Rogers and Soros are snapping up farmland right now. These two old hands are betting that demand for food will soar, pushing up the price of arable land. This from MoneyNews.com:

Falling commodity prices aren’t bringing prices for farmland down with them. Even as the price of grain goes down, the cost of the land it’s grown on keeps going up, leading George Soros and other guru investors to bet big on agricultural land.

The fundamentals are easy to understand: Over the next 40 years the population of the world is projected to grow from 6 billion to 9 billion, hugely increasing the strain on arable farmland worldwide.

The spiking grain prices that caused food shortages and rioting in dozens of countries in spring of 2008 fell some 50 percent by December. Yet even after the correction, grain prices remain above their 20-year average, and food stocks around the world are still near 40-year lows.

“Land is scarce and will become scarcer as the world has to double food output to satisfy increased demand by 2050,” Joachim von Braun, director general at the International Food Policy Research Institute, told Fortune Magazine.

“With limited land and water resources, this will automatically lead to increased valuations of productive land. And it goes hand in hand with water. Water scarcity will probably increase even more than land.”

“I’m convinced that farmland is going to be one of the best investments of our time,” says commodities guru Jim Rogers.

Long-suffering readers will know that we’re bullish on the PowerShares DB Agriculture Fund (NYSE:DBA). But there are a number of other ways to invest in the ag sector.

These include agricultural chemical companies such as PotashCorp (NYSE: POT) , Mosaic (NYSE: MOS) , Agrium (NYSE: AGU) and Terra Industries (NYSE: TRA). Also worth considering is farm machinery outfit Deere (NYSE: DE) and farm products company Archer-Daniels-Midland (NYSE: ADM).

Consider the course of the last 12 months, and then look at this chart… is China even part of the global slowdown?

We don’t want to get too excited about this growth, as much of these sales are a product of Chinese government stimulus. But I.O.U.S.A. is certainly throwing a bunch of money at this crisis as well, and the same measure of auto sales here fell 34% in May… so they must be doing something right over in Beijing.

Chinese property sales rose 45% in the first five months of 2009 compared to the same period in 2008, their National Bureau of Statistics announced today. Heh, notice a trend?

Again, these numbers are manipulated by government intervention… but 45%? That’s pretty big. We also note that real estate investment over the same period rose 6.8%, a rise the U.S. certainly can’t claim.

Thus, the market story today is “buy whatever China wants.” Namely, commodities. Oil’s up to $71, a 2009 high. Copper is at an eight-month high of $2.36 a pound. Aluminum, lead, zinc and nickel are all in the same boat.

Stocks like Alcoa (NYSE:AA) and Exxon Mobil (NYSE:XOM) helped the Dow to open up 1%.

“Buy what China needs, but can’t make enough of for itself,” Chris Mayer urges, taking this investment theme to the next level.

“In other words, as an investor, buy what the Chinese have to buy. Conversely, don’t compete with China. Sell what the Chinese make plenty of. This next chart captures the idea. It shows China’s ability to produce a commodity against its demand for that commodity.

“You want to be in the lower left-hand part of the chart. In short, the very best places to be are in potash, soybeans, iron ore and oil. In these commodities, China’s share of world production is low. For potash, China represents less than 5% of global production, as shown by the vertical axis. It is also not self-sufficient. As the horizontal axis shows, China’s production of potash is little more than 20% of its domestic demand.

“As for soybeans, China was once the world’s largest exporter. In 1995, it flipped to a net importer and has been the largest importer of soybeans in the world since 2000. Much of its supply is in the hands of companies such as Archer Daniels Midland (NYSE:ADM), Bunge (NYSE:BG) and Cargill.

“More broadly, this speaks to China’s growing demand for food, and its growing dependence on foreign suppliers to keep its rice bowls full. This is why we see China in recent months making deals for food.”

Source: Can the Far East Drive American Markets Forward?

But finally it looks like ADM has turned a corner and is set to push higher over the months ahead.

As you can see, ADM has risen nearly 100% from its mid-October lows. While that’s a great rally, the real bullish signal is coming from the fact that ADM just broke above its 200-day moving average.

The 200-day moving average tends to be one of the strongest moving averages you can use as a support or resistance line. Usually, when a stock breaks above this long-term moving-average, it signals more gains to come.

To keep this play safe, all you have to do is enter a stop-loss about 10% under 200-day moving average. If ADM drops 10% under that average, it’s safe to say that the bull run will never materialize.

If ADM is on a real bull run, you could end up riding ADM shares back up to their previous highs by this time next year.

This from Today’s Financial News:

When Americans want something, we want it now. We want our big house with a white picket fence, and we want it now. We do not want to have to wait until we have a sizeable down payment or a job that pays well enough that we can afford it.

When we want a new car, we want it now. We will not wait until we can buy it with cash.

