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.

This chart shows the price movements since the beginning of the year of the Powershares DB Agriculture Fund (NYSE:DBA). It represents a basket of futures contracts for commodities such as wheat, corn, soybeans and sugar. As Justice says, “Commodity after commodity has roared back to life, thanks to a combination of renewed inflation expectations, a crashing U.S. dollar, and newly bullish fundamentals.”

Last Thursday, we discussed at length the effects that inflationary expectations are having on the market. We said that Treasuries were a bad place to be and that energy-related commodities such as uranium and lithium were likely winners in an inflationary scenario. Justice points out that corn, soybeans and sugar are worth considering.

Corn prices surged to a six-month high,” Bloomberg reported earlier this week, “after the U.S. government said domestic demand will exceed production for the third time in four years, slashing reserves by 28%.”

Corn inventories are expected to fall even as the various demand sources for corn – food, livestock and fuel – rise an estimated 3.5% next year.

Soybean prices, meanwhile, recently hit seven-month highs on the CBOT (Chicago Board of Trade) after U.S. stockpile forecasts dropped. Beans were also boosted by word that the Brazilian National Agriculture Confederation, a major farm lobbying group in Brazil, would press for limited soybean acreage in the coming planting season to help keep prices firm.

And finally Sugar, not to be outdone, recently hit 34-month highs – their highest level in nearly three years – on “poor crops and robust demand,” according to the Financial Times. A failure of India’s local sugar crop was seen as a big price booster. “Swings in Indian sugar output, which move the country back and forth from exporter to importer, are a critical factor in global prices,” the FT reports.

“The price of lumber is a fair indicator of where the market is headed,” says Tom Dyson in last Friday’s DailyWealth. Lumber is an “on-demand” market. That means prices are set by real commercial demand (not the pie-in-the-sky nonsense we’re seeing in US equities right now). This from Tom:

Take the 2008 credit crisis as an example. The lumber price was the first to signal a bear market was coming. It peaked in May 2004. The Bloomberg Homebuilders Index peaked in July 2005. The Case-Shiller U.S. home price index peaked in July 2006. The credit crunch started in February 2007, when New Century Financial collapsed. And finally, the S&P 500 peaked in October 2007.

Only 21% of Europeans are willing to eat genetically engineered food, according to a survey by the European Commission.

Some nations, such as France, have banned the planting of genetically modified crops, while others like Germany have enacted laws that allowed foods to be labeled as “GM free.”

Critics insist that such foods could pose risks to health and the environment, and further assert that genetically modified crops produce better yields.

“Most testing is carried out by the very biotech companies that have the most to gain from results that say GM food is safe,” the activist group Friends of the Earth says on its Web site. “Growing GM crops also threatens wildlife and the production of GM-free foods. What’s more, some GM crops could allow more pesticides to be used.”

But global demand for foodstuffs is on the rise, and as supplies tighten, prices continue to soar. For instance, global corn consumption is expected to rise to 793.1 million tons in 2009, up from a record 778.9 million tons this year. Stockpiles are expected to fall to just 103.3 million tons next year. Corn prices have surged about 75% over the past year and 17.5% since early June.

The price increases have trickled into the meat and dairy industry, as corn is widely used in animal feeds. Tyson Foods, Inc. (TSN), the Arkansas-based meat producer, has predicted that retail chicken prices will have to jump by double-digit percentages in 2009 for poultry processors to recoup their feeding costs, according to the Times Online.

Higher feed prices will eventually filter through to the cost of milk, cheese and yogurt, too, since 65% to 75% of a dairy farmer’s production costs are for feed, Chris Galen, a spokesman for the National Milk Producers Federation, told The Associated Press.

The World Bank estimates that worldwide food prices have risen a scorching 83% over the past three years. And the president of the World Bank, Robert B. Zoellick, estimates that the spike in food prices could push 100 million people in low-income countries deeper into poverty, as food costs cut into already meager earnings.

The biotech industry claims it can help. Research by the U.S. Department of Agriculture found that one variety of genetically modified corn yielded 9% more than conventional corn. The International Service for the Acquisition of Agri-Biotech Applications, which encourages developing countries to adopt GM technology, says GM cotton has increased yields by 50% in India.

