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).

Organic farmers typically use manure from farm animals, or some other form of organic compost. Large, commercial operations typically use ground potash, a rock mined in Canada and elsewhere.

I’m not going to debate organic versus conventional farming here, but suffice it to say that all plants – regardless of how they are grown – need a good source of nitrogen and potassium.

Potash – otherwise known as potassium carbonate – is essential to commercial agriculture. It improves crop yield, taste, water retention, color, disease resistance and texture of food crops. Fruits, vegetables, rice, corn, wheat, soybeans and cotton all benefit from being grown in soil enriched with potash.

In the past few years, shareholders of the largest, profitable potash producers like Potash Corporation of Saskatchewan (NYSE:POT), The Mosaic Company (NYSE:MOS), and Agrium, Inc. (NYSE:AGU) were very happy campers. The stocks traded at PE multiples pushing 30 during the commodity boom of last year.

Not anymore: they’re all off more than 70% from 2008 highs. The financial distress that hit the rest of the economy in the fourth quarter of 2008 hit farmers too. When times are tough, farmers hunker down and cut costs. And one of their biggest expenses is fertilizer.

Most farmers typically have a large stockpile of potash on hand, and not buying on a regular basis causes them to use up what they have. You see, they can’t just stop fertilizing: many soils are overworked, or are marginal to begin with. If they scrimp or otherwise cut back on their applications of nutrients, yields suffer, and crop prices rise.

Once their penny-pinching became obvious to Wall Street, the already jittery markets didn’t need any prompting to hammer shares down to today’s low single digit PE’s, where they’ve remained since last October.

The problem facing the three companies mentioned above is that several big financially strapped potash producers in Russia have dropped prices 25%, putting pressure on others to do the same. This would have the effect of continuing to hold prices low.

It’s all being watched closely by China – one of the world’s biggest potash customers – who’s set to begin negotiations with the industry for its 2009 purchases. In response to the Russian action, Potash has cut production in order to keep prices from dropping through the floor.

The key here is to keep a watchful eye on crop prices. As they start to rise, farmers will jump on the bandwagon and fertilize more to increase their yields and make more money. And given that most are depleting current potash inventories, buying could soon resume in a big way, driving prices up once again.

Growing economies like the BRIC’s: Brazil, Russia, India and China are big potash users, and let’s face it: the world’s growing population will always need to eat.

Source: Agrium, Inc. (NYSE:AGU): Stock of the Day

• Nortel Networks Corp. (NRTLQ) said it plans to slash 3,200 jobs as part of the company’s efforts to climb out of bankruptcy protection. “With the unprecedented economic environment and resultant impacts on revenues, significant changes are required to regain our financial footing,” Chief Executive Officer Mike Zafirovski said in a statement, Bloomberg reported. “Tough decisions are being made to restructure the company and work towards a successful emergence from creditor protection.”

• Seed and fertilizer producer Agrium Inc. (AGU) made an unsolicited $3.6 billion bid for CF Industries Holdings Inc. (CF), a nitrogen and phosphate fertilizer producer. The $72-a-share proposal is 30% more than CF’s Tuesday closing price, and is a shot to dissuade CF from buying rival Terra Industries Inc. (TRA), Bloomberg reported.

• Ambac Financial Group Inc. (ABK) posted a $2.34 billion, or $8.14 a share, fourth-quarter loss. The bond insurer set nearly $1 billion aside for losses tied to residential mortgage debt, Reuters reported.

• U.S. President Barack Obama yesterday (Wednesday) nominated former Washington State Gov. Gary Locke – a Democrat with strong ties to China – as his choice for U.S. Commerce Secretary, the Voice of America reported. Locke, the son of Chinese immigrants, served two terms as Washington’s governor, making him the first Chinese-American governor in the United States. Locke was a strong proponent of trade with China during his time in office, and led several trade missions to the country. Two prior candidates withdrew – one over an ethics probe and the other over political differences with the new president

• Crude oil continued to rise yesterday (Wednesday) climbing $2.54, more than 6%, to settle at $42.50 a barrel on the New York Mercantile Exchange. The rally came after gasoline inventories showed a 1.7% rise in demand.

• The San Francisco Chronicle, founded during the gold rush of the mid-19th century, could be shut down, Reuters reported. The paper lost more than $50 million last year and this year’s losses to date are worse, according to its owner, Hearst Corp. “Survival is the outcome we all want to achieve,” said Hearst Corp Chief Executive Frank Bennack Jr. “But without the specific changes we are seeking across the entire Chronicle organization, we will have no choice but to quickly seek a buyer for the Chronicle or, should a buyer not be found, to shut the newspaper down.”

Source: Global Investment News Briefs Thursday, February 26, 2009

Merger mania is going full tilt with the latest marriage proposal being Victoria Gold’s all-share offer for StrataGold. Victoria is offering up 0.1249 of its shares for each StrataGold share held. The move would give Nevada focused Victoria the Dublin Gulch gold deposit in the Yukon. Victoria ended the day up C$0.01 at C$0.39, while StrataGold added C$0.01 at C$0.05.

Rubicon Minerals (AMEX:RBY) cut 173.7 grams gold per tonne over 2.5 metres at its Phoenix gold project in the Red Lake camp of Ontario. Rubicon ended the day up C$0.20 at C$1.73.

Not to be outdone, Colossus Mineral tagged 406.4 grams gold, 98.4 grams platinum and 115 grams palladium over 7.88 metres at its Serra Pelada project in Brazil. Colossus added C$0.78 to close at C$2.38.

Agrium (NYSE:AGU), North America’s third-largest fertilizer producer by market value, posted a fourth quarter profit of $124 million or $0.79 per share, down from the $172 million or $1.24 per share tabled in the same period a year earlier. However over the year Agrium, which ended the day up C$1.20 at C$47.21, posted record profits.

A stock to watch is Kinbauri Gold. The company’s shares were halted from trading at C$0.47 pending news. Kinbauri holds the advanced El Valle/Carles project in northwestern Spain and has been seeking strategic alternatives to move the project towards production.

Right now it is all about gold and nothing else. We will see what Thursday trading has in store.

Source: Resource Stock Roundup: Thursday, February 12th, 2009

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