Heat Wave: Three Ways To Harvest A Bumper Crop Of Gains From This Hot Weather (CORN, PIO, DE)
Sean Brodrick: Dang, it’s been a dry summer. And just as bad, it’s hot — so hot and dry, that crops are withering across America’s farm belt. Therein lies opportunity for investors, which I’ll get to in a minute. First …
How hot is it? More than 40,000 daily heat records have been broken around the country so far this year, according to a recent report from the National Oceanic and Atmospheric Administration (NOAA).
In addition, the continental United States broke its record for the hottest first six months in a calendar year, NOAA said on Monday. What’s more, the last 12 months have been the warmest since modern record-keeping began in 1895.
As for dry, well, more than half of the Midwest had moderate to extreme drought conditions as of July 3, the highest ever recorded by the government-funded U.S. Drought Monitor.
Now, I’m not here to discuss global warming, or climate change, or whatever you want to call it. But I am going to ask you to ignore the fact that …
- It’s so hot in Washington, D.C., that recently the tarmac at the airport melted and a U.S. Airways jet got stuck in a “soft spot” as it sat at a gate. All passengers had to disembark until a tug pulled the plane out of its hole.
- It’s so hot that, as the wildfire season gets longer and worse, more than 2 million acres have burned in U.S. wildfires already this year.
- It’s so dry that areas of the Midwest that, just one year ago, saw the worst flooding since 1937, are now facing the driest season in 24 years.
- It’s so hot that, in June alone, 2,284 record-high temperatures were set across the country, as seen in this chart from NOAA’s National Climate Data Center …
But don’t obsess about the map. See, focusing on things like the map scares people, and this is not a time to panic. This is a time to look to your financial future. And there are some bullish facts for investors, including …
‘Farming in Hell’
- The USDA just cut its forecast for corn production this year by 12% — the biggest July reduction in decades.
- It’s so hot AND dry, one expert told Bloomberg, “You couldn’t choreograph worse weather conditions for (corn) pollination. It’s like farming in hell.”
- Harvest forecasts could continue to worsen. While the U.S. harvest is about two months away, the drought is hitting plants at the most-vulnerable period in their growing cycle. So there may be damage we can’t see yet. Some experts say the U.S. harvest may fall to as low as 11 billion bushels.
And we have to take this in the context of the fact that global demand for corn is soaring. World corn use has hit new records every year since 1997. The USDA is expecting global corn demand to rise another 6.4% this year.
So if someone does have corn to sell, this is a seller’s market!
Sure enough, the grain complex has surged higher in the past three weeks, with corn leading the way. Soybeans also recently hit a record price.
3 Ways to Harvest a Bumper Crop of Gains
Here are three ideas on how to play this trend …
Agriculture Commodity Funds. For example, the Teucrium Corn Fund (NYSEARCA:CORN) holds a basket of corn futures. It has already taken off like a rocket, but you might consider it on a pullback. There are other funds that track individual agriculture commodities or baskets of commodities. Plus, there are also …
Water Investments. In dry times, select utilities can do very well, and pay nice dividends. Or you can just buy one of the water utility funds like PowerShares Global Water ETF (NYSEARCA:PIO), which pays a 2% dividend to boot. And don’t overlook …
Farm Tools. Makers of farm machinery like Deere & Co. (NYSE:DE) are already doing well, because farmers who do have crops to sell are going to be flush with cash. They can probably be bought on pullbacks.
These are just three ideas. Do your own due diligence before buying anything.
The weather that parts of the Midwest are experiencing is the worst since the Dust Bowl, according to some experts.
However, to be sure, it will rain again, and it will get cooler … and grain prices that go up will also go down.
The good news for U.S. farmers is that the U.S. Mississippi River Delta and parts of the southern Midwest were expected to get rain this week. But other areas remain dry, and the pressure on U.S. crops continues.
I don’t think things are apocalyptic, but we do seem to be in a pretty well-defined trend of hotter weather. And in a trend is opportunity.
All the best,
Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Nilus Mattive, Claus Vogt, Ron Rowland, Michael Larson and Bryan Rich. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Andrea Baumwald, John Burke, Marci Campbell, Selene Ceballo, Amber Dakar, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.
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