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Published: October 27, 2009
When the market hit new lows in March, it was
understandably hard for investors to pull the trigger. They knew
they'd be buying into an investment landscape rife with risk.
Hindsight is 20/20. Just six months later, investors can see the
returns they might have captured had they taken the plunge. The
S&P 500 has rebounded +57.4% since early March. In fact, a slew
of sectors and markets have had +50%-plus gains since then.
The table below shows just a sample of gains offered up by the
rebound.
For many, it seems like a missed opportunity. So many sectors
have come so far, so fast. It's hard to imagine they have much
run left in them.
But it's not too late. There is still one sector left to bounce.
Agriculture prices haven't
rebounded like the prices of other
commodities. In fact, the
performance of the Dow Jones AIG
Agriculture Index has lagged the
S&P's gains by more than half.
Better yet, fertilizer prices are
only now reaching their lows.
When crop prices fell and credit
tightened, farmers cut back on
fertilizer purchases. Wholesalers,
in turn, cut back on their
inventories. Even when fertilizer
prices started to fall, buyers still
stalled, hoping to catch a better
deal. Exports of the fertilizer
potash were down -72% in the first
half of the year.
But the fertilizer stalemate is
about to end.
The effects of continued
under-application of fertilizer is
already starting to reverberate
throughout the world -- especially
in China. China is traditionally a
large potash importer. But like
everyone else, China curtailed their
fertilizer imports during the past
six to nine months.
Crop yields in China have been
suffering due to insufficient
fertilizer use and domestic prices
for grains and vegetables have
risen. What's more, China's economy
is not in recession; its GDP grew at
an enviable +8.9% last quarter. This
fast-growing economy is creating an
even larger demand for food.
Crop prices are rising. There is
pent up demand for fertilizer.
Together, these trends should boost
the agriculture sector into rebound
territory. There are a number of
ways investors can catch the bounce.
One way to capture the gains from
rising crop prices is by investing
in an ETF that tracks the Dow Jones
AIG Agriculture Index. For instance,
the iPath DJ AIG Agriculture Total
Return Sub-Index Fund (NYSE: JJA)
tracks the futures contracts of
seven agriculture commodities:
soybeans, corn, wheat, cotton,
soybean oil, coffee and sugar.
Agrium (NYSE: AGU) is a direct
fertilizer play. The Canadian
fertilizer company just issued an
earnings warning, saying its
third-quarter profits could be
90-95% below last year's same-period
earnings. Personally, I like buying
after a company has lowered
expectations -- especially when I
feel there is more upside than
downside.
Another avenue is investing in a
company like Syngenta AG (NYSE: SYT).
This Swiss company develops
high-yielding, disease-resistant
seeds and also markets herbicides.
While agriculture has missed much of
the rally, it now appears to be
poised to catch up. And there is no
shortage of ways for investors
follow along for what could be this
market's final rebound play.
-- Amy Calistri
Editor
StreetAuthority's Stock of the Month P.S. There's one
diversified agriculture play that I especially like. I profiled
it just a couple of months ago in my Stock of the Month
newsletter. It's already up +5.6%, but I'm convinced it's going
to be another one of my double-digit gainers. If you'd like to
learn more about this investment, and my Stock of the Month
newsletter,
click here. |
