Food manufacturers promised Mexico's government on Wednesday they would freeze prices on more than 150 food products to help families cope with the rising cost of food, The Associated Press reported Thursday.

Mexico President Felipe Calderon said prices for goods including beans, canned tuna, fruit juices, coffee, ketchup and canned tomatoes will remain fixed until December 31, 2008, The AP reported. Calderon blamed rising food prices on surging global energy prices, food demand in China, and the use of corn for ethanol production.

Good intention, wrong method

Economist Glen Langan said he agreed with the need for food assistance for Mexico's poor, but disagreed with the mechanism.

"A more effective program would be a larger cash payment or food subsidy to citizens," Langan said. "The pricing mechanism should be kept in place, because it has many benefits. Cash payments or subsidies to poor residents are much more targeted and don't provide a benefit to those who don't need it. [Mexico President] Calderon did announce a monthly subsidy, 120 pesos [$11.60], but it isn't large enough."

More good news on the economic front to go along with Wednesday's announcement that non-transportation April U.S. durable goods orders rose on strong exports: rice future dropped to a two month low on increased global supplies, Bloomberg News reported.

July rice traded as low as $18.52 per 100 pound bag, down about 5.5% and at its lowest level since March 24, 2008. Rice has now declined about 26% since its record high in April 2008.

Wednesday's downward catalyst? Improving rice planting conditions in Asia and the United States, along with falling wheat prices in the U.S. Rice is a staple for about 50% of the world's population. The U.S. Department of Agriculture announced Tuesday that 72% of the U.S. rice crop was in good or excellent condition, up from 65% a week earlier. Further, wheat also fell to as low as $7.40 per bushel, which is 45% lower than the February 2008 record of $13.50 per bushel.

Shortages not likely

Economist Glen Langan, whose specializations include agricultural economics, told BloggingStocks Wednesday the food supply data points do not negate the two macro trends driving grain commodities higher -- rising developing world food demand from expanding middle classes and institutional investors chasing outsized equity returns -- but they do suggest one battle is being won: the battle over shortages.

A modicum of good economic news, at least on the commodities front: rice prices are headed for their biggest weekly drop in four years, on the prospect that exports from Japan and Pakistan will ease concerns that a global food shortage is worsening, Bloomberg News reported Friday.

As of mid-day Friday, rice had plunged 14% this week to $19.80 per 100 pounds.

Pakistan, the world's fifth-largest rice exporter, will allow shipment of 1 million metric tons because local needs have been met, Bloomberg News reported Friday. India may also ease its ban on rice exports. Rice is a staple for about 50% of the world's population.

Long-term, secular factors, including expanding middle classes (who consume more calories daily than lower-income groups) in Asia and Latin America, rising oil prices (which increase farming costs), have propelled a global rise in commodity, ingredient, and food prices.

I've received a few chuckles for investment directions I've suggested in the past, but if you care to review a couple of my previous generalities, I believe that my record has held up fairly well.

I submit for approval the following investment angles for the balance of 2008 and possibly beyond:

Have I suggested investments in water holdings? Yes, I do believe that I have. I believe that going long in water stocks could be an investment hedge of the decade. I also suggest a look into the desalination technology from General Electric Co. (NYSE: GE).

I'd think it's a good idea to stick with the railroads, such as Burlington Northern Santa Fe (NYSE: BNI). I claim that, with all things given, for now, railroads can't fail. Conversely, I think it's a good time to back away slowly from trucking. I think misery lies ahead there.

Reports that Wal-Mart Stores Inc.'s (NYSE: WMT) Sam's Club and Costco Wholesale Corp. (NASDAQ:CSCO) were placing limits on the amount of staples such as rice and flour that customers can purchase have left me stunned. It makes me think of the food rationing that went during World War II.

Food inflation is getting out of control. Prices for everything from cereal to pastries have jumped. Pizza shop owners are getting squeezed by soaring costs for milk, flour and cheese. Rice prices alone have soared 68 percent since the start of the year, according to Reuters. Think of that the next time you order takeout from your favorite Chinese restaurant. No wonder demand for Food Stamps is at a record.

Billionaire investor George Soros said Thursday that the boom in commodities is still in a "growth phase" despite the fact that prices for oil, wheat, rice, and gold have risen to records in 2008, Bloomberg News reported Thursday.

