What’s he talking about? Today, we take a look and invest right alongside his idea. And it should start to pay off with the arrival of the first swallows of spring in 2010. It’s also timely now — in this weak-kneed economy — because it has traditionally held up well even in when the economy is on the ropes. Even the Great Depression couldn’t put this thing down.

We start with simple truths. The world’s population has more than doubled since 1950 — from about 2.5 billion to 6.7 billion. By 2050, there will be more than 9 billion people on the planet. Almost all of this growth will come from undeveloped markets such as China and India. And they will all be doing one thing, for sure — eating.

Now, hang on. I know that is a banal insight by itself, but this story has layers like a tiramisu. The second layer is the mix of food eaten, which is important. These undeveloped economies are getting richer. Predictably, as people everywhere have done and continue to do when they have a little more money in their pockets, they change their diets. They spend more on food. The average Chinese spends 40 cents of every additional dollar earned on food. In India, it’s about 70 cents of every additional dollar. What do they buy?

Read the rest of the story at PennySleuth.com.

Underground investor Jim Rogers is also bullish on agriculture. He says Asian demand and low inventories will lead to a long secular bull market in corn, soybeans and fertilizer.

As Brian Hunt wrote in yesterday’s DailyWealth:

DBA “is one of the largest and most liquid ways to trade agriculture through the stock market. It divides its holdings evenly between corn, soybeans, wheat, and sugar.”

From this chart, you can see that DBA is has been showing some strongly bullish action lately. And it has the Jim Roger’s seal of approval.

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 The Rude Awakening:

We have it comparatively easy in this, the crisis of 2008. We may have to make do with fewer Swatch watches and Coach handbags. We may have to pass on the latest iPod and make do with last year’s winter coat. These hardships are not important, except for people selling those goods. But the credit crisis is also affecting the world’s ability to produce one thing important to everyone: food.

It’s harder for farmers to get credit for next season’s crop, especially farmers overseas. They need fertilizer, seed, fuel and more. And most farmers need to borrow money to obtain these essential items. No credit; no crops.

Therefore, the global credit squeeze might reduce plantings of key grains, even as world inventories of these grains hover near historic lows. In Russia, for example, cash-starved banks have cut off funding for the industry. The head of the Russian Grain Union says, “Many farmers probably won’t be able to borrow money for the spring sowing.” This is important because Russia is no lightweight in the grain division. It produces 9% of the world’s wheat, for instance. No surprise that the United Nations considers Russia a critical component of the global food supply.

Ironically, Russia just had its best harvest ever. And still, global grain inventories remain low. Bloomberg reports that global inventories of corn, wheat and soybeans are the second lowest they’ve ever been since 1974.

A number of countries already fear what might happen next year. The Washington Post Foreign Service in Shanghai reports that China adopted a number of measures to protect itself from the worsening food crisis: “Among the most extreme measures [China] took was to impose new export taxes to keep critical supplies such as grains and fertilizers from leaving the country.”

These taxes are extremely high, on the order of 150%-185%. China worries that richer countries may outbid its own farmers for supplies and weaken China’s own food supply. One Chinese fertilizer company, which produces 150,000 tons per year, already said that the new taxes mean exporting is no longer profitable.
China was the biggest exporter of certain types of fertilizer. No longer. That’s a lot of supply off the market.

Fertilizers are absolutely critical in maintaining (and improving) crop yields. Without them, we’d produce far less per acre. As a result, in parts of Africa where people depend on Chinese fertilizers, the food supply problem is now more acute. China’s export taxes and bans follow those of other grain producers, including the Ukraine, India, Pakistan and Argentina.

Amazingly, despite these various maneuvers around the world to prevent grain exports, the prices for wheat, corn and soybeans are all half of their mid-summer highs. It seems the market believes a global recession will dampen demand. Maybe so, or maybe the market doesn’t know anything. The severe commodity selloff during the last few weeks might be saying a lot more about the desperation of hedge fund managers to raise cash than about the prospect that grain demand will fall – in which case, we could see another surge in prices next year.

Demand for grains is still very strong. In China, each wage-earner devotes about 40 cents of every dollar earned to buying food. In India, that number is a staggering 70 cents out of every dollar earned. In other words, the food budget in these countries is hardly a discretionary item. It will remain constant, or even rise, no matter what the global economy does.

