Agriculture stocks are one place that I'll be looking for profits in the year ahead.

Do you own gold and silver?

Do you have investments in the stock market that give you the potential to profit from higher priced oil, natural gas and coal?

What about agriculture: do you have access to the inevitable sustained interest that people seem to have in eating food?

I hope you do. If you don't, it looks like you'll have an opportunity to buy some of these assets at sale prices during this broad-market down turn.

I'm forcing myself to turn away from the obvious debt ceiling story that's playing out right now.

For the record, I don't believe that the debt ceiling will have any long term effects that won't be completely superseded by the fact that our debts are already much too high. We'll default sooner or later. The debt ceiling is an imaginary line that will be crossed regardless of how politicians vote. Interest rates will rise. Social Security will go unfunded.

All of these things will happen - not because our leaders failed to act to raise taxes or to cut spending - but because our debts are so incredibly large and our leaders so clueless that they can't even conceive of how to solve the problem.

Today I'm cooped up in an Alexandria, Virginia hotel room while my wife attends a National Association of Drug Court Professionals conference.

If you're not familiar with drug courts, and how they can save our criminal justice system huge amounts of money every year, you should read this brief article in the Economist about how drug courts keep drug addicted Veterans out of prison - by keeping them clean and sober.

I won't ruin the ending, but basically these courts seek to help people beat their addictions instead of throwing them in jail where they're not likely to get much of any treatment - and their rate of drug abuse is likely to increase. A novel approach...

One of my favorite ways for regular investors to invest in the agriculture commodity boom is to buy the Market Vectors Agriculture ETF (NYSE: MOO).

This fund is liquid, meaning that anyone can easily buy shares at or near the prevailing ask price. With average volume of nearly 2 million units traded daily, you won’t ever have a problem buying or selling a large block of shares. This type of liquidity can be a problem for some stocks and ETFs. More on liquidity issues in a minute…

On August 6, 2010, I recommended this ETF to readers of Global Commodity Investing, a research service I help write and edit.

Since then it’s returned a respectable 26%, which is about twice as good as the return you would have received from just buying a broad market index fund like the SPDR S&P 500 ETF (NYSE: SPY).

For 60 years it worked nearly flawlessly. You work hard, you save any excess earnings, invest prudently, you pay your taxes, and you pay into Social Security. Then when you retire, you have a nice pillow-cushion of savings, investment income and social security checks to fall back on.

But that’s clearly not the case anymore. The social contract is broken – and it wasn't broken by the average retiree. The average retiree held up their end of the bargain. But now, every single penny sitting in savings accounts, 401(k) plans, mutual funds, and being held in what remains of the Social Security coffers is a huge liability for the Federal Government.

Why? For a Federal Government that demands never-ending bureaucratic AND economic growth, money that just sits in a savings account or in a retirement fund could be better spent on war-machines and/or frittered away on stuff from China, Japan or Indonesia.

So when I say that you should make a list of stocks to buy, I’m not saying you should jump into the market and buy them just because they’re down a few points. I’m saying you should name your price, have the capital ready, and jump on the opportunity IF it comes.

And if this correction is even half as big as I expect it to be, just about every boat will get sunk as the tide recedes.

Even big, blue chip stocks that every investor should own will get hammered.

Last year, Exxon-Mobil (NYSE: XOM) shares sold for less than $60 – even cheaper than they were during the depths of the 2008-2009 bear market – briefly selling for less than 10 times earnings.

That’s the kind of company that should be on your shopping list at that kind of price.

The Wall Street Journal reported today that troubles in Japan aren't staying on the island nation. Instead, they're spreading throughout the world.

From the Journal's article, "Global markets plunged as deepening worries over the specter of a nuclear power crisis in Japan in the wake of last week's earthquake and its economic implications sent investors scurrying again for safety."

This piece begs the question: what's safe these days? Is the U.S. Dollar safe? Are U.S. Treasuries safe?

There are long stretches of time when stocks outperform commodities, and conversely, long stretches when commodities outperform stocks.

There’s also a tendency for world governments to spend beyond their means.

