Agribusiness Stocks Are Breaking Out

| September 6, 2011 | 0 Comments

“Dad, you know I love this place… but I’m not coming back to the farm.”

It was an easy decision for me at the time.

Back in 2001, corn prices were still cheap.  And it was hard to make a living producing corn.

For nearly 30 years, corn prices fluctuated between $2 and $4 per bushel.  The problem is we only made money when we could sell our harvest for more than $3.

Some years we made money.  Sometimes we broke even.  But most of the time, our family farm was losing money.

Finally, after enduring an entire decade of sub $3 corn prices from 1997 to 2007, my family got out of the corn production business.  Instead of suffering losses year after year, we sold all of our equipment and rented out our land to other farmers.

As they say, “If I only knew then what I know now.”

You see, since mid-2007, corn prices have tripled from $2.50 to $7.50 per bushel.

After nearly 30 years of range bound trading between $2 and $4, corn prices have reset higher.  Now corn regularly trades as high as $8 per bushel.

That’s great news for corn producers…

Higher corn prices have led to boom times for producers.  According to the USDA, net farm income is forecast to rise $24.5 billion this year to $103.6 billion.  That’s a 31% increase from 2010!

You see, bad weather, low inventories, rising ethanol usage, and booming demand from China and other emerging markets are propelling corn prices higher in a hurry.

In just 12 months, corn prices have more than doubled!

And here’s where it gets interesting… Corn producers aren’t the only ones making money.

Farmers are re-investing profits back into their business.  They’re buying more farmland… upgrading to the latest technology… buying new tractors and combines… building new buildings… installing new irrigation systems…

In fact, the biggest question most farmers are dealing with today is how to reinvest their profits!

It also means farmers are putting more land into production.  And that’s great news for the seed and fertilizer companies.

You see, with corn prices this high, even marginal farmland is profitable. And marginal ground typically needs more fertilizer to boost the amount of grain it yields.

As you can see, farmers will be re-investing their record profits in a variety of ways.  And that’s great news for the entire Agribusiness industry.

Any way you slice it, Agribusiness companies like Potash (POT), Mosaic (MOS), Monsanto (MON), and Deere & Co (DE) are going to make a killing.

And here’s the best part…

Despite corn prices remaining high, Agribusiness stocks suffered right along with other stocks in the latest downturn.  In fact, from the April high to the August low, Agribusiness stocks were down just as much as the S&P 500.

That’s just amazing!

But over last week, the tide is beginning to turn.

As you can see, since mid-August, the black line representing Agribusiness stocks is rocketing higher much faster than the gray line representing the S&P 500.

This is a clear indication investors are favoring Agribusiness stocks.

Look, Agribusiness stocks are the proverbial baby thrown out with the bath water in the recent market correction.  Now savvy investors are swooping in to pick up these stocks at a huge discount.

Fortunately, this is only the beginning of a huge breakout for Agribusiness stocks.  Don’t miss out… Now’s your chance to buy these great companies at a huge discount.

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Category: Stocks

About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets on a daily basis. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

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