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- BBQ Corn Recipes
- 60% Gains from Agriculture
- How to get rich…from corn?
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 [email protected].
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.
Admittedly I haven’t written
about corn or agriculture in general very much. I may have been neglecting this topic somewhat for the simple reason
that there’s just not the perception of the immediacy of riches that you can get
by investing in gold miners or oil prospectors. No one yells “Eureka!”
when a farm gets built or a new fertilizer plant produces its first ton of
nitrogen. Archer Daniels Midland (NYSE: AMD) doesn’t ever “strike”
corn.
But that doesn’t mean there
are no riches to be made investing in agriculture.
For
instance, one of the top performing stocks in the Small Cap Investor Pro
portfolio is an agriculture company that’s returned nearly 60% in the past
year.
And speaking of Archer
Daniels Midland, the company has been very good to shareholders over the past
10 years, when it made nearly 200% gains while the broad market traded
flat. They also pay a 2.4%
dividend. They’re the kind of company
everyone should own. Archer Daniels
Midland, like Exxon (NYSE: XOM) and
Wal-Mart (NYSE: WMT) benefit from
what I call “The Inevitability Factor.”
These types of big blue chip
companies with strong earnings and international exposure are so big and so
ubiquitous, that they’ll be around no matter what happens to the broad market,
world governments, currencies; indeed, it’s almost impossible to think of a
likely scenario where these companies won’t thrive and survive.
Their future is inevitable. We’re going to keep using ADM corn, just like
we’ll keep fueling our cars with Exxon gasoline and being consumers of Wal-Mart
goods.
And there’s definitely some
potential upside in corn prices, especially considering that corn prices have
moved sideways for the past 18 months.
This chart plots the average
weekly cost of a bushel of corn, in cents. You can see how corn skyrocketed in price to over $7.50 a bushel back in
the summer of 2008. That’s because, in
part, corn prices are tied to oil prices. In the United States,
most gasoline is blended with 10% ethanol. And most of that ethanol comes from corn. According to a paper published by Schnitkey,
Good and Ellinger from the Department of Agricultural and Consumer Economics at
the University of Illinois, 11 percent of total U.S. corn consumption was used to
make ethanol in 2006-2007.
Right now, it’s easy to see
that corn has been beaten down in a sustained correction from its highs in
2008.
With oil
prices near their one year lows, it could be a great opportunity to buy
companies that will benefit from rising corn prices.
And right now, there’s some
speculation that corn prices will rise thanks to increased demand from China.
According to an article in
Bloomberg today, “Twenty-five of 35 traders and analysts surveyed from Chicago to Tokyo on May 21
said corn will gain because of rising purchases by China.”
If you want to give your
portfolio exposure to the likelihood of higher corn prices, the safest bet
would be to buy shares of Archer Daniels Midland. This $16 billion company seems to track
pretty closely with the price of corn.
For a more speculative play
with better upside, I’d recommend checking out the agriculture company in the Small Cap Investor Pro
portfolio. They’re not a pure play on
corn prices, but they do have exposure to China, and they’re already
benefitting from greater demand in the agriculture sector. Unfortunately I can’t publicize this
company’s name here: it wouldn’t be fair to paid subscribers to the
service. But I encourage you to take a
30-day trial subscription by clicking
here now.
Good investing,
Kevin McElroy
Editor
Resource Prospector