In 2011, for the first time ever, more corn was made into ethanol than consumed as food (for humans) or feed (for animals) in the United States.

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

That wasn’t the first call for the end of the commodities bull market, nor was it the most serious.

We heard it proclaimed that 2008 was the official end of the bull market – no ifs ands or buts.

“Bull Market In Commodities at an End, For Now” – New York Times

The proof? Well, you might recall that gold, oil and nearly every other commodity on the planet was on the receiving end of a huge uptrend until early 2008, when the “bubble” began to deflate a bit. As the New York Times said in October of that year:

“Since July, when prices for many commodities peaked amid fears of a permanent shortage, the prices of wheat and corn - two cereals at the base of the human food chain - have dropped 70 percent. Oil prices have dropped 55 percent. Important metals like aluminum, copper, nickel and platinum have declined more than half.”

Again, I’ll use a chart of gold as a proxy for the “commodity bubble”:

For the record, I actually am not a big fan of Monsanto on a personal level. As much as any other publicly traded company, Monsanto personifies the kind of big, bad corporation that’s in bed with big Government to the detriment of individuals and small business people.

This type of firm works hand-in-glove with the many and sundry regulatory bodies in this country to make it near-impossible for the little guy to get ahead. In effect, companies like Monsanto are a state-sponsored monopoly. If you’re familiar with Nobel prize winning economist George Stigler and his work, you’ve heard of “regulatory capture.”

Monsanto, and other huge companies in this country all benefit from regulatory capture – which in essence just means that regulatory bodies become dominated and controlled by the very sectors and firms that they’re intended to regulate.

Think: Dept. of the Interior employees sleeping, partying and drinking with oil company employees.

And it makes sense that companies like Monsanto would eventually come to control the regulators. If you’re a regulator, keeping a company like Monsanto in business means job security. You’re directly incentivized not to keep a close eye on the business operations, but rather, to make sure those business operations are protected, thriving and unthreatened.

Right now, we have crystal clear proof on the topic of the wages of reserve currency devaluation. We know, because we’re seeing those wages everyday.

Reserve currency devaluation results in higher commodity prices.

I don’t even think that Ben Bernanke himself would dispute the above statement privately.

Over the course of Bernanke’s tenure, we’ve heard some fancy banker speak. We’ve heard about increasing liquidity and backstopping the financial system and easing quantitatively.

But today, everything that you would expect to happen when a currency is devalued is happening – and more.

Before I get to the “and more” portion, we don’t have to look very far or hard at all to find the wages of currency devaluation.

But government can’t abide higher prices on food. So President Obama will institute price controls. If you think that we couldn’t possibly have food riots here in the United States, then you probably also believe that we couldn’t possibly have price controls in the United States.

But you’d be wrong on the second count, at least.

In 1971, President Nixon enacted wage and price controls - and the biggest reason he gave for these price controls was rising food prices. He also capped oil prices.

You might remember oil shortages during this time - that was a direct result of Nixon’s price controls.

Just to be clear, “lexicon” is a fancy word that means vocabulary – and “food riot” is a phrase that refers to a group of angry, hungry, violent people who destroy property because they feel (among other things) that food prices are too high.

And yes, to answer any questions from the peanut gallery in my office, I do believe we’ll see food riots in these United States of America sometime in the next year and a half.

I’m belaboring this point because I want to be crystal clear with this prediction, not because I especially like making predictions. Quite the opposite, actually – I detest making predictions because it’s so easy to be wrong on the scope, specifics, time-frame, location, etc.

In that vein, if I am wrong about this prediction, it will probably be a matter of my timing rather than anything else.

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.

The problem isn’t that Ben Bernanke talks over our heads with his arcane banker vocabulary - where you say “quantitative easing” instead of “printing money.”

The problem isn’t even really the idea that being a Central banker is all that complicated. It certainly doesn’t have to be.

The problem is that Bernanke, and other central bankers cram so many lies, half-truths, obfuscations and red herrings into every single sentence they utter that making sense out of their words is like trying to sort out fact from fiction in a 10 car pileup - with 10 drunken drivers!

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.

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."

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.

Today you can buy a 10-year Treasury bond and get a 3.11% yield - but wouldn't you rather own shares in a company that pays a better yield, and has the potential to increase in share price?

I usually try to find companies that benefit directly from higher commodity prices, but in this case, I've found a company that could benefit despite higher commodity prices...

