July 22, 2010 – More on the Grains

Featured Trades: (POT), (MON)


 

4) More on the Grains. I managed to catch an interview with Charlie Rentschler at New York boutique investment bank, Morgan Joseph, one of the top agricultural analysts in the industry, known as the ‘Farmer from Harvard.’ He says that investment in the sector is a frustrating and unpredictable mix of bugs, weeds, and weather, tossed in with capricious government policy and volatile commodity prices. The industry is enjoying enormous productivity increases, thanks to new genetic seed varieties, narrowing rows for planting which accept more corn seeds in the ground,  automatic GPS steered tractors, and farms requiring less tillage, enabling more acres to be planted. Ethanol now accounts for a staggering 10% of the arable land in the US and one third of the corn crop, and is having a huge upward push on prices. It has ratcheted corn up from the $2 to $4/bushel range, and soybeans from $4 to $10/bushel. His first pick is Saskatchewan fertilizer producer Potash (POT), which is benefiting greatly from rising prices and soaring demand from China, followed by Monsanto (MON), which I, myself, have been pushing for a year. After a period of weakness triggered by the government’s January crop report predicting huge increases in corn plantings this year, which is cutting the knees from under prices, I expect to see a long term bull market in food prices. Wait for the markets to price in another perfect year, buy, and then wait for the weather to turn bad, as it invariably does.

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