Agriculture stocks have gotten beaten up this year, yet the bullish case - a growing, wealthier...


Agriculture stocks have gotten beaten up this year, yet the bullish case - a growing, wealthier world population - remains, writes Jay Palmer. For broad exposure, there are ETFs MOO. PAGG, DBA, or companies like ADM and Bunge (BG). Equipment makers: Deere (DE), AGCO, CNH Global, Titan Int'l (TWI). Fertilizer firms: Mosaic (MOS), Potash (POT), CF Industries. Seed science: Monsanto (MON), Syngenta (SYT), Dupont (DD).
Comments (4)
  • Bruce Whitaker
    , contributor
    Comments (406) | Send Message
     
    I would rather buy a grain or broad agricultural commodity ETF and avoid trying to outguess on what and where farmers will spend their money. I like JJG which is an unleveraged play on corn, soybeans and wheat, and Jim Rogers' RJA which is a very broad play on things that grow including a small play in live cattle and lean hogs. The play here is a bet on food and other crop scarcity rather than equipment, seeds or fertilizer. Farmers can cut back on fertilizer use, hold off on equipment purchases or even planting, and suffer crop failures, but if you believe that it will become more difficult to meet the world's need for food or that global warming may cause crop disruption due to floods, drought, etc., then this is an interesting place to put some money.
    8 Oct 2011, 07:47 PM Reply Like
  • The Patriot
    , contributor
    Comments (358) | Send Message
     
    Another good play that I have had good success with is NEOG,
    testing equipment for food safety.
    8 Oct 2011, 10:56 PM Reply Like
  • dividend_growth
    , contributor
    Comments (2895) | Send Message
     
    Agricultural ETFs? Longs should watch out for contangos.
    9 Oct 2011, 09:23 PM Reply Like
  • Bruce Whitaker
    , contributor
    Comments (406) | Send Message
     
    Contango is the norm for grains in a bull market. That's not to say that prices will necessarily rise to the futures contract level by expiry or that they won't fall. As is true for the share prices of Ag equipment manufacturers, fertilizer producers and seed companies there is no guaranty of stock appreciation or that shares will not fall in price.

     

    Looking at the various charts and comparing a few representative stocks mentioned versus Ag commodity ETFs on a one, two or 3 year basis its difficult to come to any conclusions. Just as their are variances between individual stock performance within a group their are variances between stock groups and Ag commodity ETFs depending on the time frame looked at. In the end it's merely a matter of investor preference and perception as Ag ETFs are relatively new and longer term comparisons don't exist unless one wants to go to the trouble of weighing and balancing actual commodity prices versus the stocks mentioned.
    9 Oct 2011, 10:27 PM Reply Like
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