Best of the Week
Most Popular
1.Stock Market Crash and Recession Indicator Warning: Extreme Danger Ahead - Harry_Dent
2. Is This How World War III Begins, In Almost Complete Silence? - Jeff_Berwick
3.Trump Wins 2nd Presidential Debate, Betfair Betting Markets Odds Bounce - Nadeem_Walayat
4.Why Krugman, Roubini, Rogoff And Buffett Dislike Gold - GoldCore
5.End of SPX Stock Market Correction Nears - Tony_Caldaro
6.Get Ready for the Future - Exponential Machine Intelligence Mega-trend towards Singularity - Nadeem_Walayat
7.US Housing Market Bubble II – It’s Happening Again! - Andy_Sutton
8.FTSE BrExit Stock Market Panic Crash Resolves towards New All Time Highs - Nadeem_Walayat
9.Can Trump Still Win Despite Opinion Polls, Bookmakers and Pundits all Saying Hillary has Won? - Nadeem_Walayat
10.Gold’s, Miners’ Stops Run - Zeal_LLC
Last 7 days
4 Incredible Market Forecasts You Have to See to Believe - 26th Oct 16
Silver Prices in an Exponential Financial System - 26th Oct 16
Rigged Election: Hillary and Trump Caught Partying Like BFF’s With Kissinger at Jesuit Gala - 26th Oct 16
The Current Message of Yield Curves: Inflation or Deflation? - 25th Oct 16
Broken Central Banks: 4 Quick Pix - 25th Oct 16
Government Stimulus is an Oxymoron, Debt to GDP - 25th Oct 16
Where Will Crude Oil Price Head Next? - 25th Oct 16
Diamonds in the Gold and Silver Mining Stocks - 25th Oct 16
Trump’s Gettysburg Address against the New World - 25th Oct 16
This Past Week in Gold - 24th Oct 16
Can Gold Continue To Rise, Since The Usd Is Moving Higher Too? - 24th Oct 16
Why are Americans Avoiding the Stock Markets; Fear or Lack of Money? - 24th Oct 16
The US Is NOT a Low-Tax Jurisdiction - 24th Oct 16
Stocks, Crude Oil and EURUSD Trend Forecasts - 24th Oct 16
Stock Market Another Month to Go? - 24th Oct 16
Large Sell-off in Stock Market Looming - 24th Oct 16
Ungovernability - 24th Oct 16
Stock Market Boredom Before The Storm - 24th Oct 16
Establishment Mainstream Media Elite Buys US Election for Hillary Clinton, Time Running Out for Trump - 23rd Oct 16
Inflation About To Explode Higher - 22nd Oct 16
Still waiting for SPX uptrend to kick off - 22nd Oct 16
Will a Rising US Dollar Crush Gold’s Fledgling Bull? - 22nd Oct 16
Why The Global Economy Will Disintegrate Rapidly Back to Olduvai Gorge - 22nd Oct 16
GLD Bleeds Out; Weekly Gold Update - 22nd Oct 16
Stock Market Investment Success Through the “Investment Rule of 72” - 21st Oct 16
The Final Bottom in Gold - WHEN - 21st Oct 16
Gold Green Lights Upleg - 21st Oct 16
Demand for US Mints Silver Eagles has ‘Returned with a Vengeance’ - 21st Oct 16
Central Bankers Can't Stop The Death Blow Of The Post US Election Recession - 21st Oct 16
The Fortune at the Bottom of the Pyramid: Golden Opportunity for Frontier Asia - 21st Oct 16
Have You Taken These 4 Simple Steps to Improve Your Trading? - 21st Oct 16
The Stock Market is an Accident Waiting to Happen - 20th Oct 16
It's Rally Time for Gold and Silver Equities - 20th Oct 16
Cashless Society – Risks Posed By The War On Cash - 20th Oct 16
China's insane Housing Market Will Tumble and Crash in 2017 - 20th Oct 16
Donald Trump Bounces Going into 3rd and Final US Presidential Election Debate - 20th Oct 16
Attention Please: Phase Two of the Gold and Silver Train Now leaving the Station. All Aboard? - 19th Oct 16
How to Successfully Trade a Stock Market Crash - Black Monday October 19th 1987 - 19th Oct 16
Tesla, Apple and Uber Push Lithium Prices Even Higher - 18th Oct 16
Silver, Debt, and Deficits – From an Election Year Perspective - 18th Oct 16
UK Property Market: Slow Growth Does Not Equate To Decline - 18th Oct 16
Trump Election Victory is in Your Power - 18th Oct 16
Stock Market More to Come! - 18th Oct 16
This Past Week in Gold and Silver - 17th Oct 16
A Falling Stock Market Cannot Be Allowed - Financial Repression Is Now “In-Play”! - 17th Oct 16
Commodities, Forex and Stock Market Trend Forecasts - 17th Oct 16
Stock Market Crash..or No Crash? - 17th Oct 16
A perspective on risk rally – Risks abound but Stock Market is Confident - 17th Oct 16
Bank of England Blames Brexit for Sterling Drop Inflation, Masks QE Money Printing Cause - 17th Oct 16
From Piety to Pride to Pity, America's Racial Divide - 17th Oct 16

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

The Power of the Wave Principle

Agricultural Stocks: Fatten Up Your Portfolio on Food Price Inflation

Companies / Agricultural Commodities Apr 19, 2012 - 10:08 AM GMT

By: Money_Morning


Best Financial Markets Analysis ArticleDon Miller writes: For most Americans, the cost of food hasn't always been such a big deal.

