Monday, March 10, 2008

DailyWealth: Why Grain Prices Will Triple

In today's DailyWealth, Tom Dyson makes the case for much higher grain prices in the future. According to Tom, here are the inflation adjusted highs for the grains (hit in 1947):
  • Soybeans: $37.86
  • Corn: $26.03
  • Wheat: $29.25
Considering that during a bull market, nearly everything hits a new all-time high - these could have some room to run, especially when accounting for inflation.

What I find particularly attractive given this argument though are the softs - particularly sugar, cotton, and coffee. Despite their awesome rally YTD, all three are still quite a ways off of their nominal all-time highs, never mind the inflation adjusted numbers.

I'm personally rooting for this correction in the softs to last a little while, so that we have time to rebuild our positions and enter these markets at favorable prices.


Anonymous said...

Hey are the writers on the DW still talking about wood pellets from Canada? I stopped the free newsletter a coupla weeks ago as their predictions seemed to always be too late or too early, plus I've plenty of better free sites to check daily.

That correction could be over, damn it was quick! I've checked quite a few ETF charts and most prices have today bounced off the 50 day EMA - I started using ETFs around 6 weeks ago, not used CFDs yet (noob).

I like softs too, in fact I had a recommendation to buy cotton from another investor February 18th but I bought a bank share instead. Oops, sold it about a week later! The cotton ETF (COTN.L) is still around 5% above the 50 day EMA so will wait a day or two before buying. Maybe I'll be using CFDs soon.

pharmer said...

Great post Brett! I read this and tend to completely agree with it. Here's why: think about the tech boom in equities in the late 90's. EVERYONE was in on it. I had waiters in restaurants giving stock "tips." My point is that with the internet and news media making all of this information so readily available today, people are going to see this run up and want to take part in it.

Now here's the catch. Unlike equities, where new IPO's can come on board and the market can grow, there is a finite number of bushels of corn harvested each year and a finite amount of oil delivered daily. You try to cram a million new investors into this space and you are going to see astronomical climbs in prices. Another thing to watch out for is called the ETF indicator. I want to credit the right person, but the author fails me right now, but he said to look at the number of ETF's in a given sub-sector space and once it gets above a certain number, get out because the whole sector has already been played for its big run-up.

So far we are fairly lucky. The mainstream exposure is very limited in offerings for commodities exposure, but when it starts to grow, I'll ride it up and then that will be my indicator to sit it out for a while. Just some thoughts... Again, like the post.

-Kyle (the Pharmer)

JustinC said...

The differences in awareness of current global financial circumstances between the net-savvy (and participating) and others is quite astonishing. I'll bet 9 out of 10 people aren't aware of so many commodities breaking records on a regular basis. I guess this will only really be news when prices have rocketed in the shops, by which time it's too late to do anything meaningful about them (or profit).

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