Monsanto Co. (MON), whose insect resistant crops have gained widespread popularity among U.S. farmers, has pledged to double yields on corn and soy by 2030.

Genetically modified crops have become so popular in countries like the United States that they are actually cheaper and more readily available than their non-GM counterparts.

“We cannot get hold of non-GM corn nowadays,” Yoon Chang-gyu, director of the Korean Corn Processing Industry Association, told the International Herald Tribune.

According to Yoon, non-modified corn costs Korean millers about $450 per metric ton, up from $143 a metric ton in 2006. Genetically engineered corn costs about $350 per metric ton.

In 2007, 75% of the corn grown in the United States was genetically modified, up from 40% in 2003.

With food prices soaring and GM crops posting impressive results in the United States, Argentina and Brazil, the tide of opinion is beginning to turn in Europe. In Britain, the National Farmers’ Union is asking supermarket chains to drop their GM-free requirements for all but organic foods.

And the National Beef Association issued a statement earlier this year demanding that “all resistance” to GM crops “be abandoned immediately in response to shifts in world demand for food, the growing danger of global food shortages, and the prospect of declining domestic animal production.”

Yesterday (Monday), Peter Brabeck, chairman of Nestle SA, the world’s biggest food company, joined the chorus in calling for a change in European policy.

“You cannot today feed the world without genetically modified organisms,” Brabeck, told the Financial Times. “We have the means to make agriculture sustainable in the long term. What we don’t see for the time being is the political will.”

Organic crops are “a nice treat for those who can afford it,” Brabeck said.

“The European Union used political pressure in Africa to prevent some of those countries using genetically modified organisms,” he said. “I don’t think that was necessarily helpful for the agriculture of those countries nor for their supplies.”

Monsanto Chief Executive, Hugh Grant, recently told BusinessWeek that his company would distribute seeds to African farmers royalty free. However, he was quick to point out that this was not a “feel-good thing,” but that “satisfying the demand curve is a great business opportunity.”

As such, critics have been quick to accuse biotech companies of exploiting the world’s food crisis to further their own agenda.

“Where politicians and technocrats have always wanted to push GMOs, they are jumping on this bandwagon and using this as an excuse,” Helen Holder, who campaigns against biotech foods on behalf of Friends of the Earth, told IHT.

Regardless of that view, policymakers have been forced into reconsidering their once ardent stance against GM crops. The European Union has launched a study into whether increased use of the crops could help to curb soaring food costs across the world. Also, British Prime Minister Gordon Brown has called on the European Union to relax its rules on importing genetically modified animal feed.

“His view is that we must be guided by the scientific evidence,” a spokesman told the Independent.

Should scientific evidence continue to accrue on behalf of GM foods, a company like Monsanto might soon find itself with a whole new crop of clientele.

Source:  “Frankenfoods” Gain Greater Acceptance as Food Prices Skyrocket

I’m at the annual Biotechnology Industry Organization (aka “BIO”) Conference here in San Diego. The buzzwords I keep hearing are biofuels, green energy, and agribusiness. This year’s tag line is Innovate. Heal, Fuel, Feed the World. And no shortage of businesses are claiming to do just that…

On Tuesday, keynote speaker Arnold Schwarzenegger highlighted several state energy programs that use biotechnology. And before the “governator” took the stage, genomics pioneer Dr. Craig Venter discussed his biofuels research…

As CEO of Celera Genomics, Venter headed efforts to sequence the human genome. Today, he’s launched his own private research institute focused on creating synthetic life forms… Essentially, he’s making creatures that eat carbon and excrete fuel.

Innovators like Venter are about to make a boatload of money in ag-bio, biofuels, and other “green” life-science technologies.

You see, when oil was $30 a barrel and corn still cost $2, biotechs didn’t have a reason to develop alternative energies or agricultural breakthroughs. Now, oil is over $130 and corn is $7.50 – and hitting new highs along with wheat, soybeans, and rice. The biotech industry wants a piece of the action…

Large players like Monsanto (MON) and Syngenta (SYT) dominate the food side of the game. Both companies develop insect-resistant crops and genetically engineered seeds. Over the last year, Monsanto’s shares have doubled, up nearly 110%. Syngenta is up nearly 75%. Both are still in relentless uptrends.