Right now, these two trends are occurring all at once. Commodities have outperformed stocks for at least a decade. World governments are actively devaluing their currencies as fast as they can.

Being a commodity investor today means that you have the wind at your back. Demand for real assets will not diminish, and at the same time, supplies of nearly ever commodity are dwindling. Central banks exacerbate the problem by throwing ever-greater amounts of money at these problems. It’s slowly but surely becoming a perfect storm.

And the only lifeboat that shows any signs of surviving is the 'SS' Commodity.

I should qualify the statement: if you are a homeowner, a taxpayer, a retiree, or someone with any savings, investments or dollar-denominated assets - you are the fall guy.

I’ll back up further: what are you taking the fall for?

Simple.

You’re already on the hook for bad mortgages on the books of banks like JP Morgan (NYSE: JPM), Bank of America (NYSE: BAC), and you’ve already backstopped General Motors (NYSE: GM) and Chrysler.

“But Kevin, I didn’t bail out those companies - the Government did.”

Well, Mr. Fall Guy, you know as well as I do that the Government doesn’t have any savings, so the money and resources that they have given and promised to give insolvent corporations didn’t come from some secret government rainy-day fund.

The point is that it’s tough to get excited about buying stocks on a fundamental basis when they’re much more expensive than they were a year or two ago. With unemployment near multi-decade highs, the price of nearly every commodity on the rise, and a concerted effort to devalue the dollar, the American consumer is getting pinched on all sides. It’s only a matter of if, not when, stocks will correct.

We know that when the broad market falls, many other un-related sectors get creamed as well. Junior gold mining stocks, for instance, typically fall dramatically when the broad market dips.

That’s because many investors pull their riskiest capital out the market soonest. They’ll let the money ride on blue chips, but not on risky micro-cap resource companies.

If Exxon Mobil (NYSE: XOM) catches a cold, you can bet that tiny oil exploration companies will get pneumonia and some will die.

No one believed that mighty Troy would ever fall. “The city of Troy is too big to fall,” they’d say, “and besides, how will they ever get through our massive walls? Inside of a horse?”

“Yes - that’s exactly how!” she would answer.

But no one listened.

She told her father Priam that his kingdom would be sacked, and he himself would be murdered. He dismissed her claims out of hand, claiming that any problems from Greece were exceedingly unlikely to visit Trojan shores.

For the record, we have likely passed the point of peak oil production. I know there are some people out there who don’t agree with that statement. Some of them might even be reading this letter right now. But in the oil exploration and production industry, there is little argument. There just isn’t.

If you have any proof that we have yet to hit peak oil production (in other words, you have oil production numbers that are on the rise, not on the decline) then I’d love to see it.

With peak oil production in our rear-view, we will necessarily produce less oil in the future - until eventually oil is too expensive to bring to market.

No one is following this story. The Great Lakes Seaway News actually wrote a story about how no one is following this story.

While Ben Bernanke continues to gift billions of dollars to the banking industry for no defensible or discernable reason, there are actual, real-life industries in the United States that are producing real-life stuff that we all need.

While President Obama wrangles with Congress to pay unemployed people $150 billion not to work over the next year, a small group of American farming and shipping firms are feeding the world from the sweat of their brow.

According to a recent report by the United Nations Food and Agriculture Organization, the world will require a 70% increase in food production in the coming years.

In order to grow food production fast enough to match population growth, agriculture markets will require an average of $209 billion in additional investment.

Commodity prices are headed much, much higher in the coming years. But in short term, I'm not so sure...

Why?

Well, I have an active imagination, but I can't see how Ben Bernanke's quantitative easing (QE) announcement next week will be anything more than a disappointment.

Here's how I think it will go down:

On November 3, 2010 (next week) Ben will announce $571 billion worth (to pick a random number) of Treasury purchases - or some other kind of direct or indirect printing of money.

That's a good chunk of change, but the problem is that the market has already boosted nearly every type of asset to price in much bigger QE. Stocks, bonds, commodities, - it seems like everything except for middle class homes have skyrocketed in the past two months ahead of big Ben's announcement.

