and constantly changing fundamental news out of Europe and elsewhere.
Everything from gold and oil to base metals and coffee, have been on a roller coaster ride that doesn’t seem to end. However one group of commodities that could be poised for a strong rebound in 2012 is: The grain markets!
Grain Price Rebound Likely
The grain markets have not been spared the extreme volatility in 2011. And prices for corn, wheat, and soybeans have fluctuated wildly. The USDA reported better than average crops, and the weak global economy all weighed on prices for the second half of 2011. But all that could change dramatically in 2012 as demand is likely to pick up with emerging markets continuing to buy more and more grains … especially soybeans.
Even banking giant UBS is suggesting 2012 could be a very good year for grains. UBS rated farm commodities with high-yield credit and hard-currency emerging market debt, as the asset classes in which it recommended an overweight rating.
While banks are keen on agriculture as a potential highly profitable sector in 2012, farmers are facing much higher input costs.
According to reports, Purdue economists Bruce Erickson and Alan Miller say “growing corn, wheat, or soybeans next year will likely cost much more than it did in 2011.” In the latest Purdue Ag Economics Report they outline many of the increases in crop input costs that farmers will have to budget for the coming crop year.
Inputs like fuel, fertilizer, seed costs, and more, are going up exponentially. And at the end of the day the futures prices will reflect that. One input cost that is going up faster than any other, is rent! Cash rents that some farmers pay for the land they grow their crops on, will likely see a big jump of another 12 percent, the same increase seen a year ago.
Overall, the added costs are going to put an incredible burden on farmers … consequently the prices you pay at the neighborhood grocery store are sure to skyrocket.
Unique Ways to Put the Grain Markets to Work for You
You can take advantage of agriculture price increases by buying corn, soybeans, or wheat futures and options or an ETF like the PowerShares DB Agricultural Fund (NYSEARCA:DBA).
Another idea is to consider buying shares in some of the key companies supplying much of these inputs …
Companies such as Monsanto (NYSE:MON), Agrium (NYSE:AGU), Potash (NYSE:POT), as well as farm equipment makers like Deere (NYSE:DE). In addition, some of the seed companies may also be very good prospects to look at. Companies like Syngenta (NYSE:SYT) are sure to benefit as agriculture prices rise. These are the kinds of companies Sean Brodrick and I uncover, and closely monitor, for our Global Resource Hunter subscribers.
Agricultural commodities can often stay very strong, even in down markets. After all, everyone has to eat! So look for a few good agriculture plays for your portfolio to help you “grow” your wealth in 2011.
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 MaMare 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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