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But today, the stocks are too rich for my taste: Monsanto sells for 45 times earnings and Syngenta for 30.

One company I like better is Denmark-based Novozymes. Novozymes works on food, energy, and… oh yeah… drugs. The company makes specialty enzymes. Its products are used in dishwashing detergents, food and alcohol production, oil and ethanol processing, livestock feed, and pharmaceuticals. Novozymes netted $1.5 billion in sales last year. And the $5 billion company is trading at reasonable levels today.

The one catch is that the stock trades on the OMX Nordic Exchange in Copenhagen. That makes it more difficult for U.S. investors to buy.

The same is true of a couple of other interesting companies I found at BIO…

Take Danish company Danisco, for example. Danisco is one of Europe’s largest producers of sugar. Its technology also transforms raw materials into livestock feed, biofuel, and plastics. Last year, it brought in $4 billion in sales from customers in close to 50 different countries.

And Euronext-traded DSM sells plastics, polymers, and chemicals used in human health and animal feed. And half of its $13 billion in sales last year came from industrial materials. The $10 billion company also has a manufacturing relationship with one of my favorite Phase 1 picks, Dutch biotech Crucell (CRXL).

I’m not suggesting you buy any of these stocks, not without putting in some solid research. But these companies are all cashing in on a trend I expect to track for some time. The agriculture and energy sectors are minting money right now… As the biotech industry is figuring out, there’s plenty to go around.

Good investing,

Rob Fannon

P.S. Analyst George Huang and I are busy seeking out the trend’s smallest and most innovative newcomers. Phase 1 readers can expect recommendations focused on cleaner fuels, sustainable food production, and agricultural technologies.

Source: A Strange New Way to Invest

Here’s how this rain affects consumers and investors: The states of Iowa and Illinois are the world capitals of corn production. Over 27 million acres there are devoted to growing corn. They anchor production for the world’s top corn-exporting nation. All that rain keeps farmers out of the field and damages the crop. Corn soared 11% this week as a result.

The most active corn contract has increased 86% in the past year. Corn is the chief feedstock for cattle, pigs, and chicken. It’s a primary ingredient in soda pop and cereals. To learn just how pervasive corn is in your life, we recommend reading the excellent book, The Omnivore’s Dilemma. Read it and
get ready to pay out the nose for food…

Brian Hunt

Source: Soon You’ll Pay Even More for Food

“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.

As the big dominos of $125 oil, $4 copper, $6 corn, and $1,000 gold fall onto the market, raw-material producers enjoy record cash flows. The next domino is all the cash finding its way to companies that supply equipment, services, and infrastructure to those producers.

If you’ve listened to our commentary on oil services, you’ve probably made a lot of money. But don’t forget companies like John Deere… Don’t forget the “ag services.”

John Deere is America’s largest farm-equipment maker. Think tractors, hay balers, plows, mowers, planters, and combines. Deere expects the booming farm economy to push up ag equipment sales by 35% in 2008. Shares are in a smooth uptrend. Like oil-service stocks, expect ag services to keep rising in response to high corn and bean prices.

Source: The Other Way to Make a Fortune in ‘Services’

I received an article from Kevin Kerr the other day on our current US agriculture supply.

Here is the link:
http://biz.yahoo.com/rb/080609/markets_grains.html?.v=4

I like this…

“Worries about tight fundamentals, such as low stocks and high demand, was likely to continue feeding the rally in corn, market participants said.”

Gee, do ya think so?

Hey, over the weekend, parts of Indiana got hit with 10 inches of rain. Not exactly corn-weather, if you get my drift. Can’t do much planting in those conditions.

Stand by for an ag disaster this fall….

Also over the weekend, I was listening to a speech by Obama… He said that we’d solve our energy problems over time, “by switching to getting our energy from windmills, solar and biofuels.” No crap. That’s what he said. I almost wrecked the car against a bridge abutment as I listened to that comment.

