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Is The Taco Play (Ag) Over?
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As Jon Markman writes so well in his MSN Money article "Could we really run out of food?" I have agreed with his opinion for the last month with a good portion of my portfolio in ag stocks as I stated in a previous post I called "Stagflation or Agflation?". I honestly don't believe the high ag prices are purely from speculation, nor from the declining dollar although some speculation and a lower dollar is providing a lot of volatility. The famine angle is so acute I have heard that certain charity organizations have much less food to give out due to cost and are trying to find ways to cope. There are a few basic tenants to my thesis: The corn inflation itself has downstream affects to half the products in a taco for example. It takes corn to feed livestock to make beef (or any meat), cheese and sour cream, let alone corn and flour tortillas. The more corn and soy we burn for fuels, leaves less land for growing wheat and other much needed crops. In the US, we burn 35% of our corn crops for ethanol. The growing middle classes in the emerging markets are eating better now and will not go back to a meatless diet until they can no longer afford it. Failed crops, unpredictable weather patterns are all contributing to world hunger. See my previously referenced post to see what picks I'm holding to make this play. Here's the burn now. The story is out. (OK, yes the "ag story" has been out a while but the new twist of actually stating a good case is different then the tradition momentum jargon.) Analysts are typically late to the party and with a well written article that, I'm sure, will be expounded on my many other writers, I'm starting to wonder if the story is over for me. Sure, I will get a nice bump in the next week or two, maybe through the month, but I am already thinking about rotating out of the ag sector on pops over the next few weeks. It's not a done deal in my mind yet but I get nervous when others start writing about what I am already doing. (It's that contrarian in me.) I guess I'll have to see if my favorite taco stand can raise prices to cover rising costs. Good luck and good eating, | ||
