Corn is the problem. The June floods in Iowa wiped out 2% of the U.S. corn crop, and corn prices spiked to more than $8 a bushel – four times the average corn price of the last 30 years. With corn at $8, it costs $150 to fatten a hog. But the meatpackers only pay $100 per hog. So the finishing farms lose $50 on every pig they raise.

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Right now, finishing farms are liquidating their herds and going out of business.

So farmers are getting stuck with piglets. When I went to Iowa a few weeks ago, I heard of farmers throwing piglets in the trash… or using them as compost. For the first time in his life, the farmer doesn’t have enough money to make his interest payments.

So the farmer contacted his lender and explained the situation. The loan officer advised him to sell all his land, liquidate the sows, and look for a job.

But Tom says this is a short-term trend. Once a shortage of hogs begins, the price of pork will follow corn to record highs. And this is when investors stand to make a big profit…

When corn goes to record highs, pork must also go to record highs. That’s because pork is corn refined. You could say a pig is just a sack of corn with four legs.

But there’s a lag. Right now, everyone’s selling hogs. The finishing operations are selling their herds, and the farrowing operations are dumping their sows. It is pushing down live hog prices.

But in nine months – when the market has worked through the excess – hogs will be in short supply. And that’s when hog prices will start setting records. This shortage will last for two years, because that’s how long it takes to bring a commercial hog operation from scratch to production.

In 1998, the last time the hog business washed out like this, live hog futures jumped from 10¢ to 70¢ in two years. I expect we’ll see something similar this time around…

The hog ETF is the easiest way to invest in hogs. It trades in London. The symbol in Yahoo Finance is HOGS.L. Experienced traders should look at the futures market. A lean hog contract trades in Chicago on the CME.

According to a report by Bloomberg, cattle prices may rise 13% by the end of the year on the Chicago Mercantile Exchange and Brazil’s Bolsa de Mercadorias e Futuros. More from this story:

Not since 1996, when corn reached what was then a record $5 a bushel, have cattle been this cheap relative to their primary source of feed. Cattle are the seventh-worst performer of the 26-member UBS Bloomberg Constant Maturity Commodity Index in the past year, a time when soybeans, oil and copper jumped to records. After adjusting for inflation, cattle are down 27 percent from their 1988 peak.

“It’s pretty certain that we’ll see a decline in domestic supply in the U.S.,” Joesley Batista, chief executive officer of JBS SA, the world’s biggest beef producer, told reporters in Sao Paulo on May 15. “As a result, we’ll have price hikes and improved margins.”

Production also is dropping or failing to keep pace with demand in China, Brazil and the European Union, mostly for grain-fed beef, analysts and government data show.

“We expect meat prices, especially beef prices, to rise this year,” said Peter Weeks, chief economist at Meat & Livestock Australia, a trade group in Sydney. “We’ve already seen big increases in beef prices in China, Russia, India and throughout Southeast Asia.”

Now is a great time to invest in a livestock ETF, says Ian Davis in The Growth Stock Wire. And hog prices are set for a similar upswing to cattle prices.

“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.”

“Hogs, like most commodities, went nowhere for 30 years,” says Ian Davis in The Growth Stock Wire. “In 1977, hogs sold for about 55.5 cents per pound. Today hogs sell for only about 79 cents per pound. That’s a rise of 42% in 31 years, or an annualized return of 1.1%… well below the inflation rate.

“Why are hogs so cheap? One reason may be that an overabundance of cheap corn for decades led to an oversupply of hogs. According to the Iowa Farm Outlook produced by Iowa State University, corn accounts for about 80% of hog feed. But now, the brutal combination of pricey corn, increased energy costs (for processing and shipping), and cheap hogs is wreaking havoc on hog farmers worldwide.

“This trend cannot continue. 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.”

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

Tom Dyson in DailyWealth agrees with Ian’s read on livestock: “When the gold price rises, jewelry gets more expensive. 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.”

MarketWatch reports that corn stocks are set to suffer because US farmers are cutting back corn acreage this spring to grow more soybeans.

Corn futures for July delivery today closed down 1 cent at $6.2925 a bushel. The contract had ended Thursday’s session at $6.3025 a bushel, an all-time high.

Meanwhile, the price of hogs has barely inched its way higher in the last two years — it’s risen by a measly 17% since the beginning of 2006. When you adjust for inflation, hogs are only up 9.9%. So it’s not difficult to see how spiraling corn prices will play havoc with livestock prices — particular hogs and cattle.

“The prices of all commodities – and corn in particular – have soared, but hogs remain as cheap as ever,” says Ian Davis in The Growth Stock wire.

“Hogs, like most commodities, went nowhere for 30 years. In 1977, hogs sold for about 55.5 cents per pound. Today hogs sell for only about 79 cents per pound. That’s a rise of 42% in 31 years, or an annualized return of 1.1%… well below the inflation rate.

“But now, the brutal combination of pricey corn, increased energy costs (for processing and shipping), and cheap hogs is wreaking havoc on hog farmers worldwide.

“This trend cannot continue. 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.”

Read on here to find out what livestock ETF Ian recommends to his readers to profit from corn’s upswing.

Tom Dyson also thinkswe’re approaching a major bull move in hogs and cattle.

“When the gold price rises jewelry gets more expensive,” says Tom 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.

“Here’s how you play it: Buy a livestock ETF. Two trade in London under the symbols CATL.L and HOGS.L. They track the Dow Jones AIG sub-indexes for live cattle and hogs.

The freezer belongs to Wells’ Dairy. Wells’ Dairy is America’s largest private producer of ice cream. It owns the Blue Bunny brand, but it also produces ice cream for Haagen-Dazs, Weight Watchers, and Walt Disney.

No other town in the world produces as much ice cream as they produce in Le Mars. Le Mars is the ice cream capital of the world.

Last week, I went to Iowa to research agriculture. While I was there, I passed through Le Mars and saw the Wells’ dairy plant. One of the locals I talked to knows someone who works in the freezer. He says the ice cream freezer is full of frozen pork. I asked the local why. “The Wells brothers must be speculating on a rise in pork prices,” he answered.

The Wells are making a smart move. I think we’re approaching a major bull move in hogs and cattle (although there is probably a little more liquidation to come first).

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You see, livestock farmers go broke when grain prices are high and meat prices are low. That’s the way it is right now. Take a look at this chart my colleague Ian Davis put together…

Two large hog farming concerns went bankrupt last week in Le Mars. Eric, a hog farmer I met, says hog producers are losing $40 on every pig they raise. I heard stories of farmers killing their cows and pigs at birth… They use females for breeding. They use the males for meat. Right now, it’s cheaper to kill the males than it is to fatten them up and sell them as meat.

Smithfield Foods, the largest hog producer in the nation, is cutting its herd. Earlier this year, Smithfield announced it would reduce its output of hogs by 800,000 to 1 million heads.

Eric said he knew trouble was coming and sold his hogs last year. Now he uses his hog farm as a “hog hotel.” He receives rent for taking care of another person’s hogs, but takes no risk (except the credit risk of his customer). He has an option to buy a piece of these hogs later in the year if he wishes. He says he’ll wait about six months to buy hogs… when the herd reductions start to bite.

When the gold price rises, jewelry gets more expensive. 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.

Here’s how you play it: Buy a livestock ETF. Two trade in London under the symbols CATL.L and HOGS.L. They track the Dow Jones AIG sub-indexes for live cattle and hogs.

Good investing,

Tom

Source: Largest Freezer in the World