Meanwhile, the people in these countries who have a couple of extra rupees to toss around are upping their consumption of meats, which increases the per capita demand for grains. As PotashCorp chief William Doyle recently pointed out: “The average daily protein intake in China has increased by 40% over a 20-year period, with the greatest percentage of that increase coming from meat consumption.” You can see it in the size of the people themselves: The average 6-year-old Chinese boy is 12 pounds heavier and 2 inches taller than 30 years ago. These people aren’t going back to the ways thing were. This is a long-term story, and these trends should continue.

Yet even if demand growth for grains slows, it’s not likely that those low global grain inventories will improve. Even if grain demand fell to 2% per year, we’d still need record production to keep grain inventories from falling further.

For all these reasons, I think the future is still bright for agriculture and all that it entails. I think the fertilizer companies look cheap again. We owned Agrium (NYSE:AGU) for nearly three years, and it more than tripled our money. The stock is now a good one-third below what we bought it for initially.
PotashCorp (NYSE:POT) and Mosaic (NYSE:MOS) are other names I’m looking at hard right now – both have been crushed in this troubled market.

Beyond that, irrigation companies have come way down, even after posting outstanding results. Lindsay (NYSE:LNN) and Valmont (NYSE: VMI) are two irrigation equipment makers, for example, both coming off great quarterly results.

Source: Meal Ticket

This is because, once the threat posed by the US housing crisis has passed, the Federal Reserve will be forced to increase interest rates to fight inflation. Other countries will follow, which will deflate the commodities boom.

However, over the short-term, gold, whose movements are directly linked to inflation, is likely to bounce. Martin reckons a price tag of $1,500 an ounce for the yellow metal is entirely possible. He recommends two ETFs and four gold miners to profit from this situation…

The most important factor regulating international demand is the overall level of interest rates in terms of inflation. If “real” interest rates – netting out the rate of inflation – are high as in the 1980s, demand growth is sluggish (because the cost of capital to make new investments is high) and so commodity prices are generally low. Conversely, low real interest rates and surging inflation, such as occurred in 1973, can cause the prices of all commodities to spike upwards.

While there are signs of global demand slowing, it is nowhere near stalling. The International Monetary Fund (IMF) expects world gross domestic product (GDP) growth of 4.1% in 2008 and 3.9% in 2009. Those rates compare with growth rates of 5% or just over in 2006 and 2007. However, they are still sufficient to put considerable pressure on commodity supplies, which are already stretched by current demand.

To reduce commodity demand, and produce a real drop in prices, global interest rates would have to rise sharply. Currently, short-term interest rates are negative in real terms (below the local rate of inflation) in the United States, the European Union and Japan, and only just positive in the United Kingdom.

They are also sharply negative in India and many emerging markets and likely to become so in China, where official inflation has been suppressed pre-Olympics. With negative real interest rates prevailing almost everywhere, the global trend must be one of firm demand and accelerating inflation.

Eventually, the United States, which tends to lead the international community in interest rate matters, will be forced by accelerating inflation to increase sharply its short term interest rates – the 2% Federal Funds rate is now more than 3% below consumer price inflation (CPI) and more than 5% below producer price inflation (PPI). When that happens, other countries will follow and the commodities boom will deflate.

However, it won’t happen just yet because of the housing crisis. U.S. Federal Reserve Chairman Ben S. Bernanke wants to see home prices come to some kind of equilibrium before raising interest rates, otherwise he could produce an uncontrollable fall in house prices, causing more or less the whole U.S. home-mortgage market to default.

Since interest rates are likely to remain low for several months at least, commodity prices are likely to “bounce,” rather than remaining in a bear market. Speculative capital, of which there is still plenty, will then rush back into commodities, pushing prices up still further.

Of the various commodities, agricultural commodities are the least likely to bounce substantially, because the supply cycle is relatively short and high prices are already causing new planting. Shipping rates are also fairly unlikely to soar, as new building has been undertaken at a frantic pace in the past few years and capacity is now coming on stream.

On the other hand, metals and energy, for which finding new sources is a lengthier process, are more likely to bounce, particularly if geopolitical uncertainty continues to increase in the aftermath of the Georgia invasion.

