If you know how to play the volatile nature of the commodity sector, this article is not for you. Lee Lowell of the Smart Profits Report gives three reasons why commodity investing has changed for the better, and how to profit from them.
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Tighter credit for farmers could worsen a global food crisis as smaller crop sizes cause prices to soar. Many farmers have traditionally bought pre-season supplies such as seeds and fertilizer on credit and then paid off the debt with the proceeds from the year’s harvest. But with a growing number of farmers unable to obtain the credit they need, crop yields will suffer.
Most of us Americans are so accustomed to a world of plenty; we have a hard time imagining a world of scarcity — much less making investments based upon this idea. But the energy markets provide a very powerful example of what happens when resources become less plentiful.
Inflation on food items can increase even more once China depletes its food resources… Oil back to $70?
Wheat sank to its lowest price since August last year as US farmers began harvesting what is expected to be the biggest winter grain crop in a decade, reports Bloomberg:
Production will increase 17 percent from a year earlier to 1.78 billion bushels, the most since 1998, the U.S. Department of Agriculture forecasts. About 4 percent more acres were seeded from September to November, the agency said. Wheat prices have tumbled 45 percent from a record $13.495 a bushel on Feb. 27.
Agricultural commodities won’t drop back to pre-crisis levels for at least ten years, according to a report by the OECD and the UN. This from the Financial Times:
Food prices have undergone a paradigm shift and will not drop back to pre-crisis levels for at least the next 10 years, putting long-term pressure on governments facing the food crisis, according to a forthcoming report.
Wheat prices may be set for a major spike after a UN warning that a new “highly pathogenic strain of wheat stem rust called Ug99″ threatens 25% of the world’s wheat crops.
This from The World Tribune:
Scientists and international organizations focused on controlling wheat stem rust have said 90 percent of world wheat lines are susceptible to Ug99. The situation is particularly critical in light of the existing worldwide wheat shortage.
Whether his travels take our commodities guru, Kevin Kerr, to the Middle East or the Midwest of the U.S., the stories are very similar. Most people are concerned about the rising costs of agricultural commodities. And they should be. The commodity boom is real.
With the run on rice in the US in full swing and sky high rice prices still grabbing the the headlines, investors are looking for a rice ETF to profit from the situation.
Unfortunately, there is still no specific ETF for rice. But that doesn’t mean there aren’t any commodities ETFs to help investors profit from the rise in rice and grain prices.
“Commodity service-providers have launched a blizzard of commodities ETFs over the last 12 months,” says Eric Roseman in the Offshore A-Letter.