For some industries - like shipping - oil prices are one of the biggest cost inputs. Other industries, like...oh say, online publishing, are somewhat less dependent on oil.

But every sector of the economy does have an oil cost input.

That's why I'm extremely worried about oil prices, and where we all know they're going.

For a small taste of what's in store, Charles Maxwell, senior energy analyst for Weeden & Co. - a man with 50 years experience in the field - recently predicted that we'll see $150/barrel oil within the next five years, and $300 oil by 2020.

I'm a bit less optimistic - because I think we could easily break the $150 barrier in the next 18 months. It was only 24 months ago that we saw similar prices - so it's not out of the question.

Before I reveal the name of this stock, I want to point out that buying a company with farmland in the mix is a great diversification play - and doubly so when it pays a dividend.

That's because when you buy this type of company, you're getting exposure to the continued profitability of its underlying farm business, but you're also buying actual farmland that the company owns - and if you've been reading this letter, you probably know that I'm extremely bullish on farmland prices.

I also happen to be bullish on the commodities that grow on farms; corn, wheat, sugar, cattle, pigs, chickens, etc.

The dividend is just a small bonus, but I know there are readers out there interested in income, so it's worth a mention - even though it's only a 2% annual yield.

Okay, it's not news that Jim Rogers likes agriculture. He's taken every opportunity to tell anyone who will listen that he likes farmland, corn, wheat, rice - and just about every other agriculture commodity.

But unless you have a margin account on a commodity futures exchange, you probably can't follow his advice to a T.

In other words, if Jim shows up on CNBC and says he likes rice (as he did on August 28^th - you can watch the video by clicking here) it's frustrating to sit on the sidelines if you don't have a futures account.

And I'm not recommending that you should open a futures account and simply follow Mr. Roger's advice every time he's on TV. Even if you have a futures account, you know that it's almost a full-time job keeping track of the complicated options and futures contract strategies that would be considered entry-level for most traders.

But I do think your portfolio should have some exposure to agriculture, for reasons so simple that a kindergartner can understand them:

The biggest reason is population growth. According to a 2004 study from the United Nations, "World population is projected to grow from 6.1 billion in 2000 to 8.9 billion in 2050, increasing therefore by 47 per cent."

Last week fertilizer stocks all surged in unison after the world's largest mining company BHP Billiton (NYSE: BHP) tried, and failed, to acquire the world's largest potassium company Potash Corp. (NYSE: POT).

Right now, there's only one company in the sector that's still (relatively) inexpensive. More on that company in a minute…

First, a little tooting of my own horn: just over a month ago, I recommended you pick up shares of another fertilizer company (now the second largest) -Mosaic Co. (NYSE: MOS).

Here's what I said on July 22:

I hate falling into the trap of simply responding to the hottest news headlines - because very few people get rich by reacting to headlines and pulling the trigger on investments based on "hot" trends in the market.

At this point, computers can wipe the floor with most any day-trader, so if you think you can buy yesterday's news and still eke out a profit, you're probably wrong.

In the past couple weeks agriculture has been the hot topic on everyone's mind. First, fires in Russia caused wheat prices to double in less than a month as Vladimir Putin banned Russian wheat exports. In sympathy, many other crop commodities rose in price as well. Then yesterday, BHP Billiton (NYSE: BHP) the world's largest mining company, put in a failed bid to buy Potash Corp (NYSE: POT) the world's largest fertilizer company.

I'm back in Vermont after a week in Sea Isle City, New Jersey. And there's nothing like a vacation to make you appreciate the comforts of home. Even though Vermont isn't very far from New Jersey, geographically, the weather difference is pretty dramatic. Vermont does get hot (we broke 100 degrees a few weeks back) but I've never felt the urge to apply and reapply sunscreen here, like I did in New Jersey last week. I still managed to get a sunburn.

And speaking of sunburn, we've seen a doubling of wheat prices over the past month thanks to fires in Russia, brought on by drought. Vladimir Putin just announced an export ban on all wheat for 2010.

