Why Cold Weather Will Equal Hot Profits For These Agriculture ETFs (DBA, RJA, MOO, MON, POT)

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October 26, 2011 11:23am NYSE:DBA NYSE:MOO

Kevin Kerr: The crisp smell of autumn leaves, the chill in the air, and pumpkins, and turkey and stuffing, are all leading indicators that once again old man winter’s wrath will be here very soon. In fact, winter 2011-2012 is predicted to be tough sledding for much of the nation, and the world.


Last year was no picnic either …

Across many parts of the U.S., it was the coldest winter in three decades. The Eastern seaboard plunged to a record -50F with most weather records broken. Snowstorms shattered New York City in December 2010 and January 2011 to become the snowiest January ever recorded.

Now, many forecasters are predicting 2011-2012 could be even worse! So as an investor, how can you come in from the cold and potentially make some big money on the extreme weather this winter?

Markets That Heat Up, When the Weather Gets Ice Cold!

If you’re looking to take advantage of the frigid weather, there are several key commodities that can benefit from the plunging mercury. The most direct ones that can be affected are the heating fuels, (i.e. heating oil, natural gas, propane).

So it may be worth looking at some call options on heating oil futures for this winter. But expect to pay a seasonal premium. Gasoline prices also tend to go up in winter because of mandated blending requirements for certain states.

However, another commodity that can deliver big profits due to cold temperatures, and is not on the radar screen for many investors, is orange juice.

Florida’s orange crop and orange industry has been decimated over the last decade, and the situation is getting worse. In my opinion, it may never get better.

Hurricanes have ravaged the citrus groves and wiped out whole areas of growers. Citrus diseases, spread by wind from hurricanes, have taken a toll too. Diseases like citrus canker has eaten away many viable groves and damaged others permanently.

Some growers have simply given up and sold their land to aggressive real estate developers. Those are trees that will never come back on line; a permanent loss.

Another ongoing challenge for the industry is that migrant workers, once abundant and a staple to the harvesting industry, are now scarce. Homeland Security crackdowns have intimidated workers and has led many of them to flee or seek other work.

Many orange growers are beside themselves when they have oranges on the trees — literally money growing on trees — and nobody to pick them. Usually the fruit falls to the ground and rots.

The impact of freezing temperatures can also be devastating. For example: In the winter of 1983-84, a single cold snap around Christmas “destroyed over $1 billion of the citrus crop in Florida. Louisiana lost 80 percent of its citrus crop, Tennessee estimated $15 million in agriculture losses and Texas experienced hundreds of millions of dollars in crop damage” according to the National Oceanic and Atmospheric Administration.

Vitamin C for Your Portfolio

As the long, cold winter sets in, you can load up on OJ in several ways. The most direct way to take a position in orange juice is by using the futures and options market, which offers good liquidity but can be somewhat thinly traded at times.

If you’re more risk averse, you might prefer to capitalize on weather-related agricultural losses in general by taking a closer look at some exchange traded funds (ETFs), such as:

  • Power Shares DB Agricultural ETF (NYSE:DBA)
  • ELEMENTS Rogers International Commodity Agriculture ETN (NYSE:RJA)
  • Market Vectors Agribusiness ETF (NYSE:MOO)

All of these funds have a good weighting toward crops, including orange juice, that can be severely impacted by sub-zero temperatures.

You could also use ETF options to seek gains in energy and other commodities that could thrive this winter. To learn how my Master Trader members are doing that, read my new report.

Regardless of which vehicle you think is best for your particular investing, bundle up your portfolio for a long cold winter and lock in some hot profits!

Yours for resource profits,

Written By Kevin Kerr From Money And Markets

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.

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economics.


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