OK, I can’t stand it anymore. After staying out of the agricultural sector for the past six months I’m going back in. I’m not betting the farm, mind you. I am just starting to nibble by picking up a few contracts in soybean meal, the commodity with the most distressed growing outlook.
While a spectacularly positive USDA January report predicting record bumper crops this year stopped me out of my position, I knew my departure from the sector would only be temporary. Watching the charts for almost all ag products, like corn, wheat, and soybeans, make potential one year double bottoms.
I have been itching to pull the trigger for weeks. All it took was my friend Dennis Gartman, of The Gartman Letter, to make the call, who has forgotten more about the ags than I will ever know. I have been a huge long term bull on the ags, because the world is making people faster than it is growing enough food in the most classical Malthusian fashion. And the people we already have are both eating more food, and more calorie intensive foods, like beef and pork, such as the hundreds of millions in emerging markets with rapidly rising standards of living.
Did I mention that the revaluation of the Chinese Yuan is hugely bullish for all agricultural commodities? Even though I think they are utterly worthless, some weather forecasting models are predicting that we will have the hottest summer since 1980, which can only lead to higher prices. Keep stops in place, as always, as it was the ag futures markets where the term “limit move” was coined. If you can’t wait to get into soybean meal, you can buy the September futures on the CBOT (SM.U10E) at $2.72 a bushel. Or you can wait for the launch of the new soybean ETF (SOYB)
Courtesy: Mad Hedge fund trader