The most upwardly mobile commodities are likely to be those whose movements are directly related to inflation – gold and silver. Gold, in particular, is one of very few commodities whose price is currently within a few percent of that last September, when Bernanke & Co. began cutting interest rates.

While the equivalent in real terms of 1980’s $850 peak in the gold price may be unattainable – that would require gold to reach $2,300 – a $1,500 price for gold certainly seems possible.

The SPDR Gold Trust ETF (NYSE:GLD) is about the most efficient way of getting a pure gold play.

As an alternative, you might consider a silver investment – the metal is currently at less than 15% of its 1980 high equivalent to $130 per ounce – the iShares Silver Trust ETF (AMEX:SLV) seems the best way to play silver directly.

You may do even better in gold mining shares. The recent declines in the gold price have caused a huge amount of air to whoosh out of gold share prices, to the extent that they now represent pretty good value.

• Barrick Gold Corp. (NYSE:ABX) is a Canadian company, with mostly North American production, plus some in South America and Africa, and copper and zinc add-ons. With a market capitalization of $29 billion, this firm has plenty of liquidity. It has a trailing Price/Earnings (P/E) ratio (on last 12 months earnings) of 15, and a forward P/E (on next 12 months) of 13. The stock is reasonably valued and has little political risk.

• Newmont Mining Corp. (NYSE:NEM) is a U.S. company, operating in the United States, Australia, Peru, Indonesia, Ghana, Canada, Bolivia, New Zealand and Mexico. It also has low political risk, but with a $19 billion market capitalization, trailing P/E of 25 andforward P/E of 14, Barrick still looks like a better value.

• Yamana Gold Inc. (NYSE:AUY) is a Canadian company with mining in Brazil, Argentina, Chile, Honduras and Nicaragua.  It has a market capitalization of $7 billion and a trailing P/E of 33, but a forward P/E of only 10. There’s medium political risk, but the firm expects to double production to 2.2 million ounces per year by 2012, primarily in Brazil and Argentina.
• Gold Fields Ltd. (NYSE:GFI) is a South African company with mining operations in South Africa, Ghana, Australia and Venezuela (of which they recently sold control to a local company). With a market capitalization of $5.7 billion, trailing P/E of 11 and forward P/E of 10, this firm is an upper-medium political risk, depending on what you think of South Africa. However, its shares have fallen a lot and are now cheap.

Source: Commodities: Bear Market or Bounce?

“Corn is in trouble because of the wet spring that has drenched the midwest,” says Justice Litle in Taipan Daily.

Yesterday, the USDA said in a report that American corn output will be down significantly from last year’s estimate.

And that forecast was put together before the biblical drenching the Midwest suffered in the past week, when another 12 inches of rain flooded already saturated fields.

All this is sending corn futures soaring. Looking at the chart, you can see how corn has gone ballistic. Also, on the bottom of the chart, RSI (a momentum oscillator) has just given a bullish buy signal.

After this latest rainout, many corn farmers will switch to soybeans, which can be planted until the end of June with less impact on yields. And that means the corn that does grow will be much more valuable.

Jurojin already recommended our subscribers go long corn last week — after it bounced higher off of its 50-day moving average. Now, they’re racking up nice open gains, and our first profit target looms dead ahead.

Is it too late to get in on corn? Not by a long shot. We’ve seen this kind of horrible start to the crop year before — in 1993. Then, traders were slow to react to massive flooding.

The best way to play this is corn futures or options on corn futures. If you aren’t in the futures market, you could try the PowerShares DB Agriculture ETF (DBA), which tracks a basket of corn, wheat, soybeans and sugar.

“Corn is going to go higher,” says John Mauldin in his Outside the Box.

Bad weather has meant that not enough got planted, and that will probably hurt yields in the fall. This is going to mean even higher meat prices and ethanol prices. Corn ethanol is such a bad idea. This is what happens when government decides to mess with the market.

Anecdotal inflation note: I eat two chicken fajita pitas without cheese from Jack-in-the Box for lunch about three times a week (after the gym!). I throw away the pita bread and just eat the chicken at my desk. The last three days the price has been the same, but the amount of chicken is noticeably smaller, perhaps 25% smaller. Where’s the hedonic price adjustment in the BLS statistics for that? A friend of mine notes that the filet from his favorite steak house is now seven ounces instead of eight. But the steak is still the same price. Maybe portion control will finally get America to go on a diet.

