Below is a great article laying out the bullish thesis on agriculture. There is nothing I am overall more bullish on over the next few years. Unlike oil, gasoline, and hard commodities inventories are down. I am not playing the commodity story at all except through agriculture. With that said I have told several of my friends I expect gasoline to reach $4 a gallon by December 31, 2008. Even if that happens you have to make several more assumptions than you do about agriculture. The commodity boom is ongoing. Oil in the decade of the 70s was up 1800%. We are up 300% from the lows currently. There is much more room to run as we develop the next bubble but oil inventories are sky high. Agriculture commodities is where I see the value. With the said I think we have a real possibility of a 10 to 15% correction in agriculture commodities and agriculture stocks. I actually increased my hedge today on MOO which is near a 52 week high.
http://articles.moneycentral.msn.com/Investing/SuperModels/CouldWeReallyRunOutOfFood.aspx
Experts say the world is now facing down the barrel of the worst catastrophe of all: famine.
and
The very idea that the modern world could run out of food seems ludicrous, but that is the flip side, or cause, of the tremendous recent increase in the cost of raw wheat, corn, rice, oats and soybeans. Food prices are not escalating because speculators have run them up for sport and profit, but because accelerating demand in developing nations, biofuel production and poor harvests in some areas have made basic foodstuffs truly scarce.
On social unrest
Thai, Philippine and Indonesian officials are warning of civil unrest if the flow of rice does not increase.
On it being worldwide
Most unusual about this phenomenon, according to BMO Financial Group strategist Don Coxe, is that until now, food crises in world history were regional concerns .........What's happening now is a lack of supply everywhere at once.
On inventory levels
Shortages are real. The Financial Times reports that rice stocks have fallen this year to about 70 million tons, the lowest level in 25 years and less than half the total held in global inventories in 2000. Wheat inventories, called "carry-overs" in the trade, are at 30-year lows even though world wheat production was actually up 1% last year. In the past year, reports show, wheat inventories in the European Union have plunged to 1 million tons from 14 million tons.
A leading Canadian fertilizer executive told analysts recently that according to his company's calculations, global grain reserves are "precarious," at just 1.7 months of consumption, down from 3.5 months of reserves as recently as 2000.
On supply in the Midwest
the U.S. Midwest has enjoyed 17 straight years without significant crop failure, the longest winning streak on record.
On ethanol
The bill, intended to boost America's energy independence, is expected to push as much as 31% of the U.S. corn crop into biofuels production, up from 24% last year
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