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... Investors looking for growth opportunities often gravitate toward products that seem fresh and exciting.
The stock of a company that produces the newest handheld device using the latest in cutting-edge technology quite often becomes a Wall Street darling.
Sometimes, however, unexpected growth opportunities can be found in even the most ancient of human endeavors.
Case in point: farming and agriculture.
Though as old as civilization itself, the ag industry could prove to be one of this year’s fastest moving growth stories.
As a rule, making money in the agriculture sector is a function of soft commodity prices — the direction and magnitude of moves for products such as corn, wheat, soybeans and sugar, among others.
The prices of these commodities are driven by a host of factors all over the world — and this year, a far wider range of conditions than usual are impacting the markets.
Drought conditions in China, flooding in Australia and freezing winds in the American Midwest are all affecting wheat production.
The ethanol industry has projected a sharp rise in demand, prompting speculators to bid corn futures higher. That price jump has been accelerated by a recent Agriculture Department report indicating corn supplies are at their lowest point in 15 years, the result of supply disruptions and increasing worldwide demand.
That condition is likely to persist as the industry’s capacity — its ability to replenish low stocks — is a relatively slow-moving process. At the same time, the aggregate need to produce more food products continues to mushroom, reflecting a steadily expanding worldwide population.
The recent turmoil in Egypt was seen by some pundits as an uprising against a nondemocratic regime. But the root cause had less to do with politics and more to do with the fear that local food prices are out of control among a population that can at least afford such dramatic increases in the cost of a basic necessity.
Egypt aside, food-price inflation is being felt around the globe, particularly in developing countries where standards of living are improving.
These recent inflationary spikes in commodity prices probably won’t continue unabated, but there are still ample investment opportunities in even moderate increases in food prices. The question is, given the recent upward trend in agricultural commodity prices and the fundamental factors currently in place in the industry, how does the average investor best take advantage? …
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