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Agriculture Stocks Stay Hot But Remain Over Bought



January 12, 2011 – Comments (0) | RELATED TICKERS: MON

Fear that food is becoming a rare luxury is sweeping the globe. Between floods, droughts, and overpopulation, agriculture stocks are the hottest thing since the bubble. There are so many factors involved here. First, you have inflationary concerns as the Federal Reserve and most countries are printing massive amounts of money. This naturally drives up the price of food. Then you have floods, fires, droughts and over population. Emerging countries like China and India are having to squeeze every last bit of grain from each acre. This seems like an amazing bullish case for stocks like Potash Corp./Saskatchewan (NYSE:POT), Monsanto Company (NYSE:MON) and The Mosaic Company (NYSE:MOS) and in the long term it probably is. However, these stocks have soared to insane levels in the short term. In addition, grain prices have moved sharply higher causing farmers to plant more. This increases supply and in the short/mid term should bring prices back in check slightly. A smart investor would not go near these stocks until they have a solid pull back and correction. A good example would be Monsanto.  In October, Monsanto was trading at $47.07.  As of today, it hit a high of $75.09.  That is a surge of 60% in just three months. A pull back will come in the next month, be patient and be ready to pounce. A retrace to $63.00 would begin to look attractive. Always remember, the disciplined trader and investor make money.  The wild, chasing trader and investor, becomes the bag holder.

Gareth Soloway

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