The (Second) Best Jim Rogers Interview of the Year

Of course I'm biased - by vote for #2 of the year is a lengthy Rogers interview with Frank Curzio, which is excellent, thanks to the length and depth that Curzio allows for Rogers.  Here's the link.

You can hear that Jim is quite cautious right now - citing very little enthusiasm for anything, except for North Korea, agriculture, and his trusty exercise bike.

This WSJ video is more entertaining and insightful, as Jim gets pretty worked up at the know-nothing girl who appears to be doing her best to infuriate him:



And I had the opportunity to sit down with Jim Rogers this April while in Singapore - here's my writeup of our discussion.

Recommended related viewing: Check out Porter Stansberry's End of America video

A Key 2-Year Breakout in Rough Rice: Ag Bulls, Rejoice!

Regular readers know that we've been keeping a keen eye on rough rice ever since Jim Rogers said "if rice went down, he'd buy more."

That prompted me to take a look at the supply/demand fundamentals of rice, and conclude that things were teed up for a potential rally in this unsung grain.

A recent Wall Street Journal article reported farmers are reducing acreage for rice by as much as 30 percentin favor of higher-priced cotton and soybeans:

A shift in planting likely will come in the spring when farmers sow their fields in Arkansas and Louisiana, analysts said. They are projecting as much as a 30% cut in acreage devoted to long-grain rice. Growers will turn to soybeans, cotton or other crops after becoming frustrated with rice prices, which have lagged behind other agricultural commodities.

With corn, soybeans, cotton and rice often competing for the same land, the sharp speculator can often do quite well buying the laggard(s)—which, in this case, is rice.

A price-lagging grain often rallies eventually because farmers usually neglect planting it; they instead plant the crops that have already rallied, thus creating a shortage in the laggard grain and inevitably higher prices.

You can read my entire rough rice analysis here.

Since writing this piece, rice has rallied back up towards 16 cents - a key area of resistance in recent years:

Rough rice for March 2011 delivery. (Source: Barchart.com)

I was hesitant to "go long" rice until it broke through this resistance.  Unlike value investors in stocks, we commodity traders prefer to buy on strength rather than weakness.  So a decisive break to the upside, combined with the positive underlying fundamentals discussed, would be the cue I'd like to see.

But when I pulled up the chart of the May contract, I saw that there was in fact a significant breakout today:

Rough rice for May 2011 delivery - it's a bull market! (Source: Barchart.com)

So, when Asia's trading opened up at 4pm Pacific, I picked up a May contract in Rough Rice at an entry price of 16.24.

We'll set the initial stop around the 13.50 mark, where there appears to be some decent support.  I also like to use a 15-day low as another stop guidepost when dealing with the grains.

We'll keep an eye on this trade and breakout as things progress.

Let's go rough rice!

Jim Rogers' Two Favorite Commodities to Buy Right Now

Jim Rogers may like gold - but he LOVES silver.

“I would rather own silver than gold," Rogers tells India's ET Now

“Silver is still 40 percent below its all-time high. So silver has not been any sort of great bubble compared to perhaps some other assets we know." (Source: Moneynews.com)

And Jim, an agricultural bull since he opened his commodity fund in 1998, picks rice as his favorite grain:

“Likewise for the rice, if rice goes down, I will buy more rice. So both the silver and rice have a great future for the next few years,” Rogers says.

Incidentally there was an article in today's Wall Street Journal that reported farmers are reducing acreage for rice by as much as 30%, in favor of higher priced cotton and soybeans:

A shift in planting likely will come in the spring when farmers sow their fields in Arkansas and Louisiana, analysts said. They are projecting as much as a 30% cut in acreage devoted to long-grain rice. Growers will turn to soybeans, cotton or other crops after becoming frustrated with rice prices, which have lagged behind other agricultural commodities.

In 2010, U.S. rice futures fell nearly 4%, in contrast to soybean futures that climbed 34% and cotton futures that rose 91%. Driving the price gains were concerns that production wouldn't keep pace with demand, particularly as China's appetite for imports surged.

With corn, soybeans, cotton, and rice often competing for the same land, the sharp speculator can often do quite well buying the laggard(s) - which, in this case, is rice.

Precisely because farmers usually neglect the crop with the lagging price, and instead plant the crops that have already rallied.  Which reduces the supply of said grain.

Rough rice is still well off its 2008 highs - with potential acreage reductions on tap, we could see a breakout soon. (Source: Barchart.com)

This is exactly the reason we we'd been salivating over the potential for cotton for so long - it was a matter of when prices would rocket, not if.  And rocket they did!

When cotton broke out - largely thanks to supply constraints - it really did a moonshot!

The playbook was analogous with King Cotton - soybeans and corn had been rallying for years, while cotton's price languished.  So farmers who had traditionally planted cotton increasingly got eyes for the sexier returns its ag cousins could bring instead.  Supply fell - and soon after, prices rocketed.

So if you're looking to invest like Jim Rogers - and get some exposure to the grains - it looks like rice is the most reasonably priced starch for your plate today.

Hat tip Daily Crux for the original link.