The Rude Awakening
Berlin, Germany
Wednesday, August 8, 2007 ------------------------- - Time to harvest some profits from the ags boom,
- Five companies to keep a close eye on,
- One word you must remember, the "Beaumont Miracle"
and Cramer goes nuts…
------------------------- Joel Bowman, reporting from Berlin, Germany… China is hungry…very hungry. Let's put aside their insatiable appetite for oil, gas, metals, plasma TV's, woks and umbrellas for a moment and think about the most fundamental need to support the world's largest population: food. According to NBS data, China's food prices surged 7.6% in the first half of 2007, lead by a 70% jump in the price of pork from this time last year. China's overall inflation leaped to a 33 month high of 44% in June. Even the price of the humble egg rose by a staggering 27.9%! And the world's fastest growing major economy is finding it difficult to keep up with its own demand. The ongoing drought in China's northeastern provinces has hit soybean production hard with annual output projections adjusted downwards from 15 million tons to 14.8 million tons for 2007. The report from The China National Grain and Oils Information Center also cut rice production forecasts by a million tons due to reduced acreage. The effected area accounts for between ten and twelve per cent of the nation's corn growing regions. That's bad news if you're living in China and enjoy corn on the cob…good news if you live in the U.S. and happen to farm a bushel or two. Corn is up 60% over the last year due, in part, to 1.3 billion hungry Chinese mouths. In the column below, Chris Mayer investigates the global agricultural boom underway right now and identifies a few key plays that should keep your account well fed. --- Urgent: Special Resource Report --- "The Biggest Resource Breakthrough Since the 'Beaumont Miracle' of 1901" 64 publicly traded companies are already deeply invested… insiders are already raking in as much as $205,421 per day on the shares… But only one of these cutting-edge companies offers you the "secret wealth advantage" I reveal below… I urge you act quickly. I'll even front you the first $500… but only if I hear back from you by midnight Sept. 4…Read On Here For Your Full Report ----------------------------------- Preparing for the Harvest
By Chris Mayer If we were sitting at a bar enjoying a beer - a good beer - and I had to tell you only one reason why you should have money invested in the agricultural boom in some way, I think I would say this: Grain inventories are near all-time lows. And if you shook your head and still didn't get it, I would slump in my stool a bit and order another round of drinks. I would remind you of basic economics. Higher demand. Lagging supply. Inventories down. Prices going higher. And that's why more production of agricultural goods will follow. I would remind you that the prices of corn, wheat and soybeans are all at elevated levels in recent years. Just in the last 12 months alone, corn is up 60%, wheat is up 53% and soybeans are up 40%. Why? I would start with one word. Recall that famous scene in The Graduate: Mr. McGuire: I want to say one word to you. Just one word.
Benjamin: Yes, sir.
Mr. McGuire: Are you listening?
Benjamin: Yes, I am.
Mr. McGuire: Plastics. Except my one word would be "ethanol." Ethanol, as you might have suspected, is the big culprit behind a lot of this madness. How do I mean it? Let us see… Take a look at the nearby pie chart. This is based on the 2005 season. It shows you where America's corn crop goes. Only 14% of the corn crop went toward ethanol in 2005. In 2006, that swung out to 19%. In 2007, the USDA figures ethanol production should consume 27% of the U.S. corn crop. This year, U.S. farmers increased their corn acreage by 19% - the biggest increase since 1944. 
