Are China and Rural Canada the New "Odd Couple"?

One of the more certain ideas on China hinges on its appetite for something very basic: food. We’ve talked a lot about the world’s growing appetite for food and China’s role in that. The shifting diets…the straining of water resources…the diminishing acreage of arable land…

All of these things put pressure on the food supply. We’ve got a few ideas that answer the bell here, but I want to focus for a minute on just one — Saskatchewan, Canada.

We took note of this rich prairie to the north in a couple of letters in 2008. Half of all the arable land in Canada is here. It has one quarter of the world’s uranium production and one third of its potash reserves. It produced 160 million barrels of crude oil last year.

Some of the growth in output here is astonishing. This from The Globe and Mail:

“On the farm front, the surprise is that much of the new prosperity comes from pulses, crops that were hardly known in the Prairies two or three generations ago — peas, beans, chickpeas, lentils. In 1981, 85,000 acres of lentils were planted; this year, there were 2.3 million acres. In 1976, 15,000 acres of peas were planted; this year, 2.8 million acres. Canada is now the leading exporter in the world of both foods, almost all of it from Saskatchewan.”

We own one company that is in the heart of all this earthy goodness. We’ve owned it since August of 2006. It’s given us an 11% annualized return since — which is one hell of a good return considering what the broader market has done over that time. I view it is a core Special Situations holding, and it still trades for just above book value.