This company pays a 3.4% dividend - and better yet it has the ability to raise or lower prices at will. That's because it takes one of the cheapest commodities on the planet (corn) and turns it into an easily consumable good - with a price markup in the triple digits. Whether you believe we're headed into deflation or inflation, pricing control is hugely important.

More on this pricing control in a minute...

Most people buy Treasuries precisely because they want safety.

In yesterday's edition, I talked about an oil services company that benefits from higher oil prices.

But higher oil prices don't just benefit oil companies. In fact, higher oil prices can sometimes hurt oil companies - because higher oil prices frequently reflect higher production costs - so while a company might get more dollars per barrel, each barrel costs it more to get out of the ground. And even though the effect is usually small, higher prices typically result in a somewhat diminished demand.

According to Enerdata, an independent energy consulting company, gasoline consumption dropped 4.5% in North America during the record high oil prices of 2008. That's certainly a significant drop, but as you're probably painfully aware, oil prices more than doubled from the previous year:

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.

Pacific Ethanol Inc. (Nasdaq:PEIX) CEO Neil Koehler said the Sacramento, Calif.-based firm believes the United States ethanol industry will continue its robust growth. During a morning conference call with investors, the chief executive said corn supply can match the rapidly expanding production of ethanol and “when it can’t, the technology to convert cellulose to ethanol will be commercially viable.”

Soaring oil prices are enabling ethanol industry growth, he said.

“We are encouraged with ethanol market developments,” Koehler said. “With the high price of oil, limited and expensive opportunities to expand oil production and a robust renewable fuel standard, we do believe the domestic ethanol industry will continue a rapid expansion.”

Koehler said Pacific Ethanol’s customers are “aggressively increasing” their use of ethanol. In 2007, he said the U.S. ethanol industry produced approximately 6.5 billion gallons of ethanol and in 2008, the industry will produce an estimated 9.7 billion gallons to meet a renewable fuel standard requirement of 9 billion gallons. He said the fuel standard requirement will grow to 10.5 billion gallons in 2009 for conventional bio-fuels.

On Friday, Pacific Ethanol announced that it secured $40 million in new equity financing.

“Based on this new equity, we feel we have adequate working capital and financing for 2008,” CFO Joe Hansen said.

Pacific Ethanol was faced with a cash crisis, after incurring construction cost overruns of $27 million during the fourth quarter.

After Thursday’s close, Pacific Ethanol reported fourth-quarter revenue of $130.4 million, from $80.6 million a year earlier. Wall Street analysts . . .

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.” 

Shares of Pacific Ethanol Inc. (Nasdaq: PEIX) are sagging on news before the start of trading that the ethanol producer will halt construction of a plant in California.

Sacramento, Calif.-based Pacific Ethanol announced that it will suspend construction on a plant near the small town of Calipatria in the southern part of the state and wait for market conditions to improve.

“We remain committed to completing our ethanol project,” said CEO Neil Koehler in a statement. “However, given current ethanol market conditions, we feel it is prudent and strategic to suspend construction until the market improves.”

The facility, originally scheduled to be operational in the fourth quarter of 2008, is designed to produce 50 million gallons of ethanol a year.

Pacific Ethanol is currently operating two plants and owns a 42% stake in a third. The company, the largest West Coast-based producer of ethanol, is building two more facilities, expected to be up and running in 2008.

Ethanol, which in the United States is produced primarily from corn, is viewed by some as a clean energy alternative to gasoline and has been the focus of much recent attention. However, increased demand for ethanol has lifted the price of corn and narrowed the profit margins of ethanol producers.

At 1:24 p.m. ET, shares of Pacific Ethanol (PEIX) had declined $0.01, or 0.16%, to $6.10. The 52-week low of $4.20 was set on Nov. 23, while the 52-week high of $18.79 was established on Jan. 23.

Sanderson Farms, Inc. (Nasdaq: SAFM) CEO Joe Sanderson said ethanol demand will keep the grain market “high and volatile.” The chief executive said grain costs will add about $0.02 per pound to the poultry processor’s cost of producing a pound of dress chicken. Sanderson made the comments during a midday conference call.

“In order to offset this cost, the chicken market must move in tandem with this cost. While I have confidence that the fundamental rules of supply and demand in economics will work to maintain industry profitability over the long term, we recognize that short-term swings are inevitable,” Sanderson said. “However, we will manage our company as we always do, which is the same goal regardless of where we are in the chicken cycle.”

Before the opening, Sanderson Farms reported fourth-quarter net sales of $426.9 million, below analyst estimates of $429.2 million. Last year, Sanderson Farm’s fourth-quarter net sales totaled $291.7 million.