Mother Nature is the biggest risk factor for farmers. We are all at her mercy, and boy, can she have a temper.
Merciless flooding in the Corn Belt is keeping farmers from getting out in the fields. Not only can they not get their equipment rolling due to the muddy, wet and cold conditions, but they also don’t want to chance putting down all that expensive seed and precious fertilizer only to see it washed away before the growing season even has a chance to begin
The argument over whether the agriculture markets are simply in some speculative bubble or if the prices are based on demand is really easy to figure out. We are seeing cash crops get gobbled up right and left, and support for prices seems very strong from every sector of the planet.
The fact remains that if farmers in the U.S. do not get their crops, especially corn, in the ground soon, there will almost certainly be much lower yields and a drop-off in supplies. Carryover stocks of most of the grains are quite low heading into 2008, and if the new crops get off to a late start, that situation will be made even direr. There is very little room for error this growing season, and farmers know it.
In 1983, there was the same kind of pattern. Farmers got their crops in the ground around early May, so the crops were not all that mature by the time the scorching summer heat came in and decimated them. If that were to happen again this year and we were to have a major loss of yield for corn, the results could be that corn prices would double.
The trickledown effect could be that that poultry and beef prices would skyrocket, as would many of the items you use every day -- everything from soda to shoe polish. Most people are not aware in the least how many things corn is used for, and let’s not forget that it now makes up at least 10% of what you put in your car every time you fill up.
One thing is for sure: The current weather situation is very troubling and could make for a very rough growing season. If the crops fall short, the costs will be passed right along to consumers in the grocery aisle at a time when few people can really handle more inflation.
So how can I protect myself from this event.
In the past investors would play the commodities market. But with today's etf you don't have to play the commodities market you can buy the grains in an ETF that has professionals trade the market. The ETF is DBA.
Look it up and see how the price of commodities has gone up.
So investigate this stock and use charting techniques to determine a buy or sell strategy and help yourself by investing into something that will make you money when the price of agriculture products go up.