abare on grains

Thanks for the pretty weather pictures yellowcake. Rain is good.

This is an excerpt from a Dow Jones article:

"Australian grain farms are well placed to expand operations after two years of solid financial performance, the government's Australian Bureau of Agricultural and Resource Economics reported Friday.
"Grains industry farms have a relatively strong equity position and should have little trouble continuing to expand in the future should seasonal conditions allow them to," Abare said in a report on the financial performance of grain farms.
Australian grain farms experienced substantial growth in their financial performance in the 2007-08 fiscal following a dismal, drought-affected year for farm incomes and
profitability in 2006-07, with this improvement projected to continue for most farms into this fiscal year ending June 30, according to the report."


In my opinion, if investors/traders want exposure in the commodity sector, a safer spot to be is the soft commoditiy sector. Grain prices have not sky rocketed over the past 5 months and they are reacting in a more stable fashion.

I seriously doubted calls in the past of shortages in food. The globe is much more technically advanced now than 50-100 years ago. Yields have improved dramatically and there is ample arable land in the world. However, I do believe if we have muted global growth over the medium term, food prices should not fluctuate too much (i.e. people do still need to eat), but industrial metals can actually decline if growth is not as strong as expected. (you need to eat, but you can make do without the latest mobile/ipod etc.)

End of the day, agri. stocks always depend on good weather and that is not something we can predict in advance. Fingers crossed we get good drenchings in Nth America & Australia this year.

As for valuations, please seek professional advice.

Happy investing.