Agriculture – Getting back to our "Roots" February 17, 2009 National Inflation Association - Preparing Americans for Hyperinflation
Other than gold, the one thing that we believe will help our country get back on its feet is agriculture. One of the only things our nation has going for itself and could produce for the world is agricultural resources and farm goods. These are the strong roots of our country that at one point helped make us the strongest nation in the world.
We are very sad that we have so many young men and women in our country that have taken out huge student loans that they will be paying back for many years and in return have received the same degree as millions of other students with no jobs available. Many of these Americans went to college with the goal of receiving a high paying job on Wall Street. They would've been much better off learning how to farm. Almost nobody went to school during the past decade to become a farmer and there is a huge drought in the amount of farmers in our country. Farmers will soon become some of the wealthiest people in America because they actually produce something valuable, unlike the people on Wall Street.
No matter how bad our economy gets, people will never stop eating and consuming farm goods. This is a true safe haven and with the drought in farmers we have today there will be limited supplies of agriculture that won't be enough to meet demand. We believe this will cause agriculture prices to skyrocket! With the hyperinflation our government is creating, a collapse in the dollar coming, and a limited supply on farm goods - every characteristic is there for agriculture stocks to move aggressively into the green.
What's remarkable about soaring agriculture prices is that corn, oats, barley and wheat aren't finite resources, like oil or copper. Fortunately for the world's ever-growing population, food is a renewable resource. Yet, U.S. stockpiles of many grains are at record lows.
The upcoming hyperinflationary crisis in America will allow investors who diversify into agriculture stocks to benefit as the average American suffers. You thought $3-a-gallon gas was bad? Soon (if not already in some areas) loaves of bread will fetch upward of $4+, a small box of granola $5, and a pound of beef filet is already nearing $27.99! Get ready for “refrigerator shock.” There isn't much consumers can do about it, unless you go on a crash diet. But you can ease the pain by sharing in some of the profits that are flowing into the agricultural sector.
Recently, a famous Billionaire investor had a good quote on Bloomberg: “There are 3 billion people in Asia who were not involved the last time we had a commodities rally and aren’t going to lose their appetite because of problems in the U.S… Even if America goes bankrupt, those 3 billion people are going to continue to do well and eat more.”
Now, consider the macro economic forces that should trend bullishly for agricultural commodities in the coming years. The markets are in turmoil but we know people won't stop consuming agricultural resources. Cotton sales to Chinese textile companies have been growing for years and are likely to continue to grow in the near future. Cotton is more than 70% down from the all time high so its upside potential is astronomical!
As for sugar... sugar is the cheapest it has ever been! Sugar is down 80% from its all time high! In our opinion, it is only a matter of time before oil prices move back up increasing the demand for bio-fuels thus driving up the price of sugar, from which a majority of the world's ethanol originates.
Rising incomes in Asia will increase demand for meat, which should increase demand for grains (corn and soy beans) and stress the supply of grains. Also, the next storm season could cause a supply crunch to add to the bullish long-term trend. All of these macro-economic realities are long term bullish characteristics for agriculture commodities!
On a recent trip to the grocery store, I managed to find some relative bargains, and the same is true of agriculture stocks. With the "green" revolution showing no signs of flagging, they belong in every long-term investor's portfolio.
Ultimately, prices for commodities like agriculture, gold, silver, and oil will go through the roof as the value of the U.S. Dollar collapses and we will try to suggest the stocks that we feel will be along for the ride.