I hope you had a pleasant weekend and were able to get outside and enjoy the weather if it was amenable in your locale. We experienced some unseasonably warm weather here in Vermont, and I tried to stay outside as long as possible. I even fired up my new Weber charcoal grill, a birthday present from my wife. I grilled some sirloin steak, some mushrooms on a kebab and even some corn.

I’ve heard conflicting views on whether to grill the corn in its husk, or to grill it “naked.” This time I opted for naked, grilling it on the cob over indirect heat for about 10 minutes, and the corn had some nice caramelized flavors. I seasoned it ahead of time with salt, pepper and a little olive oil. If you have a bbq corn recipe (or any bbq recipe for that matter) please send it my way at editorial@resourceprospector.com.

Today’s article isn’t all grill recipes, though. I’ve wanted to write about corn, the commodity, for quite some time. It’s just tough to pull myself away from alluring topics like gold and energy. And I should apologize, because agriculture isn’t something that’s very exciting to read about – not like precious metals or oil. But commodities like corn, soybeans, wheat, pork bellies, cattle, sugar and coffee all fall into the realm of my purview.

Does your portfolio have exposure to the most inevitable bull market in the world? I’m talking about a long-term trend that has nowhere to go but up. It’s literally a life and death situation.

The alternative to a bull market in these commodities is something the world’s population has to strive to avoid at all costs. It’s more important than oil, more vital than coal, and way more serious than gold, copper, iron - or any other industrial metal or energy commodity.

Because if there’s not more production of this particular group of commodities every day, in perpetuity, most people on this planet will starve.

Yes, I’m talking about food. And I realize it’s not an “exciting” investment, not like some new oil discovery or a massive gold bonanza. But the world’s population is growing.

In the United States, pork might be "the other white meat," but in China, it's the only meat. Well, almost.

Far more than any other meat, pork occupies a special place in the Chinese diet and economy. Supporting a hog market estimated to be worth $32 billion annually, the Chinese consume more pork than any other nation. It is prepared in almost every conceivable way, from roasted whole suckling pigs, commonly served during holiday feasts, to sweet and sour pork, whose Americanized version is a Chinese restaurant staple. Pork accounts for two-thirds of the average Chinese's protein intake.

Last year, spiraling pork prices amid shortages tied to severe weather in southern China and an outbreak of "blue ear" disease — a form of swine flu that decimated up to 2 million pigs — left Chinese shoppers suffering from the same sticker shock as Americans filling up at the pump these days. Today, pork prices continue to rise as producers who are feeling the pinch of pricey feed and fuel pass along costs. As of this April, pork prices in China had increased a further 68% from the same time last year.

The vast majority of China's annual population of between 500 and 600 million hogs is raised on small farms. And with the nation's appetite for pork and pork products growing with consumers’ prosperity, producers are unable to meet demand. To fill the supply gap, China has sealed importation deals with U.S. pork and meat processing giant Smithfield Foods Inc. (NYSE:SFD) and its rival Tyson Foods (NYSE:TSN) to put American pork on Chinese tables.

Despite surging expenses that are plaguing companies in the sector, AgFeed Industries Inc. (Nasdaq:FEED), a leading pork producer and livestock feed grain maker, is setting the stage to bring home the bacon in the fast-growing market. AgFeed develops, manufactures, distributes and sells pre-mix feed and feed additives primarily for use in China's pork husbandry and slaughter market. It is also engaged in the raising, breeding and sale of hogs for the domestic pork production and hog-breeding markets. The company, which does business through a handful of subsidiaries, has production plants in Shanghai, Nanchang and Nanning, . . .

AgFeed Industries Inc. (Nasdaq:FEED) announced Wednesday it is expecting favorable second-quarter earnings. The China-based commercial hog producer and premix feed company said it sold a record number of hogs for the quarter ended June 30. The company also said lower production costs due to better operating efficiency helped expand profit margins for the quarter.

Ahead of the bell Wednesday, AgFeed was mostly flat, trading at $13.93, up $0.04 from Tuesday’s close.