And most importantly, when we want our economy to get back on its feet, we want it now. That is why we are constantly bombarded with terms like bailouts, TARP, life preservers, and rescue packages. Americans are willing to risk everything as long as it will provide positive short-term results.

Short-termism is a deadly disease that could kill an investor’s shot at success.

****** Oil at $70 a Barrel — Gold at $500 by Christmas? ******

With stocks as volatile as nitroglycerin, gold should be trading above $2,000 an ounce! But the dollar insurrection has shaken up the commodities markets. Some experts now put gold’s downside at $500… even $400.

What if they’re right?

TFN’s options strategist Andrew Snyder has developed a gold hedge strategy that could make you money on your gold position either way. Find his Special Report on the Members Only Reports section of HotStockConfidential.com. To become an instant member, click here…
———–

Fortunately, the short-termism pandemic has not affected everybody in this country. There are still plenty of investors and companies looking for strong, long-term returns.

One of them, surprisingly, is Archer Daniels Midland (NYSE:ADM), the company known for its huge stance in the heart of the bubble of all bubbles, the ethanol industry.

As you probably know, the nation’s ethanol industry has all but dried up. The hype we saw 24-months ago is gone. The profit potential is nearly nothing. And, because they focused solely on short-term profits, many of the industry’s largest players are in bankruptcy or darn close to it.

But ADM is different. In fact, it is doing surprisingly well and is even increasing its stake in the world’s ethanol industry.

Why is it running into an industry when everybody else is running out?

ADM is one of the industry’s only companies that focus on long-term profitability. It is using the recent ethanol bust as an opportunity to strengthen its stance, increase its competitive moat, and buy its competitor’s assets at rock-bottom prices.

Life after tomorrow

Investors once debilitated by short-termism are finally starting to see the logic behind ADM’s maneuvering. A blow-out earnings report, which showed the company more than doubled its first-quarter profits, helped prove to many investors ADM is a long-term leader. Since the report, share price has risen by about 20%.

Of course, ADM is involved in a lot more than ethanol, it is a global commodities powerhouse, but the biofuel sector is getting a lot of the company’s attention. In fact, just yesterday [Thursday] executives announced the company is investing $370 million in Brazil’s ethanol market.

When one industry is sagging, good companies look for opportunities elsewhere. Instead of begging the government for bailout assistance or closing shop, ADM’s superb management team put on its long-term glasses and searched for better opportunities.

The company has a great shot at success throughout the world as alternative energy grows from short-term hype to a long-term power industry.

Even if Obama makes good on all of his immense promises, the nation is not going to be “green” by 2010 or even 2020. But you can bet, in the long run ADM will be competing with the likes of Exxon Mobil (NYSE:XOM) in a drastically greener America.

If you want to get rich and stay rich, you have to treat short-termism like an evil enemy. The mental flaw will do you no good.

Source: Patience is a virtue

• The iShares MSCI Brazil Index (EWZ), an exchange-traded fund (ETF) that was the topic of the popular “Buy, Sell or Hold” feature a week ago Monday (Oct. 27), surged another 9.82% yesterday (Tuesday) and is now up 42% in the six days since Contributing Editor Horacio Marquez rated the ETF as a “Buy” in his column. The shares, which were recommended at $29.94, zoomed $3.81 each, or 9.82%, to close at $42.60, and have now gained $12.66 a share, or 42% since they were recommended by Marquez. They traded as high as $43.35 yesterday – an increase of 45% from their recommendation price.

• Magna International Inc. (MGA), the largest auto-parts maker in North America, reported a $215 million third-quarter loss and cut its quarterly dividend 50% to 18 cents. The dividend cut reflects the “reduction in profitability and uncertainty about the timing of an industry recovery in our traditional markets,” Magna said in a statement.

• U.S. factory orders in September fell three times more than forecast, Bloomberg reported, slumping 2.5% after a 4.3% drop in August. “There’s not a lot of hope on future orders and production,” Guy Lebas, chief economist at Janney Montgomery Scott LLC, told Bloomberg. “The economy was on the edge of a precipice, and the credit crisis gave it a shove. Manufacturing will weaken because of slowing exports.”

• October same-store sales at Walgreen Co. (WAG) rose 2% and pharmacy same-store sales rose 2.8%. As of Oct. 31, the company operated 6,544 drugstores, 600 more than it did a year ago, Reuters reported.

• Shares of Yahoo Inc. (YHOO) got an unexpected lift when brokerage firm Collins Stewart raised Yahoo’s shares from “hold to “buy.” Collins Stewart cited a possible search deal with Google Inc. (GOOG) or Microsoft Corp. (MSFT), and set a target for $18 share, Reuters reported.
• Oil prices jumped nearly 12% yesterday (Tuesday) as Saudi Arabia cut its crude exports.  Light, sweet crude rose $7.59, or 11.88%, to settle at $71.50 a barrel. Oil had previously fallen more than 55% since hitting a record high $147.27 a barrel in July.

