Agriculture Sector

[winston]

Taking Advantage of Skyrocketing Demand for Agricultural Products By Ted Peroulakis

Agricultural products, including corn, wheat, and soybeans, are absolute necessities for human existence. And with the world's population quickly increasing, demand for these commodities will skyrocket... and push prices much higher.

That's one good reason to invest in agriculture.

In addition, as oil prices head higher bio-fuels will increasingly be used as an alternative energy source - which, in turn, will boost the demand for agricultural products (especially corn).

Furthermore, investing in agriculture is a great hedge against inflation - and it looks like inflation is coming. Elevated inflation drives the prices of agricultural products higher - and, let's face it, people are always going to need to eat, no matter how bad things get with the economy.

My favorite way to invest in agriculture is with the PowerShares DB Agriculture (DBA). This exchange traded fund (ETF) tracks widely traded agricultural commodities. As the prices of those products rise, the price of the ETF goes up.

[greenhoney]

i have thought about this one but had a moment of 'what if'. i mean what if we enter a phase of deflation for a lets say 6-12 months?

but then again, if we were to have too many 'what if' moments, we better be reading Marvel comics.

[winston]

DJ MARKET TALK: China XLX, BlueChem Top Fertilizer Picks -UOB-KH

1046 [Dow Jones] UOB KayHian tips urea plays as remaining top fertilizer sector picks on expectation producers to benefit from continued urea price strength, drop in anthracite coal prices. Rates regional fertilizer sector at Overweight.

Tips urea plays China BlueChem (3983.HK), China XLX (B9R.SG) as remaining house's sector favorites on better supply-demand balance amid industry consolidation; adds Sinofert (0297.HK) squeezed by falling potash prices. Notes BlueChem, XLX trading at only 12.7X 2009 P/E, 7.9X respectively, vs domestic peers' 17.0X, global peers' 12.3X.

Sets BlueChem, XLX targets at HK$4.80, S$0.57 respectively; rates both at Buy. Adds Sinofert's valuation high at 17.8X 2009 P/E; keeps at Sell on looming margin risk; sets fair price at HK$2.40. BlueChem down 1.8% at HK$4.45, Sinofert +0.3% at HK$3.68, XLX +2.3% at HK$0.45.

[winston]

IT'S A JIM ROGERS-APPROVED BULL MARKET by Brian Hunt, Daily Wealth

If you've listened to legendary investor Jim Rogers in the past few months, you know the guy loves agriculture right now.

Jim points out that growing Asian demand and low inventories will create a long bull market in ag products like corn, soybeans, and fertilizer. He even went so far as to issue marriage advice based on his belief: He says marry a farmer instead of an investment banker. Farmers are the guys who will get filthy rich over the coming years.

So how does Jim's top idea look from the "big trend" perspective? Pretty good...

Below is a chart of the PowerShares Agriculture ETF (DBA). This is one of the largest and most liquid ways to trade agriculture through the stock market. It divides its holdings evenly between corn, soybeans, wheat, and sugar. As you can see, grains were clobbered during the great washout of 2008. But after striking a hard bottom in December, the grains are slowly and surely setting a series of "higher highs and higher lows." It's bullish action from this Jim Rogers-approved asset.

[winston]

The Biggest Reason to Get Excited About Investing in Agriculture
By Chris Mayer, editor, Mayer's Special Situations

There is some mind-bending stuff percolating in the agricultural markets. In fact, the setting recalls the one that set off the big move in oil prices in recent years...

"Investing in agriculture today will be like investing in the oil sector in 2001-2002," writes Mark McLornan in the May issue of Marc Faber's Gloom Boom & Doom Report. McLornan runs a fund that invests in farmland. Some of his on-the-ground observations confirm many of the things I've been telling my readers for the past several years.

As for likening agriculture today to oil in 2001-2002, an investor's pulse quickens. We all know the great run oil stocks had as the price of oil sprinted from under $30 to a peak of $143 per barrel. Investors made hundreds-of-percent gains – even thousands-of-percent gains. What most investors forget is that oil prices halved from 2000 to the bottom in 2001 before the great run-up. The same sort of setup seems to exist in agriculture.

In agriculture, most commodities are half or so of their June 2008 highs. This is the pause that refreshes. All the kindling that turned them ablaze in 2008 – rice was trading for $1,000 per ton – are still in place for a much bigger surge this time around.

"I believe one should look for areas in which there is underinvestment, low leverage and undersupply," McLornan continues. "Agriculture is one of the very few sectors globally that currently face supply shortages." The biggest reason to get excited about agriculture is to look at the stocks-to-use ratio, which measures how much supply is on hand versus how much we use.

Higher ratios imply a fully supplied market. Lower ratios hint at possible shortages. McLornan provides two charts that show how the stocks-to-use ratios look for wheat and corn, respectively.

The Cupboard Is Almost Bare

Those ratios today are lean. You have to go back to the 1970s to find inventories this low.

The kicker to all this is that last year, we had a record crop and the stocks-to-use ratio barely budged. There is no way we are going to top that harvest this year with all the drought hitting different parts of the world.

