are dealing with that now with their hog crop; an African swine fever breakout has wiped out 20% to 30% of the hogs in China. Closer to home, flooding in the Midwest has devastated this year’s corn, wheat, and soybean harvests. At the same time that most of the world’s crops have been engineered to be grown using the pesticide glyphosate (RoundUp), there are huge lawsuits being won that could ban its use. It’s accused – quite possibly correctly – as being a dangerous carcinogen. “Roundup Ready” crops don’t do well, however, without RoundUp.
I say that with the understanding that productivity of all foods has been going up for many years. Farmers produce two to three times per acre more than they did just fifty years ago. I’m sure, for many reasons not germane to this short discussion, that trend is going to continue. Always remember that the longest bear market in history is commodities. In real terms they’ve been collapsing in price for roughly 10,000 years – punctuated by explosive rallies, usually caused by either natural disasters like flood or drought, or anthropogenic ones, like war and collectivism.
My guess is that we’re at the bottom for commodity prices here. Unless we have a credit collapse, there will be fortunes made in the next couple of years. People who feel guilty about profiting from higher food prices simply have no understanding of basic economics. A proper speculator is a humanitarian in disguise. Why? By buying things when there’s a surplus, and prices are cheap, he’s in a position to make them available to the less prudent when there’s a shortage.
Now’s an excellent time to speculate on these commodity type foods at these prices.
Justin: Aside from plant-based meat, what other developments in the food industry should we expect? I recently read that insect-based foods might be needed to deal with overpopulation. What do you think?
Doug: First of all, it’s too bad that most meat today is produced in an industrial manner. The conditions under which cattle, hogs, and chickens are produced are absolutely disgusting. The animals are full of steroids and antibiotics. And they’re often fed what amounts to cardboard. The entire process is very unaesthetic. I avoid industrial meat, milk, and eggs whenever possible. There’s a lot of truth to the saying “you are what you eat”, and nobody needs more steroids and antibiotics.
But I’m not worried about the growing population. The population all over the world is actually dropping, particularly in North America, Europe, and Japan. And that’s not likely to change. It’s actually likely to accelerate. It’s even happening in China, the Middle East, and South America.
The only place where population is growing is in Africa. Africans can’t feed themselves as it stands. They certainly won’t be able to if their population triples by the end of this century. Unless the continent completely reforms its political and economic systems, it’s in trouble. The whole continent is a welfare case, sucking capital out of the rest of the world.
Contrary to most projections, however, I believe the population of Africa could collapse at some point – not for the reasons populations are declining in the developed world, but because they don’t produce anything. Africa doesn’t have the infrastructure, the capital base, or the political/economic environment to change that in the near term. The Central African Republic is much closer to reality than the country of Wakanda portrayed in the movie Black Panther. Anyway, they’re not competing with us for expensive foods like meat and fish. They’re competitors for subsistence foods.
As for grubs and insects I’ve tried many of them when I was living in Thailand and Hong Kong. They can be very tasty. But, even there, they’re a specialty item. When they’re bred in meaningful quantities, however, they’ll be ground into mulch. Then they won’t be a delicacy for rich people, but subsistence protein for poor people. In any event, not a consideration for many years to come.
Here’s the bottom line. It’s time to get long commodities.
Justin: Great stuff. Thanks, Doug.
Doug: You’re welcome.
Justin’s note: As Doug said, now is a great time to bet on commodities.
Our in-house commodities expert Dave Forest agrees. He says we’re entering the next “supercycle”… and smart investors stand to make a fortune.
And just like Doug and I talked about today, he sees agriculture stocks specifically as one of the top ways to take advantage.
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