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Stocks to Play in Agriculture Boom

ab-2The agriculture industry has been in a state of decline for the last 30 years as dwindling demand and technological progress cut food production costs and led to difficult market conditions for farmers to make a living. But higher prices paid for grain and other products, including meat from cattle have led to an agriculture boom.

As a result of the low margins and poor career opportunities, there has been a huge drop in people wanting to be farmers and the average age of a farmer is now 56, (in Japan it is 66). Most young people would rather study marketing than farming and this has led to a chronic lack of supply in the industry. The lack of farmers combined with the impact of severe droughts has seen prices for agricultural commodities hit record levels.

As the world population increases, it becomes more urgent to produce the levels of food to be able to feed each person. China alone has over 1.3 billion people, many of whom still survive on relatively simple, vegetarian fare. As China’s middle class grows, more and more people will start to eat meat as part of their diet. The quantity of meat currently being produced will need to increase on a massive scale. It’s a trend already being seen on a large scale.

Another reason to invest in agriculture stocks stems from the Fed’s massive money printing policy. As the Federal Reserve continues to stoke inflation in order to tackle the global financial crisis, prices for virtually everything will eventually soar. The best investments in times of strong inflation are real assets and agricultural investments sit nicely in this category. Solid exposure to the agriculture industry can be gained from investing in these 3 big agriculture players:

POTASH (POT)

As a miner and producer of Potash, a popular fertilizer used in the farming industry, Potash is one of the biggest ab-2companies in the agriculture sector. The company is currently trading at a forward P/E of only 12.17 so there is plenty of value in this stock.

Deere & Co (DE)

Deere & Co. is another large company that will surely benefit from a bull market in agriculture. The company provides first rate equipment to farms and other agricultural companies such as tractors, trucks and turf equipment. DE was voted in the Fortune top 50 most admired companies and also placed among the world’s most ethical corporations.

MONSANTO (MON)

Monsanto provides agricultural products such as seeds, genetic material and insecticides to farmers around the world. Billionaire Israel Englander’s hedge fund Catapult recently made a big acquisition of MON stock and it’s not hard to see why. With revenues of $14-billion and nearly $5-billion sitting in cash, Monsanto is a company with high expectations in the agriculture boom.

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