AGRI-FOOD THOUGHTS
by Ned W. Schmidt, CFA, CEBS
Schmidt Management Company
November 28, 2007

Agri-Food commodities are an essential part of our lives. Nearly every hour of our waking day we come in contact with something derived from corn. We eat it, drink products made from it, write on paper made with starch, and are now trying to fuel our cars with it. However, competition for corn has greatly increased. Rising consumer demand, driven by expanding incomes in China, and an attempt to expand biofuel production have driven prices up from about $1.75 a bushel two years ago. Will the price of corn soon take out the most recent high? Will state bird of Nebraska be changed to the Lexus?

Farmers in North America responded with gusto in 2007, leaving only their front yards not planted in corn. A massive crop was harvested this fall. Expectations of that harvest depressed prices in late summer. Now that the crop is in, buyers are again bidding up prices. The farmer with corn in the bin has done as well as investing in the equity market. The red line is a the ratio of price of corn to the S&P 500(multiplied by 100), and uses the right axis. A bushel of corn over past year has done as well as the U.S. equity market. Since the middle of August, corn has done far better. Such is the changing situation in the Agri-Food sector due to higher demand from Asia and biofuel producers. Interestingly though, corn has the weakest price trend among the Agri-Food commodities. Investments in Agri-Food sector have done extremely well. DE, trading at an all time high, recently declared a 100% stock dividend to affect a 2 for 1 stock split. Investors should be researching the Agri-Food structural investment climate rather than waiting for Abu Dhabi to bail out their bank stocks.

© 2007 Ned W. Schmidt
Editorial Archives

AGRI-FOOD THOUGHTS are from Ned W. Schmidt,CFA,CEBS, publisher of Agri-Food Value View, a monthly exploration of the Agri-Food grand cycle being created by China, India, and Eco-energy. To review a recent issue write to agrifoodvalueview@earthlink.net. Ned will be exploring the Agri-Food cycle at The Wealth Expo in NYC, 19-21 October. For information go to www.wealthexpo.net