And that forecast was put together before the biblical drenching the Midwest suffered in the past week, when another 12 inches of rain flooded already saturated fields.

All this is sending corn futures soaring. Looking at the chart, you can see how corn has gone ballistic. Also, on the bottom of the chart, RSI (a momentum oscillator) has just given a bullish buy signal.

After this latest rainout, many corn farmers will switch to soybeans, which can be planted until the end of June with less impact on yields. And that means the corn that does grow will be much more valuable.

Jurojin already recommended our subscribers go long corn last week — after it bounced higher off of its 50-day moving average. Now, they’re racking up nice open gains, and our first profit target looms dead ahead.

Is it too late to get in on corn? Not by a long shot. We’ve seen this kind of horrible start to the crop year before — in 1993. Then, traders were slow to react to massive flooding.

The best way to play this is corn futures or options on corn futures. If you aren’t in the futures market, you could try the PowerShares DB Agriculture ETF (DBA), which tracks a basket of corn, wheat, soybeans and sugar.
This analysis is brought to you by the Secret Order of Jurojin.

Source: King Corn Retakes the Throne

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.

“High prices beget low prices,” said Dan Kuechenmeister, a manager of the commodities department at RBC Dain Rauscher in Minneapolis. “We’ve seen a lot of wheat planted, and we’re finally going to get a decent harvest.”

Prices will rise again, so now is a great time to invest in a livestock ETF, says Ian Davis in The Growth Stock Wire: “Hog farmers are not running charities. When the input costs for hog producers soar, the price of hogs must also rise. By buying hogs, we are piggybacking (excuse the pun) on the uptrend in agriculture and crude oil.

“So when the uptrend finally begins, how should we play it?”

Read on how to profit when this upswing kicks in with this livestock ETF.

“When the gold price rises, jewelry gets more expensive,” says Tom Dyson in DailyWealth. It’s the same way with farm animals. When the corn price rises, livestock must get more expensive. Corn has doubled in the past 18 months, but livestock prices are still in the same range they were six years ago. They will catch up with corn.”

Tom also recommends that his readers invest in a livestock ETF.

“Two trade in London under the symbols CATL.L and HOGS.L,” says Tom. “They track the Dow Jones AIG sub-indexes for live cattle and hogs.”

You can see that corn looks ready to challenge its recent high — and on rising volume, too.

Now for the fundamentals behind this chart. The soil in parts of the country is too cool and wet for corn. This forces corn farmers to replant. Some investors think it will also force farmers to switch to soybeans (which can be planted later than corn), and maybe 10 or even five years ago, it would have. But nowadays, with farm suppliers practicing “just in time” inventories, farmers would have trouble finding the seeds for such a switch.

And too much rain means that farmers have planted only about 10% of the corn crop, compared with 20% at this time a year earlier. Over the past five years, the average for the date has been 35%.

Globally, corn supplies are already straining to meet demand. America is the world’s king of corn. If our crop is going to be light, that puts corn on the launch pad.

You can play corn with an exchange-traded fund: Corn is one-fourth of the holdings of the PowerShares DB Agriculture Fund (DBA:AMEX). The other parts are wheat, soybeans and sugar. But to really ride this agricultural rocket, futures or futures options are the way to go.

Be sure that any trade fits your risk profile, and run ideas past your investment advisor.

Good luck and good trades,

The Secret Order of Jurojin

Editor’s Note: The Secret Order of Jurojin of Taipan Publishing Group

What we’re thinking about is that we have entered a much more dangerous and troublesome period in world financial history. The planet was leveraged up. Now it is going to be de-leveraged.

We have been talking about the battle between the forces of inflation and the forces of deflation. It is not clear which way it will go…or when. The feds – who favor inflation – seem to have the upper hand one week. The next week, Mr. Market – who seems to have thrown his lot in with the force of deflation – seems ahead on points.

Meanwhile, many of the foot soldiers are lost, separated from their units…shooting at their own men…and often blowing themselves up. Many don’t know which side they are on and are willing to switch sides at any minute. But in the fog of war you always get a lot of people bumping into one another. That’s why we get such peculiar reports from the front – such as when the feds cut short rates (which is inflationary)…but long rates nevertheless go up (which is deflationary). Or when the unemployment numbers go up (which is deflationary)…causing the dollar to fall (because investors expect another inflationary rate cut!)

