Gyroscopic Investing

If you anticipated rising food prices, say as a result of rising demand from China, and you wanted to speculate on that, how would you do so? Certain stocks? Commodities? Let's also say that this is a long-term play, since it would obviously be impossible to get the timing right. It's kind of like buying Estee Lauder and waiting for aging baby boomers to buy some luxury items.

John Deere is the most obvious play on rising food prices.

Higher food prices mean that farmers can invest in more expensive technology to increase the efficiency of their operations.

Higher food prices also mean that more people will go into farming, which also means there will be more demand for the latest farming equipment.

I would caution, though, that from a historical perspective, the factors above have always caused rising food prices to eventually lead to a market glut of the food items that were perceived to be scarce in prior seasons.

When it comes to most commodities, the market works pretty well.

Makes sense, thanks.
I was thinking about fertilizer, too -- obviously, I wouldn't want to get in too deep so to speak. ;-)
But, I like the John Deere idea.

dualstow wrote: Makes sense, thanks.
I was thinking about fertilizer, too -- obviously, I wouldn't want to get in too deep so to speak. ;-)
But, I like the John Deere idea.

Based on the way John Deere acted in early 2008 (very strong) when food prices were rising, I think that Deere is also the place that hedge funds like to go when the "rising food prices" meme starts bouncing around.

dualstow wrote: If you anticipated rising food prices, say as a result of rising demand from China, and you wanted to speculate on that, how would you do so? Certain stocks? Commodities? Let's also say that this is a long-term play, since it would obviously be impossible to get the timing right. It's kind of like buying Estee Lauder and waiting for aging baby boomers to buy some luxury items.

I would look at the Tecrium ETF's.  They minmize the futures rollover problem.

MG

MOO

Moo is an agribusiness ETF. Here is a summary from yahoo.finance

The investment seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the DAXglobal Agribusiness Index. The fund normally invests at least 80% of total assets in equity securities of U.S. and foreign companies primarily engaged in the business of agriculture, which derive at least 50% of their total revenues from agribusiness. Such companies may include small- and medium-capitalization companies. It is non-diversified.

Thanks, guys.
Much appreciated!

I see that Deere is one of MOO's top ten holdings.

Agribusiness ETF called MOO?

You have got to be f*king kidding me.

And COW???

I'm losing my mind... is this a bad dream?

If you have a long term investment horizon and can tune out any near-intermediate term volatility, I think food and particularly food production might be a very attractive speculation.  The world's population is expanding rapidly and its food supply is not. 

Commodity that everyone needs + increased demand - limited supply = Good Investment

Ad Orientem wrote: If you have a long term investment horizon and can tune out any near-intermediate term volatility, I think food and particularly food production might be a very attractive speculation.  The world's population is expanding rapidly and its food supply is not. 

Commodity that everyone needs + increased demand - limited supply = Good Investment

If you want to slice it a bit more finely, consider that as people come out of poverty they like to have more meat in their diets, and more meat means a need for a lot more agricultural products, since it takes a lot more plant material to feed an animal, slaughter it and feed it to a person than it does to simply feed the plant material to the person directly.

You might say that cows, pigs and chickens are basically an inefficient way of concentrating the caloric content of plants for human consumption.

Just what are you trying to tell us, Clive?  

Moda: My wife always liked the ticker SHOO.
Ad Orientem: exactly.

MediumTex wrote:...consider that as people come out of poverty they like to have more meat in their diets, and more meat means a need for a lot more agricultural products

That is precisely what was on my mind when I mentioned China in the original post. Well, that and the current price of cashews.

You might say that cows, pigs and chickens are basically an inefficient way of concentrating the caloric content of plants for human consumption.

You just reminded me of a 'Nature' program that recently aired on PBS. It was mainly about the roar of lions, but also about how the body plan of cats doesn't change much from lions to tigers to house cats. Near the end of the program, they analyzed the poop of different animals to see how much energy was extracted from each animal (elephant, lion, giraffe...) One scientist mentioned that those animals that are lower on the food chain do the plant digestion for those at the top. So I guess from a lion's point of view, it's efficient.
(Edit: it was the Big Cats episode of 'Inside Nature's Giants')

The best thing for agribusiness is not merely people eating meat but them throwing meat away uneaten. Isn't that the pinnacle that we have now achieved.

Off topic but I also loved the colossal squid episode of Inside Nature's Giants.

stone wrote: The best thing for agribusiness is not merely people eating meat but them throwing meat away uneaten. Isn't that the pinnacle that we have now achieved.

That reminds me of the pinnacle of business in general, which seems to me must be Facebook.

In the past, companies were evaluated on how productive they were and how much they were able to add to society.  In the world we live in today, however, we celebrate companies that are able to subtract from society's overall productivity, which is surely what Facebook is doing by facilitating such a massive waste of time, much of it during the workday.