For the better part of the last 30 years, food supplies were plentiful and the economy provided enough wealth to keep cupboards stocked.

But my how things have changed since the financial meltdown of 2008. Today, food inflation has more people concerned about the cost of groceries -- and how they're going to pay for them.

Yet for investors, the same food price inflation dilemma presents an investment opportunity that is ripe for the picking.

With that in mind, agricultural stocks are where to look for the low-hanging fruit as food prices keep heading higher.

Food Price Inflation is Good News for Agricultural Stocks
The average annual increase for grocery prices between 1990 and 2011 was a reasonable 2.8%. But since 2005, the International Monetary Fund's food price index has increased by 90%.

Meanwhile, the implied volatility for the most important traded commodities such as wheat, corn and soybeans is up by more than half.

All of this began in 2008. Food price inflation really began to take off when commodity prices soared and home prices plunged.
A combination of factors added fuel to the fire including converting corn and other food stuffs
into ethanol, a growing middle class in emerging countries like China, and a jump in oil prices.

What's more, food prices surged again last year on the heels of a drought, a wheat export ban in Russia, and bad weather in Argentina and Australia.

Since then things haven't gotten much better.

The latest USDA commodity price forecast predicts 2012 beef and chicken prices will increase by 9% and 5%, respectively. That comes after many food items posted double-digit increases in 2011.

It is no wonder people are struggling.

Food Price Inflation Hits a Tipping Point
Up until now, food price inflation has been held in check by producers and manufacturers afraid they might lose business by passing on cost increases to retailers and consumers.

While large multinationals such as Unilever (NYSE: UL) and Nestlé SA (PINK: NSRGY) have been absorbing the extra costs through cost cutting and productivity gains, smaller and midsized producers have struggled.

But all that may be changing...and fast.

A global survey by Grant Thornton shows that mid and small manufacturers who have been squeezed by higher costs for seeds, fertilizers and other supplies plan to charge retailers more over the next 12 months.

The survey, which covered 11,000 businesses across 39 economies, found that 41% of food and beverage businesses expect to increase prices in 2012, compared with just 12% a year ago.

In short, producers are now willing to push higher prices for raw goods on to retailers where the consumer will pay more.

"There are scenarios throughout North America and elsewhere where these players are now going to retailers and saying: "We have absorbed too much here and prices have to go up,'" Jim Menzies, global food and beverage industry leader at Grant Thornton Food, told The FT.

Agricultural Stocks Poised to Gain
As the planet's population explodes, the amount of arable land available for planting isn't able to keep pace. Over the past 50 years, grain production has doubled while arable land use has increased only 9%.
That means spending to boost agricultural yield is the most viable way to increase production and keep prices from soaring.

But while a short-term boost in food price inflation hurts, humans have used their imagination to come up with long-term solutions to many tough problems.

"Human ingenuity has a good track record of overcoming nature's constraints so far. A commodity bull market is really just a bottleneck, and, as a species, we've succeeded in bottleneck removal," Société Générale strategist Dylan Grice told MSN Money.

Investors should focus attention on low-cost commodity producers and the equipment providers that supply them, he said.
Here's how.

Governments around the globe and regional communities will have to spend big bucks to improve crop yields. And that means big profits for companies like Deere & Co. (NYSE: DE) and Agrium Inc. (NYSE: AGU).

Fertilizer prices also have nowhere to go but up and that bodes well forCF Industries Holdings Inc. (NYSE: CF). The company is trading at just eight times earnings, despite sales growth of over 50% the last two years.

Another good way to gain exposure to the big trend is the Market Vectors Agribusiness (NYSE: MOO) and Global X Fertilizers/Potash (NYSEArca: SOIL) ETFs.

Finally, you might consider the SouthernSun Small Cap Fund (MUTF: SSSFX).
According to Bloomberg Markets, the $300 million fund, whose largest investments are in agriculture and construction equipment companies, returned an average of 41.1% per year for the three years ended on Feb. 17.

Either way, one way to ease the pain of food price inflation is by investing in agricultural stocks.

Unfortunately, food prices aren't going lower anytime soon.

Source :

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2016 - 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

Catching a Falling Financial Knife