No, we don’t know exactly which way it will go (so don’t ask us when gold will hit $2,000…or when the Dow will break below 10,000). But it scarcely matters. Because, we’re like the innocent civilians caught in the crossfire. Sooner or later, our assets are going to be shot down…and our liabilities are going to blow up. In other words, dear reader, this is not a war in which you should try to speculate on which side will win…this is a time to keep your head down.

It’s a Liquidation War…in which mistakes will be corrected BOTH by inflation and deflation. Take stock prices, for example. Our guess is that they’ll be taken down – either by inflation or deflation, or both. Prices will fall either in nominal terms, in other words, or relative terms. Already, adjust the Dow to the price of gold, or wheat, or oil, or copper and you get a very different picture. Instead of being flat over the last 10 years…the Dow is down a half to two-thirds.

“It’s the Greater Depression,” said Doug Casey at dinner Monday night, with a satisfied look on his face. “I’ve been expecting it for a long time. I was a little early. But now, it seems to be finally getting going.”

What happens in a Greater Depression? We don’t know, but we think we’re going to find out.

And we imagine its most important feature will be a general markdown of debt and the relative value of Western assets – stocks, houses, currencies, and labor. The East and developing world is on the rise; even if it stays put, the West, in relative terms, will sink.

Some assets will go into default – which is what is happening in the financial industry lately. UBS (NYSE:UBS) alone has lost 38 billion. Hedge funds are going broke. And the captains – present and past – of the financial industry are pointing fingers at each other.

Many people say we’ve seen the bottom for equities, and the financial sector in particular. Maybe in nominal terms. And maybe in the East and the developing world. But in America, in real, inflation-adjusted terms, we’d expect more of a selloff. The S&P is still selling for more than 18 times earnings; there is still plenty of room on the downside.

The financial sector looks particularly bad; there’s probably a lot more bad news coming. And since it was the big winner for the 25 years, it probably needs a bear market of at least 5 or 10 years. At the beginning of the boom in finance, which began roughly during the first Reagan Administration, people still wanted their children to grow up to be doctors, lawyers and businessmen. At the end of it, every mother’s son was encouraged to into ‘finance.’

But now, the bubble in finance is over. It will probably take many years before values appear and prices begin to rise – just look at what has happened in the NASDAQ. Or look at our favorite example – Japan. Many people thought Japanese stocks were a once-in-a-lifetime bargain after the Nikkei Dow crashed in 1990. Well, they’re an even bigger bargain today!

*** “Señor Bonner…I have to tell you. I won’t be able to work here any more.”

Francisco, who has been our ranch foreman, quit. He explained why:

“There’s no money in cattle now. So my father sold our ranch over in Angustura. We’re buying a big farm in Bolivia. It’s about 7,500 acres. Very rich. And with lots of water. It’s not in the high part of the country. It’s out on the eastern plain, where the Amazon begins.

“The place we’re getting is practically virgin land. It was farmed many years ago, and then abandoned. I don’t know why. And we’re going to plant soybeans. You just stick the seeds in the ground; three months later you have a crop you can market. And with prices this high, we can’t resist.

“Farming soybeans is about the easiest farming there is. You only have to go out to the farm a couple of times. And you don’t need any labor – it’s all mechanized. Labor is cheap in Bolivia, but it’s still a lot easier when you don’t have to deal with farm labor. And now with these genetically modified plants, it makes it easy to kill the weeds. We just spray herbicide from the air; it kills everything but the soybeans, because they’ve been modified to resist it.

“We’re going to plant about 1,000 acres this spring. Then, we’ll add another 1,000 next year. Some of the land is still covered by jungle. It’s just the opposite of here. Here it never rains. There, they get plenty of rain. We would plant more land, but the Bolivian government has banned clearing any more jungle. At least, there’s some restriction on it.

“And in Bolivia, the government lets you sell your crop on the world market, without taking half of it. [He was referring to the Argentine government's 49% tax on soy exports].

“Everybody is planting soybeans. But I’m not worried about the price going down. It can fall in half, and we’d still make money.”