In fact, the International Grains Council (IGC) predicts a fall in total wheat output in 2009-10. The IGC predicts global wheat output of 650 million tons, down by 5% from the previous year. The largest declines are seen in the European Union, the U.S., China, Russia, and Ukraine. "Although conditions in the Northern Hemisphere are generally favorable," the IGC says, "production is likely to fall sharply."

There is other ancillary evidence that we can't meaningfully boost crop yields easily at this point, either. China has the highest levels of fertilizer use in the world and its crop yields are still not even average. McLornan says that global yields for wheat hit a plateau in the 1980s and "gene modification technology has been unable to improve what natural selection has achieved over the past centuries." So we already have tight supplies. And they look to get tighter. What about demand?

Demand for grains is not likely to fall. Population growth is the biggest driver. Globally, between 2000-2012, we'll add some billion people to the world's population. "Coincidentally," McLornan writes, "2000 was the year in which global grain stocks peaked and then began their rapid decline."

Dietary patterns also have a big impact on grains. As more people eat meat, as the increasingly wealthy Chinese are doing, the pull on grains for livestock goes up exponentially. The USDA projects global consumption of wheat will increase 6% in 2009, with a large part of this as feed wheat to cattle.

Adding to the impending crisis is the insistence of governments around the world to prop up biofuels. This puts the production of food in direct competition with the production of energy. Just when we need all that acreage for food, we've got acres of, say, corn for ethanol. There is even talk of raising the ethanol blend from its current 10% to 15%. So while the economics of making ethanol are abysmal right now, it seems the ethanol industry still has government in its back pocket.

I think we're getting close to when all of this becomes front-page news. We have another few months before the reality of a lousy fall harvest sets in. Agriculture stocks should do very well from that point – for everything from fertilizer stocks like Potash (POT) to agricultural equipment makers to the grains themselves.

As always, I recommend buying assets like these before the crowd sees it on the news.

[winston]

THE CONTRARIAN'S INFLATION HEDGE by Brian Hunt

After watching gold, copper, silver, and oil run higher this year, the commodity contrarian has to ask, "Is there anything I can buy that hasn't jumped in price?"

Answer: Sure... you can take Jim Rogers' advice and buy grain.

Rogers is one of the world's best investors... and a big bull on agricultural commodities like corn, soybeans, and sugar. Rogers points to low inventories and growing emerging-market demand as factors that will drive prices higher. He says if you want to get rich over the next 20 years, don't go to Wall Street, learn how to farm.

Like all commodities, those in the ag complex were hammered in 2008. The DBA fund – a "one click" way to own corn, soybeans, wheat, and sugar – fell from $42 per share to $22. But as you can see from today's chart, the DBA has bottomed out and strung together the classic bull market action of "higher highs and higher lows."

While gold gets all the press as an inflation hedge, many elite investors consider agricultural commodities (and the land that produces them) a better alternative. Contrarians... here's your commodity... and here's a bull market just getting started.

Source: Daily Wealth

[winston]

THE NEXT BREAKOUT FOR AGRICULTURE by Brian Hunt

Last month, we asked the question contrarian commodity investors are asking right now... "Gold, oil, copper, and silver are up big this year... is there any commodity that hasn't soared?"

Our answer is still, "Take master investor Jim Rogers' advice. Check out the grains."

Rogers has made big news in the past year by telling folks to give up on Wall Street dreams... and focus on the really big money that will be made in agriculture in the coming years. As our friend Chris Mayer points out, farmland and agriculture investments are a great inflation hedge, a great way to store wealth in real assets instead of wilting paper dollars.

The market likes this idea. Below is a chart of the DBA fund. It's one of the market's largest and most liquid ways to own corn, soybeans, wheat, and sugar. It's enjoying a quiet series of "higher highs and higher lows." A breakout above its 12-month high of $29 per share is the next significant step higher.

Source: Daily Wealth

[winston]

THE AG COMPLEX IS HEATING UP

After taking a dip early this year, the "ags" are finally moving again.

Back in mid-2009, we highlighted the series of "higher highs and higher lows" in the DBA, an investment fund that allows investors to own agricultural products like corn, soybeans, wheat, and sugar through the stock market.

We've taken an interest in the agricultural complex because outstanding investors like Jim Rogers and Marc Faber are long-term bullish on the idea… and it almost always pays to listen to these contrarian legends.

As you can see from today's chart, the DBA enjoyed that series of higher highs and higher lows for all of 2009, then weakened in 2010. But in the past few months, low inventories and bad growing weather have propelled this fund to its highest high in over a year. For folks who like to follow Rogers and Faber, this is fantastic price action… and bullish for our "farm income through the stock market" idea.

www.dailywealth.com

[iam802]

DBA has a fantastic run up since breaking through the kumo resistance back in July.

As with all run ups, it will ultimately need to take a break before going higher.

In this case, the resistance can be found in the Weekly Chart at around $28 established back in June 2009




At this moment, I still can’t tell how far it will retrace. Though, a good entry on the Daily Chart will be around $27 near the kumo support level.

[kennynah]

i agree...~$27 should be a support...

on viewing weekly chart, there's now about a resistance....@ ~$28....

so, i thought, let's review its option chains.... wah da eh....atrociously thin... cant play this...