Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Agri-Food Stocks Investment Opportunities Ahead

Commodities / Agricultural Commodities Nov 22, 2010 - 03:20 PM GMT

By: Ned_W_Schmidt


Best Financial Markets Analysis ArticleFortunately for investors the majority of the world does not allow either bumbling Bernanke or wealth confiscating Obama Regime to manage economic policy for them. What that means is that once one departs the shores of the U.S., leaving its wealth destroying policies and laws behind, economic growth is possible. That reality allows investors to find economic sectors that are benefiting from economic growth.

As is readily evident in the graph to the right, returns on U.S. equities have been miserable. Despite the bump from last debt monetization by Federal Reserve, U.S. equity returns reflect the ineptness of U.S. economic policy. On the other hand, the returns produced by Agri-Food commodity prices have been exceptional. These returns have been created by the secular economic growth in China, India, et al, where governments encourage economic prosperity and the creation of wealth.

The secular growth produced by the free market economic policies in China, et al has created demand for Agri-Food commodities that is straining the capacity of the global Agri-Food production system. With Agri-Food commodity markets operating in the price inelastic portion of the long-run supply curve, Agri-Food prices have been pushed higher. While all markets will have up and downs, the growing inability of the global Agri-Food system to satisfy demand without price rationing is readily evident in the graph below of our Agri-Food Price Index.

While the secular Agri-Food story is now acknowledged, we must live in the short-term. In the short-term, both seasonal and government policies may influence Agri-Food prices. Those factors may produce both rewards and opportunities.

In the most recent portion of the above graph several factors have come together to push Agri-Food prices to a record high. First of which is strong demand for Agri-Food commodities. That is evident in the chart below of U.S. grain exports. While these trends are evident in other nations, the U.S. is a major producer of both grains and weekly statistics.

Green bars in that graph are the year-to-year percentage change in U.S. exports of the Big Four, wheat, corn, soybeans and rice. With the exception of corn, exported grains of the other three are up more than 30% from a year ago. Corn is lagging due to the short supply conditions that developed in the U.S. prior to the Fall corn harvest.

Second set of bars is for export sales that have been made, but not completed. There we see corn export sales up about 30% . Increase in wheat sales is almost "off the chart," as the world has been scrambling for grains since the Russian export embargo. Soybean export sales seem weak, but that is because so many have already been sold, and the growing short supply of soybeans in the U.S. That may not mean much to some, but if one lives in the Americas each meal consumed probably includes some soybean oil.

We note that the growth rates observed above are inordinately good for staple grains. These are not the latest generation of cell phones. And that growth is organic, not requiring another product innovation or creation of frivolous apps.

Second factor pushing grain prices higher has been, surprisingly, the availability of the Fall harvest in North America. Historically, arrival of Fall harvest has pushed grain prices lower. However, in a world generally short of Agri-Food commodities, that pattern exists less and less. In short, buyers have to buy when the grains are available. A buyer cannot wait, hoping for lower prices. The grains may not be available.

Third factor that has helped grain prices move higher is the Bernanke Currency Bubble. As the Federal Reserve has attempted to devalue the U.S. dollar, U.S. grains became a relative bargain on world markets. That connection between demand for U.S. grains and the dollar is both real, and in the imagination of traders. Many traders, rather than trading the U.S. dollar, have been buying corn and tractor stocks.

That brings us now to the red line in that second graph on the first page. It is a stochastic built on the Agri-Food Price Index. As both the second and third factors are leading to a short-term corrective process, an opportunity may be building for those that have thus far missed out on the gains in Agri-Equities. With the North American harvest complete, little news on the size of the next crop, Fall of 2011, is available. That may lead to further development of the corrective process. Additionally, the U.S. dollar is strengthening as it exits an inverted parabolic formation. That should cause traders to be far more cautious in grain markets.

All of this seems to be coming together to create an opportunity in Agri-Equities for investors in the months ahead. Short-term considerations have recently been lowering grain prices, and that pressure may continue in the weeks of Winter ahead. However, underpinning Agri-Food prices is the longer term, secular growth of China, India, et al. Now is the time for doing your research as Winter closes in on North America, and the fields become covered with ice and snow.

By Ned W Schmidt CFA, CEBS

AGRI-FOOD THOUGHTS is from Ned W. Schmidt,CFA,CEBS, publisher of The Agri-Food Value View, a monthly exploration of the Agri-Food grand cycle being created by China, India, and Eco-energy. To contract Ned or to learn more, use this link:

Copyright © 2010 Ned W. Schmidt - All Rights Reserved

Ned W Schmidt Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in