• Archer Daniels Midland Co. (ADM) said yesterday (Tuesday) that its fiscal first-quarter earnings more than doubled. A food processor and ethanol producer, Archer Daniels Midland reported quarterly profit of $1.05 billion, or $1.63 per share, up from $441 million, or 68 cents per share, last year. Sales jumped 65% to $21.16 billion.

• After four consecutive quarters of declining profit, UBS AG (UBS) posted a net profit of $252 million (296 million Swiss francs) during the third quarter. The Swiss bank benefited from a tax credit of $776 million (913 million francs) and a revaluation of credit positions that resulted in a $1.88 billion (2.21 billion francs) gain on its books, The Associated Press reported.

• The Federal Communications Commission yesterday (Tuesday) approved Verizon Wireless’ (VZ) planned $28 billion purchase of Alltel Corp., The Associated Press reported. Verizon is paying $5.9 billion and assuming $22.2 billion of Alltel’s debt. Verizon also agreed to sell assets in 22 states.

Source: Global Investing Roundups Wednesday, November 5th, 2008

Global wheat production will likely be 4.4% less next year, Dan Basse, president of AgResource Co. in Chicago, told Bloomberg News. Basse believes the world’s corn and soybean crops will also see declines.

“The credit situation is worrying even the biggest and best farmers,” Brian Willot, a former University of Missouri commodity analyst who now grows soybeans in Brazil, told Bloomberg. “For the financially weak, credit has dried up completely. For the strong, credit has been delayed and interest rates are higher.”

The risk-aversion of Wall Street is spreading out into other industries, as the main sources of lending for farmers – rural independent banks and crop processors such as Cargill Inc. and Archer Daniels Midland Co. (ADM) – tighten credit requirements by charging higher interest, demanding more collateral or in some cases, discontinue lending completely.

“We certainly could see tight credit having an effect on agricultural production,” U.S. Agriculture Secretary Ed Schafer said earlier this month. “The costs of farming operations today are huge, and that backs up to the banks that have balance sheets that are tight, it backs up to elevators that have credit stretched out.”

Worse, drops in agriculture yields could be devastating to more than just the agriculture industry.

“Stockpiles are going to be extremely tight,” AgResource’s Basse told Bloomberg. “The world cannot afford any dislocation in production next year, or there will be a real shortage.”

The United Nation’s World Food Programme says the world is already gripped in a “silent tsunami” of hunger. And every drop in production pushes more of the world’s hungry towards the brink of starvation.

“It is estimated that more than 100 million people in the world have been forced into poverty and hunger because of the dramatic increase in food prices,” said Benjamin Senauer, a professor of applied economics at the University of Minnesota, author and researcher, MarketWatch reported. “Millions of American families’ food budgets have been stretched to the limit and beyond. Food stamp enrollment is up and food banks are seeing unprecedented demand.”

Smaller crops could mean higher prices at a time when consumers were just starting to see some slight signs of relief in the grocery store checkout line.

The change in food and beverage prices, as tracked by the U.S. Department of Labor, had moderated slightly in August and September after the record-highs of the summer. But even off the summertime highs, the overall Consumer Price Index increased 4.9% for the 12 months ended September 2008. In the food and beverage category, the increase was 6.0% year-over-year.

Agriculture futures for corn, wheat and soybeans are trading lower from earlier 2008 highs, but a steep decline in crop yields could cause future prices to reverse course.

Source: Tight Credit for Farmers Leads to Smaller Crops, Higher Prices and More Hunger

ADM profits from oilseed, corn processing, and agricultural services hit a record $3.4 billion for the 2008 fiscal year, in part because of strong ethanol sales. However, ethanol has come under fire from meat and dairy producers who argue that the diversion of corn for ethanol production is the principle catalyst for soaring food prices.

The price of corn soared from about $3.50 a bushel to $7 in the last two years, driving up the price of cattle and poultry feed – and causing the prices of many meat and dairy products to skyrocket.

Not everyone subscribes to that theory, as a report from the Council of Economic Advisors in May said only 3% of the 40% increase in food costs worldwide could be attributed to the diversion of corn to ethanol production.

Still, the controversy has gained plenty of political traction. Senator John McCain, the Republican nominee for president, has voiced his opposition to federal subsidies for corn-based ethanol and senators John Warner (R-VA) and Jim Webb (D-VA) have petitioned the Environmental Protection Agency to temporarily waive a congressional mandate that requires the oil industry to blend increasing amounts of ethanol into gasoline.

