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Political Instability in Egypt has been surrounded by nothing but speculation from the outside world. What are the implications? What is going to happen with crude oil prices? Is global shipping going to be affected by restricted access through the Suez Canal? However, these questions fail to take into account that the current protests have had limited effect on these sectors (although a communications blackout has caused some delays through the Suez).

(Chart created using Hidden Levers app)

The two factors driving this current upheaval in Cairo and Alexandria are high unemployment (specifically within the educated population) and rising food prices. If you have been following the 24/7 cable news cycle, one theory getting traction is a domino effect in the Middle East. Though I’m wary of agreeing with the consensus, this is certainly a possible outcome. However, I think this event is much larger than one region. The governments of developing nations are carefully watching this situation because of an inability to control rising food prices. Even though these nations are coming up, there is still a significant majority of the population that is below the poverty line. This is of grave concern because Egypt along with other emerging nations is currently maintaining agricultural subsidies that are simply unsustainable. This is not unlike to the flawed logic in developed nations of running deficits, kicking the can down the road. Look for agriculture commodities to play an especially important role as to how emerging markets and the global economy as a whole grow in 2011. For now I think the Mosaic Company (MOS), AMCON Distributing Co. (DIT) and Agrium Inc. (AGU) are just few of the companies that may fair well if food prices continue to spike.

(Chart created using Hidden Levers app)

Source: Lesson From Egypt: Agriculture Key in Emerging Markets Facing Rising Food Prices