The Andersons, Inc. (Nasdaq:ANDE) shares were up 15% in pre-market trading after the company raised its guidance late Thursday for fiscal year 2008 to a gain between $4.40 per share and $4.80 per share. Previous estimates were between $3.65 and $4 per share. The Maumee, Ohio-based agriculture and transportation company said it raised the guidance outlook based on a solid first half of the year. Ahead of the bell Friday, shares were at $37.98, up $5.05 from Thursday’s close.

Grain prices are soaring and farmers, in turn, are investing more in seed, fertilizer, pesticides and equipment, which plays nicely into the hands of American Vanguard Corporation (NYSE:AVD) and KMG Chemicals (Nasdaq:KMGB), two companies that will likely report strong double-digit earnings growth this year. 

Fertilizer spending rose 20%, or $14 billion, last year and is forecast to rise another 18%, or $3 billion, this year. Spending on crop pesticides is forecast to increase 11%, or $1 billion, this year.

Rising demand from India and China, low grain stockpiles and the increased use of grain for ethanol and other biofuels have fueled huge increases in grain prices. A flood of new investors have entered the agriculture commodity markets in search of high returns and total index fund investments in corn, soybeans, wheat, cattle and hogs are up nearly five-fold to $47 billion today, from $10 billion in 2006.

Good news for American Vanguard Corporation, a developer of crop protection products, turf products and insecticides. The company has grown by acquiring niche products from larger companies such as BASF, The Dow Chemical Company (NYSE:DOW), Bayer and DuPont that divest some of their mature products to focus more resources on newly discovered molecules. Through this strategy, American Vanguard has acquired 13 new products since 2000 and produced 20% annual income growth over the last five years. In 2006, American Vanguard launched a new corn herbicide, Impact, which it believes will become a top five product in this . . .

Lindsay Corporation (NYSE:LNN)
Omaha, Neb.
http://www.lindsaymanufacturing.com

52-week low / high: $29.78/$131.14
Shares Outstanding: 11.92 million
Market Capitalization: $1.21 billion

Who knew that crop irrigation and traffic flow could be such a fateful match? Lindsay Corporation (NYSE:LNN) has successfully melded the two segments under its umbrella of self-propelled center pivots and crash cushions, proving that a love affair between apples and oranges can exist under the right conditions.

Lindsay manufactures the joints of the irrigation industry – in the form of lateral move irrigation systems and self-propelled center pivots, both used to stabilize crop production while preserving water, energy and labor. These products are marketed domestically and internationally under its Zimmatic brand. Lindsay also makes separate lines of center pivot and lateral move irrigation equipment for use on smaller fields under its Greenfield and Stettyn brands, and hose reel travelers under the Perrot brand.

If that’s not enough to get you thinking of “greener” pastures, the company also produces irrigation controls, mini-pivots, hose reel travelers, and chemical injection systems and remote monitoring and control systems, which include remote telemetry and a Web or personal-computer-hosted data acquisition and monitoring application.

For investors wanting to plant a more industrial seed in their portfolios, Lindsay dabbles in not only irrigation, but also infrastructure. This segment produces and markets large diameter steel tubing, movable barriers for traffic lane management, and crash cushions (used at toll booths, freeway off-ramps, medians and roadside barrier ends, bridge supports, utility poles, reflective pavement tapes and other road safety devices). The company also provides outsourced manufacturing and production services to other businesses.

Lindsay’s recent results are a resounding green light to financial success. Buckle your seatbelts, profits ahead: net income for the three months ended Feb. 29, 2008 jumped a whopping 288% to $9.7 million, or $0.79 per share, from $2.5 million, or $0.21 per share. Lindsay's gross margin improved to 27.7% from 22.7% a year ago, while revenue soared more than 70% to $108.4 million. The company’s EPS of $0.79 beat the consensus by 132%. Quarterly results included revenue from recently acquired businesses Watertronics Inc. (a leader in water pumping stations and controls for the golf, landscape and municipal markets) and Snoline SpA.

"Demand for irrigation equipment is strong globally, supported by higher commodity prices, biofuel expansion and water initiatives," says Rick Parod, Lindsay's president and chief executive officer. "Infrastructure segment demand for the unique solutions provided by our products is also strong, and we continued to realize synergies from the acquisitions in this segment during the period."

