Agricultural Commodities
Posted by ML on July 6th, 2007
Mike Panzner (via the Big Picture) 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 break out 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!
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July 6th, 2007 at 7:35 am
I am still holding AGU from $17, about 160% in total gain. Besides ADM, this is the only agricultural-related stock that I have. As a percentage of my allocation, I definitely don’t hold enough agriculture. I believe financialsense had an article a couple weeks ago on 3 other stocks besides AGU. If I remember correctly, they are DE, MON. The last one I have forgotten.
Of course, my return still pales in the face of the 700% return in TNH stock in 1 year.
July 6th, 2007 at 10:22 am
Dear Frugal,
Speaking of commodities, have you changed your perspective on Gold and Silver, given the inflation that will be flowing from the food side of the equation and soon labor, given the tightness of the labour market.
Also, with central banks ready to tighthen further, how can the U.S. Fed keep pace? Seems that the USD is heading further south.
We also should note that Newmont has stopped hedging and the PM stocks are starting to rise, especially SLW.
Your updated perspective is greatly appreciated.
July 6th, 2007 at 4:57 pm
Frugal,
AGU is none too shabby either! The whole agri chemical sector has gone bonkers in the past year. http://biz.yahoo.com/p/112conameu.html
July 6th, 2007 at 5:05 pm
Frank,
I can’t speak for Frugal. But methinks he was a little too pessimistic on gold. I’ve been pretty clear on what I thought the PMs were ready to do. For a more emphatic opinion, read http://www.gold-eagle.com/editorials_05/rosen070407.html.
Price is its own confirmation, there is really no need to consult anyone.
July 9th, 2007 at 12:23 am
Frank,
I have been waiting for HUI to come back down once more in the last week to add my stake. But the market never pleases the majority. I saw the MACD’s wiggle, and thought that it would wiggle down once more, but it didn’t.
I’m temporarily positive on gold & PM. But without a general market correction, or HUI breaking above 370, I will still be cautious.
I still don’t believe US Fed will tighten. If they do, more hell will break lose besides the subprime mortgages. In any case, all of these events are long-term positive for gold. Funny money cannot outlast the real money.
Frugal