Soros said the relative stock market slump, combined with favorable, long-commodities demand, has prompted institutions to direct money to commodities, creating a "commodity as asset class" phenomenon, Bloomberg News reported. He added that increasing institutional involvement was creating a generalized commodity bubble.

Relative shortages

Moreover, demand for selected commodities (oil, rice, wheat) is so great, it's creating relative shortages, Soros added, which is only heightening the return on equity potential of commodities, Bloomberg News reported.

Rice, a staple food for about 3 billion people, is becoming a precious commodity as a result of rising demand -- a reality that's prompting some agriculture watchers to ask whether global grain producers will be able to keep the world adequately supplied amid solid emerging market economic growth.

China, Egypt, Vietnam, and India, which represent about one-third of global rice exports, curbed sales this year, and Indonesia did so as well, Bloomberg News reported Monday. Grain and food demand is increasing at above-trend rates due to solid economic growth in emerging markets. These regions are experiencing expanding middle classes -- a factor that historically has almost always led to rising per capita food consumption in the country where the growth occurred.

As a result, the price of rice and other commodities has soared -- rice hit $21 per 100 pounds on Monday, Bloomberg News reported -- and governments may face increased social unrest, given the pivotal role rice plays in many developing nations.

Rice hit a new all-time high, and corn neared a record on talk that commodities demand for grains will outstrip supply, Bloomberg News reported Thursday.

Rice, which is a staple food for about 3 billion people, surged 3.6% to $20.26 per 100 pounds Thursday, while corn for May 2008 delivery rose about 0.5% to $5.9875 a bushel, Bloomberg News reported. Government curbs on grain exports and bad weather are contributing to concerns that strong economic growth in emerging markets will cause demand to exceed the market's ability to provide adequate grain supplies.

The song remains the same

Economist Glen Langan told BloggingStocks Thursday the song remains the same regarding commodities, long-term. Although the commodities sector is overbought short-term, that short-term trading condition does not change the sector's secular, long-term fundamentals, which remain very bullish, he said.

"You could argue that a short-term bubble still exists in commodities like rice, wheat, soybean, and corn, so a word to the wise for any Johnny-come-lately traders," Langan said. "But from a fundamental and an economic perspective, grains and other commodities will continue to trend higher, after a correction. Decisions by China, India and others to cut rice exports speak to this trend. I don't see it ending in 2008."

The UBS Bloomberg Constant Maturity Commodity Index of 26 commodities has more than tripled in the last six years, as global demand, led by emerging market growth, has outpaced supplies for both commodities and raw materials.

I read a quote in an article recently which stated, "What Wall Street is about is smart guys thinking about ways to make money from dumb ones." That quote is attributed to one John E. Fitzgibbon, the publisher of an online newsletter, in an article from Eric Dash via The New York Times. While Mr. Fitzgibbon's remark might validate special investing skill on the part of some smart and timely investors, I take exception to the notion that all those investors who lost money in the markets over the past year are the dumb ones.

The question now is, where is the smart money headed?

Last December, over 100 stocks were featured in our Top Picks for 2007 report. Now, at mid-year, we turn to the 20 advisors whose picks showed the strongest gains to get an update on their previous picks, as well as a new favorite stock for the second half of the year.

Thomas Bishop, editor of BI Research, chose Taseko Mining Ltd. (ASE: TGB) as his favorite for 2007, which rose 44% as of 6/1/07. Please see his original recommendation and his current opinion on the stock.

NutraCea (OTC: NTRZ) is his new stock pick. The advisor explains, "Rice is the most consumed grain on the planet and is a primary food source for 70% of the world's population. However, 65% of its nutritional value is in the bran covering that is routinely stripped off. NutraCea offers a patent technology that preserves these nutrients.

"NutraCea had developed a technology that stabilizes rice bran into an FDA-certified edible product, leaving the nutritional value of the bran intact with a shelf life of one to three years. There is tremendous interest in this highly nutritional product, especially from humanitarian relief organizations, the nutraceutical industry, and both human and animal food companies.

"NutraCea's client roster has 187 customers, including the likes of General Mills, Pepperidge Farms, Con Agra, Archer Daniels Midland, and Purina. In addition, some 500 companies have signed nondisclosure agreements with NutraCea to test using its product in their products.To cut to the chase, NutraCea is facing demand that is expected to exceed its ability to supply it for years to come.