ADM Chief Executive Officer Patricia Woertz said she is “reasonably optimistic” that Congress would continue to support the current legislation, which mandates annual ethanol usage of 9 billion gallons by 2009.

If the waiver passes, however, that usage would be slashed in half.

With pressures mounting at home ADM is turning more of its attention to Brazil – the world’s second-largest ethanol producer and the leading exporter.

“We have been interested and continue to stay interested in an investment in sugar and ethanol processing in Brazil and we have talked with several potential partners,” Woertz told the Financial Times.

Part of the reason for ADM’s interest growing interest Brazil is the large flow of cash pouring into the country’s thriving ethanol industry. The Inter-American Development Bank, Latin America’s largest development bank, recently provided a $260 million loan to Santa Elisa Vale do Rosario to build three ethanol plants – a project that’s expected to cost more than $1 billion.

The loan, which will sit alongside a $360 million commercial bank credit, is the biggest ever by a multilateral institution for a green fuel initiative, the Financial Times reported.

The Brazilian ethanol industry also enjoys the total support of the government. Brazilian officials have made its ethanol exports a key issue in global trade talks, where they have pressed the United States and Europe to open their markets.

The European Union recently exempted 450 million gallons of Brazilian ethanol from higher tariffs as part of a larger trade deal. Marcos Jank, head of Brazil’s sugarcane industry association, expressed his happiness with the deal but said he was now hoping for a better offer that reflects the rise in ethanol consumption moving forward.

Brazil is also pressing the United States to reduce, if not eliminate, the 54 cents per gallon tax it currently levies on Brazilian ethanol imports. Critics have in the past labeled that tax as a frivolous roadblock designed to protect American corn farmers who cannot produce ethanol as cheaply as Brazil’s sugarcane growers.

Source: U.S. Political Strife Drives ADM Ethanol Business to Brazil

The Saskatoon, Canada-based Potash posted stellar results for the second quarter. Gross margins and earnings tripled to 68% and $905 million, respectively, from the same quarter last year on the back of huge gains in the prices of potash, phosphate and nitrogen, which in the past 12 months increased more than 160%, 130% and 55%, respectively. And the company raised its earnings outlook by about 30% for the year.

This stellar financial performance came on the back of increased global demand for grains, which drove grain prices to record highs and caused the head of the United Nation’s World Food Programme to warn that soaring food prices are causing a “silent tsunami” of hunger to sweep the globe.

But despite posting superb profits that handily beat earnings estimates and raising outlook, the stock sold off, together with the rest of the sector. That’s partly because commodity prices have dropped back, causing related stocks to do the same. The stock-price decline, in the case of Potash, also has a company-specific negative component: Workers are threatening to strike at three mines that account for roughly 30% of Potash’s output. Without question, a strike could negatively affect Potash’s output – even as it raises the price of potash globally, helping the company’s rivals in the near-term.

However, the afore-mentioned sell-off in commodities has been driven by several important factors:

• Short-term momentum players and some institutional investors have moved away from the so-called “ethanol trade,” since electoral uncertainties raise probability that next year’s ethanol subsidies might be reduced or scrapped altogether. This worry also has affected Archer Daniels Midland Co. (ADM), a prime beneficiary.
• The U.S. dollar has been climbing against both the Japanese yen and the European euro, especially now that Europe has started to slow, a victim of its appreciated currency tight monetary policy. Some emerging economies also tightened their monetary policies to curb inflation. In this environment, commodities as hedge for inflation have lost some appeal, at least for the moment.
• This slowdown and demand destruction, in part because of higher prices, have also induced oil prices to decline, and that, in turn, has helped reduce overall inflationary pressures – reducing the need for investors to hedge energy with grains and other agricultural commodities.
• Summer in the United States has not seen extreme temperatures nor hurricanes, so this year’s crop has only been mildly affected by floods, unlike last year’s weather-induced crop losses. Benevolent weather has also helped lower the price of oil.

On the positive side, emerging-market urbanization, and the accompanying consumer boom (all driven by strong growth in real incomes) is alive and well and will continue unabated for the long-term. So, at some point, Potash and its competitors will become a compelling long-term “Buy.” But the uncertainty regarding the U.S. ethanol subsidies, which originally helped fuel the demand for fertilizer, is too difficult to call at this point. With most investors having captured massive profits in these stocks and with a high probability of seeing next years’ capital gains taxes increased, there is a strong incentive to take profits now.

Therefore, I would lock in profits and wait for an opportunity to get back into this stock closer to the year-end. You’ll want a bit more clarity about the prospects for continued ethanol subsidies and lower prices to get back into this stellar company and its main peers in the sector. And stay tuned for news on the Potash strike.

Action to Take: SELL Potash shares right now, and look to buy back in later this year when the outlook is clearer.

Source: Buy, Sell or Hold: Potash Corp.