Think about how many jobs Facebook has created through the reduction in average per capita productivity from compulsive Facebook monitoring.

Thinking like a PP'er, I'd say buy farmland then rent share it out.  ETF's like MOO amd COW invest in stocks and are therefore highly correlated with stocks.  Farmland isn't correlated with stocks (I'd guess it has a close to zero correlation).  Direct ownership of farmland that is rent shared out generates a lot of income from property similiar to a REIT but with much lower property taxes, no counterparty risk, but less liquid. 

I hear you, FarmerD, but that seems like a lot more work than clicking a button. I think today is the day I add DE to my vp.
Edit: Just did.

Based on the prevailing wisdom regarding the future prices of food and farmland, I would bet a lot of money that there will be multiple publicly traded farm land REITs in the next couple of years.  Probably just in time to miss out on most of the growth in farm land prices 

clacy wrote: Based on the prevailing wisdom regarding the future prices of food and farmland, I would bet a lot of money that there will be multiple publicly traded farm land REITs in the next couple of years.  Probably just in time to miss out on most of the growth in farm land prices 

Last I read, Iowa farmland is already overvalued, its hard to make a profit.

MG

MachineGhost wrote:

clacy wrote: Based on the prevailing wisdom regarding the future prices of food and farmland, I would bet a lot of money that there will be multiple publicly traded farm land REITs in the next couple of years.  Probably just in time to miss out on most of the growth in farm land prices 

Last I read, Iowa farmland is already overvalued, its hard to make a profit.

MG

Not sure what article you read, but I'm from Iowa and own/operate a business there. I can assure you that the ag sector is booming there, including many family farms.  Granted land costs and rent have went up so much, that anyone who recently bought at these prices, or who rents, is probably finding the cost of land can make it costly to operate.  But those that own their land and bought 10 years ago or more are doing just fine and profiting from higher rents. Just like any business you'll have winners and losers.

Also, I've found that Iowa farmers are notorious for complaining about how difficult it is to farm for two reasons:

1- They don't want any of their friends/family/neighbors to know how much money they make.
2- They want the subsidies to keep flowing.

clacy wrote: Last I read, Iowa farmland is already overvalued, its hard to make a profit.

But those that own their land and bought 10 years ago or more are doing just fine and profiting from higher rents. Just like any business you'll have winners and losers.
[/quote]

Last I read, gold is overvalued.  But those that bought gold 10 years ago are doing just fine.  Therefore gold is not overvalued.  (Fill in the blank)

clacy wrote: Also, I've found that Iowa farmers are notorious for complaining about how difficult it is to farm for two reasons:

1- They don't want any of their friends/family/neighbors to know how much money they make.
2- They want the subsidies to keep flowing.

In the early 1970's i recall the Nebraska Governor made a rather infamous statement, "I have never met a happy farmer."  I think that's why he wasn't reelected . 

MachineGhost wrote:

clacy wrote: Based on the prevailing wisdom regarding the future prices of food and farmland, I would bet a lot of money that there will be multiple publicly traded farm land REITs in the next couple of years.  Probably just in time to miss out on most of the growth in farm land prices 

Last I read, Iowa farmland is already overvalued, its hard to make a profit.

MG

Corn prices have tripled since 2005 from $2/bu to $6/bu.  One could argue the higher land prices were in direct response to the steep rise in commodities.  Farmers are making money hand over fist right now. 

FarmerD wrote:

MachineGhost wrote:

clacy wrote: Based on the prevailing wisdom regarding the future prices of food and farmland, I would bet a lot of money that there will be multiple publicly traded farm land REITs in the next couple of years.  Probably just in time to miss out on most of the growth in farm land prices 

Last I read, Iowa farmland is already overvalued, its hard to make a profit.

MG

Corn prices have tripled since 2005 from $2/bu to $6/bu.  One could argue the higher land prices were in direct response to the steep rise in commodities.  Farmers are making money hand over fist right now. 

How much of the rise in corn prices do you think is attributable to the crop burning program that we call ethanol?

MediumTex wrote: How much of the rise in corn prices do you think is attributable to the crop burning program that we call ethanol?

This whole ethanol idea is one of those perfectly absurd plans that only governments can get away with.  Private entities that come up with ideas like this are quickly dispatched by market forces.

I really don't understand this idea of turning perfectly good food into really crappy fuel that wrecks fuel pumps.  Corn ethanol barely even has a positive energy balance!

I just found out my favorite gas station has a 100% ethanol-free 91 octane gas pump... this is the first time I've been glad I have a car that sucks Premium gas.  Lest I be left with a head scratching budgetary query every time I refill gas.