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
AgricultureiPath DJ AIG Agriculture Total Return Fund (
OiliPath S&P GSCI Crude Oil (
CopperiPath DJ AIG Copper (
Real EstateiShares DJ US Real Estate (
Emerging MarketsiShares MSCI Emerging Markets
SteelMarket Vectors Steel (
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
But it's not too late. There is still one sector left to
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
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 (
tracks the futures contracts of seven agriculture commodities:
soybeans, corn, wheat, cotton, soybean oil, coffee and sugar.
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 (
. 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
Editor: 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.
Disclosure: Amy Calistri does not own shares of any security
mentioned in this article.
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