On the other side, McCain doesn’t want to drill in ANWR because “ANWR is a national treasure like the Grand Canyon.” No crap, that’s what he said. Huh? I’ve been to ANWR and ANWR is no Grand Canyon.

We be doomed…

Really, could the Demos & Repubs have nominated two more energy-illiterate candidates?

Problem is that Big Politics treats energy like “just another issue.” As in, Are you for abortion or against it? For gun control or against it? For estate taxes or against them?

From the “energy” standpoint, you have the faux-environmental movement that says we are doing “the earth” a favor by not developing resources. It’s an issue, and on that issue they vote for Demos or not. (Never vote for a Repub, which makes McCain’s position all the more curious.) It’s just an article of faith within the enviro movement to oppose development. Oppose Uber Alles.

And whenever someone does propose development, that’s called a “fund raising opportunity” for enviros. They put out “oil spill & dying seal” brochures that make a lot of advertisements look tame by comparison.

But the no-grow thinking is premised on the assumption that the US dollar is still supreme. As a nation, we need something with which to “buy it” if we don’t produce it at home. That is, if there are still people who want to sell it to us.

I’d like to put it in terms the enviros can understand. Indeed, I’ve often wondered how the most ardent environmentalists think that without oil & refineries, the airlines can somehow buy the jet fuel it takes to fly from LAX to JFK for the weekend trip to the Big Apple. Really, flight requires jet fuel… Do the enviros really get that?

Until we meet again,

Byron King

Note: Byron King is a frequent contributor to the free e-letter Whiskey & Gunpowder. To receive daily insights into energy, oil, commodities and other natural resources sign up here!

Source: US Agriculture Supply and the Coming Election

“Soaring prices of grains, dairy and meat have been grabbing global headlines,” says Jennifer Yousfi in Money Morning, “but other commodities have been on the rise as well.

“I’m not talking about the increases in daily staples that make the front page, but those little extras that make daily life just a little bit sweeter – coffee, cocoa and sugar. We might not need them, but we definitely want them. And inflation is putting upward pressure on the price of these soft commodities just as it is on oil and grains such as wheat and rice.”

As demand for food increases, it’s 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.”

Prices, to be sure, are soaring — crude oil fetched $132.19 a barrel in New York on Friday, up 103% from $64.97 a year earlier. Yet crude has posted similarly massive increases a number of times in the past three decades. Most notably, in the spring of 1980, as gasoline lines lengthened, the price of crude oil was 150% above the year-before level.

That price spike was caused mainly by a production cutback by the Organization of Petroleum Exporting Countries — coupled with the fact that consumers had few alternatives. But over time, the high prices spurred conservation by consumers and increased exploration and production in non-OPEC countries. Oil prices collapsed.

The episode is a textbook example of the huge price swings that can occur when supply and demand are relatively inelastic in the short run, but not in the long run, says Harvard economist Greg Mankiw, who cited it in an economics textbook he wrote.

“There are plenty of opportunities out there for investors looking to capitalize on the world’s long-term needs for oil,” says Alexander Green at InvestmentU.com.

Alex says there’s a new gold rush on in Alberta, Canada.

“In Alberta’s oil sands, energy companies don’t drill for oil. They dig it up. After excavation, giant trucks three stories high — carrying up to 400 tons of oil sands — carry it off to a processing plant.

“There, the sands are heated in a cell where the oil comes to the top of the water and the sand drops to the bottom. This oil froth is then sent to an upgrader and eventually to a refiner. Is this oil really as good as the stuff coming from Saudi Arabia?

“Actually, it’s better. According to Clive Matter, Chief of Shell Canada, this oil is “absolutely as good as it gets. In fact, it even trades at a premium because it’s high-quality crude oil.”

“And here’s the kicker: Exploration of Alberta’s oil sands is virtually risk-free. You can’t drill a dry hole here. There’s no drilling at all. It’s a mining operation – and the reserves are thoroughly outlined. So what you really need is a company with plenty of machinery, money and manpower to dig it up and process it as quickly as possible.

Read on here to learn about the one stock you should own to profit from the tar sands ‘gold rush.’