With Lindsay’s segments flirting with robust demand for irrigation products in 2008 both domestically and internationally, and consistent growth of roads and highways, the pair sound like a match made in investor heaven.

For more information on the company, read Lindsay Corporation: The rainmaker.

Note: Lindsay Corporation (NYSE:LNN) is on the "Watch List" of Growth Report, a subscription investment newsletter from Business Financial Publishing, which also publishes SmallCapInvestor.com. As a Watch List company, Lindsay displays many characteristics found in successful stock winners, and is being closely monitored for possible inclusion in the Growth Report portfolio at a later date.

Origin Agritech Ltd. (Nasdaq: SEED) reported this morning that the Ministry of Agriculture in China has approved two new corn hybrid varieties of its product line for nationwide distribution during the next sales season.

The Beijing-based small cap said the approval, which includes two new corn seed products known as Lin Ao 9 and Ao Yu 28, will extend its geographic reach throughout China. Since both products were given nationwide approval, they may be sold into any regions of China, according to Origin.

“We did have the reach before, excluding Taiwan and Hong Kong, but this helps us gain more seed coverage,” said Irving Kau, vice president of Finance at Origin.

Origin currently has 4.8% of the corn seed market, according to Kau, which is estimated to be a $1 billion market. According to Eddie Cheung, head of investor relations for Origin, the company sells in 30 of the 32 provinces in China.

With today’s approval, the company now has over 55 total corn hybrids approved for sale into the marketplace next year.

Revenues from corn products comprised roughly 75% of total revenues in 2007, and are expected to continue to be the main revenue driver going forward, according to the company.

“Their geographic reach is pretty expansive within the country,” said Cheung. “In terms of market share, the corn seed market in China is really fragmented, so there’s really not a dominant player with a majority market share. [But] I think having a broader portfolio product mix should help capture market share for the company.” 

www.titanmachinery.com
Nasdaq: TITN
Priced Dec. 5, 2007
$51.0 million proceeds
$99.2 million post-money valuation

It’s too late for the IPO; the deal was priced in December. That was back when IPOs could get priced. Given the paucity of offerings in the current market, it seems like a good time to look at what companies have been able to go public, and Titan Machinery has the honor of being the top IPO in terms of aftermarket performance in the last six months. The stock has more than doubled since the deal closed on Dec. 5 and now has a market capitalization of $258 million.

This high flier operates in a grounded industry. It’s a chain of farm-equipment dealerships headquartered in Fargo, N.D. Titan represents agricultural and construction machinery made by CNH Global (NYSE: CNH), sold under the Case and New Holland brands. Its 39 stores are in North Dakota, South Dakota, Minnesota and Iowa. Hence, most investors could go through life without ever seeing one of Titan’s operations. The company’s customers, however, have come to see it as a reliable source for the parts and equipment they need to keep their own businesses operating.

Because demand for its lines is more or less fixed, Titan’s plan is to grow through acquisition. Most of its competitors are small, operating only one or two stores, and in some cases, the owners are interested in retiring and don’t have family members who want to take over. Since the IPO, Titan acquired Ceres Equipment, a Case-New Holland dealer in Roseau, Minn., that should add $11 million in revenue. Once a business is acquired, Titan can grow profits by standardizing processes, getting volume discounts on its inventory, and advertising more efficiently.

Agria Corp. (NYSE: GRO) shares are rising after the provider of agriculture products announced that it projects fourth-quarter revenue in the higher end of its guidance.

The China-based company expects quarterly revenue in the range of $31.8 million to $33.8 million, which would represent a growth of 60% to 70% over last year’s fourth quarter. Agria said strong corn seed sales fueled growth and that snow storms did not cause a material boost in sheep deaths.

"We are pleased with the success in our business and continue to expect we will achieve annual revenue growth above 25% in 2008 compared to 2007 based on current order forecasts and market expectations,” co-CEO Kenneth Huang said in a statement. “The opportunities in front of us for revenue and profit growth remain vast.”

In morning trading, GRO shares are up 12.40%, or $0.94, at $8.52. Over the last 52 weeks, shares have ranged from $6.05 to $17.