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alasker (< 20)

Corn Vesus Gold

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October 28, 2009 – Comments (8) | RELATED TICKERS: GRU , DBA , MOO

I will readily admit that I do not have the time to spend to do research lots of data. For the past year I have been a small investor and I have 4 individual stocks I own- I sell one and then buy another when I get a good return. For better or worse my investment style is more based on my own theories regarding macro trends.

In my last blog I mentioned that water worldwide will be an increasing issue. I took a risk today and rotated out a mid-sized industrial to purchase GRU an exchage traded note based on 4 commodities. DBA does the same thing- just is more evenly weighted between the 4 commodities whereas GRU is more weighted towards wheat. I considered buying MOO but it is more like a mutual fund and I wanted to roll the dice a little on a pure play commodity. I also own PICO as a water commodity.

I have argued that there is not one thing- from cars to medical equipment- that does not have some agricultural bi-product in it. I have also been reading how small farmers are going out of business in record numbers because of the recession as the cost of fertilizer, servicing equipment, etc increases more than what they can sell their product for. That means there will be less producers in the future which is never good for the price of your cheerios.

Add the fact that water costs are increasing, population is increasing and also has more access to foods from around the world, we have global cooling (forget al gore) which I am betting will effect crops next year, degredation of our topsoil, currency in flux- I am taking a small bet that the cost of the wheat to your local pizza shop will increase more (as a percentage) than any metal or oil will.  

I am not taking the Agriculture bet based on ethanol. I am taking the bet because i cannot see why the price of GRU (i know there is an annual fee subtracted) has been halved. I know commercial demand must have decreased a lot because of the recession or I may be missing some other huge increase in supply fact or decrease in demand fact that will cause me to lose my bet with myself. Like water I am betting the world cannot survive or make ipods without agriculture.

Anyone else have any thoughts?

8 Comments – Post Your Own

#1) On October 28, 2009 at 10:56 AM, outoffocus (24.60) wrote:

Your thinking is basically in line with Jim Rogers.

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#2) On October 28, 2009 at 11:04 AM, Judochop172 (25.81) wrote:

For what it's worth I ran across this today.

Farmers will see losses in yield and quality of the crop that's actually harvested.

Using July planting information, the loss on several key crops - soybeans, corn, cotton, rice and sweet potatoes - had earlier been estimated at around $377 million. After recalculating with September planting information, MSU Agricultural Extension Service revised the loss estimate to about $364 million.

http://www.clarionledger.com/article/20091028/BIZ/910280356/Soybean+loss+++212+million

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#3) On October 28, 2009 at 11:45 AM, alasker (< 20) wrote:

I was thinking about it- just an arbitrary thought as to what humans attach value to and it could be applied to our currency- gold and oil are a better means of transacting and holding value as they last longer than wheat and corn.

However- in theory only- if you are sitting on a mountain of gold and I am sitting on a mountain of wheat and I say I will only take sea shells for my wheat- how valuable is your gold?

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#4) On October 28, 2009 at 1:07 PM, MikeMark (98.45) wrote:

alasker:

On your mountain of wheat,

still you sit so neat.

Would you turn your mountain to the sky,

into just a little blueberry pie?

Trade you will as those of old,

for just a little bit of gold.

As they had found when they bought gold,

they could then trade for other riches untold.

 

Gold or any other trade commodity is valuable for trading (as money) only to the extent that others value it as well. In other words, your decision to trade for sea shells instead of gold would mean that the marketability of the sea shells was greater than that of gold given your knowledge of the market. One of the most liquid markets known is that of gold. Trading volume of gold has increased 2.77 times from 1998 to 2007. That's a volume increase of about 11% annually. During the same period, world mine production has just about remained flat, declining slightly.

Seashells, on the other hand, seem to have a very small market. I've found some on various beaches. I've even found some on hilltops in Wyoming. You can buy them at fairly low prices in Florida and California (and other places with ocean access I imagine). But I really didn't see a really large market. Things could change though.

 

-mikemark

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#5) On October 28, 2009 at 1:22 PM, MikeMark (98.45) wrote:

By the way, if you are investing in commodity based etfs, you really need to get a copy of The CRB Commodity Yearbook.

-mikemark

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#6) On October 28, 2009 at 2:00 PM, USNHR (97.85) wrote:

Sally sold seashells by the seashore.

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#7) On November 02, 2009 at 9:33 AM, alasker (< 20) wrote:

From Fool.com - a link on the left sidebar on the main page 

http://gazettextra.com/news/2009/oct/31/weather-delays-corn-soybean-harvest/

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#8) On November 18, 2009 at 10:26 AM, alasker (< 20) wrote:

Global land grab for fertile land

http://www.circleofblue.org/waternews/2009/world/water-scarcity-food-security-concerns-prompt-global-land-grab/

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