The whole ethanol craze - driven by government subsidies and higher oil prices - means there is a lot of demand for corn. It means farmers should continue to expand the acreage they have devoted to corn. The Economist Intelligence Unit projects that the demand for corn should exceed supply through at least 2009. (Also, more acreage devoted to corn means less devoted to soybeans and wheat, pushing up the prices of those commodities). Interestingly, the U.S. is only one of 41 countries encouraging the production of biofuels as a way to lower dependence on oil. It's just that in other countries, they burn other things - in Southeast Asia, they use palm oil, for instance. In Brazil, it's sugar cane. There is another big reason why agricultural prices are rising and why farming is a good business again. A rising and more prosperous global population - think India and China - means increasing pressures on grain production. As populations become wealthier, one of the first things to change is the diet. People tend to eat more meat. More meat means more grains. There are loads of statistical evidence to support this idea, none of which I feel like finding at the moment. So it seems a good bet that the boom in agriculture should continue for several years yet. Either governments back off on their support of biofuels or the price of oil has to come down. Or 2 billion people in China and India have to stop eating. In my view, none of these things seems at all likely in the near term. So it also seems wise that investors should take this into account and look to profit from the agriculture boom's widening effects. For example, consider how farmers will cope with the higher prices for their goods. They will look to add new land into production. In some places, this will be hard to do. New arable land is not often lying around near key transportation hubs. So there are challenges there. In some countries, like Brazil or Ukraine - or Argentina - there is plenty of high-quality fallow land. In the hands of a capable operator, such land can become highly productive farmland. That's one reason I like Cresud (CRESY:nasdaq). It has plenty of arable land in Agentina, which is in high demand these days. Plus, it has a proven track record of continuously improving the uses of its land, such that the land produces higher cash flows and profits. Farmers will also look to increase the yield they get from their existing land. This translates into more agricultural equipment, more fertilizers and more crop protection services. We've already got Titan Intl. (TWI:nyse) and Lindsay Corp. (LNN:nyse) on the agricultural equipment front. Titan makes tires for agricultural vehicles. Lindsay makes irrigation equipment. Both have been nice winners. As I write, Titan is up 43% since February and Lindsay is up 80% since last June. I like the fertilizer idea, too. We hold Agrium (AGU:nyse) in Capital & Crisis and have nearly tripled our money. In Mayer's Special Situations, we own Saskatchewan Wheat Pool (SWP:tsx), which is a big grain handler in the Great White North. It also is the largest distributor of agri-products (seed, fertilizers, herbicides, etc.) in the Canadian prairies. The Pool has also been a terrific investment so far, with a gain of 44% since last July. So we've played the agricultural angle many ways and come up smelling like a rose each time. All of these stocks are beyond my buy-up-to price, except for Cresud. That agricultural bull market is just beginning. Prepare now for the harvest. [Joel's Note: As Chris correctly pointed out above, higher demand (all other things being equal) will result in higher prices. It's not surprising then that Chris' own research service, Mayer's Special Situations, is about to undergo a price hike. You see, when Chris delivers consistent winners like the ones he mentioned above, word spreads quickly. Pretty soon you have people telling friends about the guy that got them onto Agrium, or Lindsay Corp. or Cresud. After a while, everyone wants in and the price of the service rises, which is exactly what's happening right now. The price for Mayer's Special Situations is heading upwards to the tune of $500, but that doesn't mean you shouldn't take advantage of Chris' stellar service. In fact, to ensure no Executive Series reader is priced out of this opportunity, we're going to front you that $500…But only until September 4. Read on here for details. --- Mayer's Special Situations Special Report --- 115 years ago… A one-armed brick maker and self-trained geologist unleashed the "Beaumont Miracle"… sparking a resource wealth explosion and the richest century in U.S. history… Today, there's a whole new and little-talked-about American energy "miracle" taking shape… one that's already creating a whole new wave of resource millionaires… and out of 64 publicly traded companies invested… This one company is the one to own if you hope to get rich on this revolutionary new discovery "event." But you have to let me know by Sept. 4 if you want in…Read On Here For The Full Report -------------------------------------------------- Rude Endnote: Yesterday your executive series took a collective swipe at television's leading contrarian indicator. After, now infamously, labeling the subprime meltdown and its ensuing derivatives debacle as "totally meaningless," Jim Cramer did an about-face when he screamed "Armageddon" on air just a few days ago. Addison was kind enough to provide the following clip, for posterity, in yesterday's 5. Do our observations constitute an unwarranted public whipping? Only time will tell. Is the clip likely to get you laughing at this early hour of the morning? You bet. Addison will be back with all the news in a couple of hours so keep an eye on your inbox. Cheers, Joel Bowman
Rude Awakening | 
