Bowing Down to the Fertility Gods
Wednesday, January 9th, 2008
By Inya Ivkovic, MA for Profit Confidential
Yes, energy and metal stocks have been enjoying quite a rush in the past few years. But eventually, most booms either become everyone’s game and quietly deflate on their own or somebody pushes a nasty little pin through their bubbles. Not that oil and base metal stocks have even come close to either potential and/or unpleasant outcome. But if you consider yourself a savvy investor, you’ll always be on the lookout for new opportunities and agricultural stocks might just be it.
Almost unprecedented demand for raw materials from the emerging economies of China, India, Brazil, etc., pushed the prices of energy and metal stocks sky-high. Crude traded close to $100.00 per barrel last week, gold bulls are calling for $1,000 per ounce, while most base metals have already reached multi-year highs as well. For the time being, and provided the demand from emerging economies keeps up its red-hot pace, these should hold.
But oil and metals are not the only raw resources hot in demand. With increasing affluence in populous countries such as China and India, their peoples are naturally demanding more food, which in turn is jacking up prices and demand for anything and everything that could help increase food production, starting with seeds to fertilizers to farm equipment. And all this is excluding the growing uptrend in the manufacturing of biofuels such as ethanol.
One more reason to consider agricultural stocks is that these are more or less immune to cycle swings for one simple reason — people gotta eat, right?! And don’t forget the entire planet is getting overpopulated, which is already flooding cultivated land with demand for more and more food.
The best part is that, at the moment, neither Wall Street nor Bay Street keeps agricultural stocks very high, if at all, on their radars. This is what typically happens when stocks lack the “sexiness” of, for example, gold stocks. But the time to get into potentially very lucrative opportunities is when things are still on the ground floor.
Here are few suggestions for your consideration: Agrium, Inc. (AGU/NYSE), Deere & Company (DE/NYSE), Monsanto Company (MON/NYSE), and/or Potash Corporation of Saskatchewan, Inc. (POT/NYSE).
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