Grain Storage Is A Growth Market

| December 20, 2011 | 0 Comments

It’s tough to invest with confidence these days.

After all, stocks are riding up and down like a rollercoaster… Treasuries are yielding next to nothing… Gold prices have fallen off a cliff the last few months… And, the housing market is still on life support…

But if you dig a little deeper, there’s one area you can invest in with confidence.

You see, while just about every investment under the sun is struggling, farmland is bucking the trend.  That’s right… Good old dirt is leaving other investments in the dust.

According to new research from Iowa State University economist Mike Duffy, over the last year, farmland prices have experienced “the highest percentage increase recorded [in the last 70 years]…, and the average land value of $6,708 per acre, when adjusted for inflation, is at an all-time high.”

Over the last ten years, land prices in Iowa have shot up from $1,857 to $6,708.  That’s a 260% increase!  And they’ve nearly doubled in just the last few years.

Clearly, the trend is picking up steam…

What’s behind the rapid gains in farmland?

Rising farm income…

The Department of Agriculture estimates net farm income will jump 28% from 2010.  This measure of farm profitability will reach $100.9 billion this year.  And many of those profits are put back into land purchases.

Simply put, the agricultural economy in America is booming.

If you have the ability to invest in farmland, now’s the time.  It’s the one investment you can make with confidence in today’s uncertain market.

However, there’s another way to profit from this booming industry.  And this one could provide even bigger returns than investing in farmland.

Over the last few years, high grain prices have been great for farmers.  It’s allowed them to pay down debt on existing loans and save some money.

Today, many farms are debt-free and have a sizeable cash cushion in the bank.

This is a huge development.  Let me explain…

When farmers have loans to pay and little in the way of cash in the bank, they’re forced to sell their crops right after or even before harvest.  But harvest is also the time when grain prices are their lowest.  So, farmers with loans to pay are forced to sell their harvest at the worst possible time.

However, if they don’t need to sell their crop to pay the bank, they’re free to wait for better prices later on.  That’s great news for farmland prices.  If farmers have more money to spend, then farmland prices should continue going up.

But that’s not all…

If farmers aren’t selling the crops at harvest, they have to be stored somewhere.  And with the amount of grain farmers are producing today, they typically don’t have enough storage capacity to hold it.

As a result, sales of grain bins are soaring.

One company ready to capitalize on the growth in grain storage is AGCO Corporation (AGCO).

AGCO is an agricultural equipment manufacturer.  And they recently jumped into the grain storage business with the acquisition of GSI Holdings Corp. for $928 million.

This looks like a brilliant move by AGCO.

Grain storage is essential for farmers if they want to get the best price for their crops.  And right now farmers don’t have enough storage capacity.  With the demand for grain storage skyrocketing, it’s one market I can invest in with confidence.

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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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