Tuesday, January 10, 2012

Agriculture's Profit Potential Is Growing Like a Weed

If you're on the hunt for massive gains, consider the fact that agricultural commodity prices have been falling. Falling prices offer buying opportunities! That's the reason why profit potential is growing.

As the global economic slowdown has churned along, economic progress has ceased. The commodity prices reflect the fact that we are bouncing along the bottom of a recessionary cycle.

Demand for most commodities has diminished. Commodity demand will, however, recover when the global economy begins to recover.

Whenever it does recover, agricultural commodity prices will skyrocket.

Many commodity traders are recognizing the opportunity and are now re-entering the market.

Few commodity traders enjoy the fame and respect that has been bestowed upon Jim Rogers. He co-founded the Quantum Fund with George Soros and retired in 1980 at the age of 37 having seen 4,200% growth in only 10 years.

In 1999, Rogers recognized and announced the now-famous "Super-cycle commodity bull market." He speculated on the precious metals when gold was trading near $260 per ounce and silver was trading near $4 per ounce.

With gold now trading over $1,500 per ounce and silver over $25 per ounce, most folks agree that he was right!

Significantly, Rogers believes that this Super-cycle will continue until 2020 to 2025 and that agriculture has lagged behind the other commodities.

He is now focused upon the agricultural commodities and predicts that he will make more from agriculture than he has from anything else in the past.

Coming from this particular billionaire, that's a big endorsement.

Investment and speculation capital tends to flow into sectors that offer the greatest potential rewards. Among commodities, the greatest potential rewards seem to be growing in the agricultural commodities sector.

Again, at some point, the global economy will recover and agricultural commodity prices will skyrocket from their present levels.

By speculating on agricultural commodities while prices are low, you will realize massive gains when the recovery materializes.

Most folks missed out on the major moves made by the precious metals and energy commodities over the last decade. That's because most folks ran away from the falling metals and energy prices of those days.

Falling prices, however, typically indicate buying opportunities for successful traders.

Of course, we should not be stopped by rising prices if proper research and analysis indicate that prices will go even higher. For example, I distinctly recall being told that I was crazy to buy gold when it reached $800 per ounce because it was at "all-time highs."

In this case, however, it is unlikely that you will find anyone claiming that commodity prices are near their highs. Most traders will admit that prices could indeed drift lower. If we are not at the bottom, however, most would agree that it is near.

So, how can you participate? There are a number of Exchange Traded Funds (ETFs) that enable the average stock trader to participate in agricultural commodities without purchasing options or futures contracts.

The present state of the global economy indicates that we are seeing extraordinary buying opportunities RIGHT NOW in the agricultural commodities sector.

Consider the global demand for food. It may increase and decrease slightly as people adjust their budgets to economic downturns from time to time, as we are seeing presently. Overall food demand, however, does continue to grow as the population grows.

The world's population has more than doubled from 3 billion in 1960 to now. It is near, if not over, 7 billion people today. The United Nations estimates that the global population will exceed 9 billion mouths to feed, less than 40 years from now.

While the population has been growing, the arable land available for farming has been declining as more former farmland has been developed to meet the residential and commercial real estate needs of a growing population.

Rising food demand and declining availability of farmland equals higher food prices.

Granted, all commodities will see substantial price increases when the global economy begins to recover. Agricultural commodities, however, should see the greatest gains due to the fact that they are so far behind the metals and energy commodities.

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