Seed Your Portfolio With Agricultural Commodities

Mike Panzner (via the Big Picture, July 5) comments on the strength of the agricultural commodities:

Over the past nine months, the Reuters/Jeffries CRB index has essentially gone sideways, and five out of six of its sub-sectors haven't really moved one way or the other. However, one group stands out: the agriculture sector, with a 33% gain relative to the CRB index.

I noted the breakout in DBA (DB agricultural commodity ETF) two weeks ago. Unfortunately, it promptly rolled out of bed and managed to hold the 50 DMA only two days ago. I will continue to monitor this ETF as I’m long term upbeat on this sector. The fantastic volatility should present some interesting trading opportunities.

Now staying with the theme and just to show you a chart that blew my mind, here’s TNH (Terra Nitrogen Co. LP). It’s in the fertilizer business that is enjoying a boom from ethanol and a general lift in the price of agricultural products. Its limited partnership structure probably also attracted yield-seeking investors. I let it go at $75 and $85 and certainly am not recommending buying now. But if you’ve had it for a while, big hat tip to you!

Comments

[Thomas Melillo:]

TNH is the most amazing stock I have come across. It is truly a mind blowing event. I just wish I had bought more when I did. Although I do think that this stock has still a ways to go, and who knows where the ceiling is. Corn ethanol is not the best choice out there but as far as the agriculture industry here in the United States and the rest of the world for now is their best bet in trying to get a jump start of the CO2 problem. Its going to be quite sometime before other plants are built to produce ethanol from other sources, and with all the corn ethanol plants being built and on the drawing board , it will be at least a couple of years before the effects from a drawdown from corn will be felt in the agricultural industry. Wait until next year with another record harvest, this stock will only continue to go up in value. There is also the other crops such as winter wheat that also requires fertilizer, the only regret I have from all this is the pollution of the water from runoff that this fertilizer creates, its really a negative result. But thats a decision that the Powers that be have to solve, in the meantime my stock just goes higher and higher!!

2007 Jul 06 07:29 PM