Coming Peak Food Greg’s Note: As much as the Fed tries to stave off inflation while still propping up the economy, it seems that we are in for more dollar trouble in the near and possibly distant future. Couple that with weather and other crop problems, and a big rally for agriculture and other resource commodities is what we can expect. Our commodity expert Kevin Kerr has been doing the leg work and finding out what lies ahead of us in the agricultural sector. Kevin’s been talking about the subject of “Peak Food” for a while now, and when it comes to matters like this, sometimes he hates to be right. Are we in for more dollar trouble? What can be done? Let us know what you think at greg@whiskeyandgunpowder.com. Whiskey & Gunpowder
May 8, 2008
By Kevin Kerr
New York, New York, U.S.A.
A Small World After All
It seems everywhere I go, people want to learn more about commodities trading, the resource markets and where I think we have been and where these markets will go next. Whether my travels take me to the Middle East or the Midwest of the U.S., the stories are very similar. Most people are concerned about the rising costs of commodities. Investors and fund managers are always asking me if this is a commodities bubble and when it will burst. In fact, now you have all of these dollar bulls coming out and saying that inflation and the commodities markets are simply speculator driven and the worst for the dollar is over. I disagree. Do you remember as a child wishing for something, wishing so hard, yet it didn’t come true? Wishing for something to happen does not mean it will be so. (I never did get that red bike.) ~~~~~~~~~~~~~~Special~~~~~~~~~~~~~~ Your Guest Pass Expires Monday The Wall Street fat cats don’t like that we’re giving away this special guest pass into the “millionaire’s market,” and that’s why this offer can’t last forever. This may be your only chance to ever see inside the market that allows members to withdraw $810 or more a week directly into their retirement account. We’re waving the million-dollar membership fee, so don’t miss this special opportunity. Click here for more… ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ As I shared with my Outstanding Investments readers, and as my Resource Trader Alert readers know, I sold our silver positions for some solid profits a few months ago, and then sold half of our gold, too. And just the day before the gold sold off, it looked brilliant. But I have to claim a little luck on that one. Any good trader knows to give credit to Lady Luck once in a while. Anyway, it was the right thing to do, and now that gold is correcting, my new target is around $850. And here we are: I think now it’s more like $820, but I am seriously looking at adding more longer-term options down here in both gold and silver. I believe this move in the dollar will continue a bit, although short-lived, and the same problems that drove the dollar into the basement will persist, and even worsen. The Fed can’t just snap its fingers and wipe away twin deficits with some stimulus checks. Too many folks are subscribing to the idea that the consumer will somehow come to the rescue and spend our way out of recession. It’s pure fantasy. Do I think commodities are in a bubble? No. Do I think that there is a lot of froth in the market? Absolutely. The fact of the matter is that we are in a new paradigm for commodities and the old-school thinking about how commodities used to be traded has to be changed. And this is true of most commodities — none more so than the agricultural ones. Peak Food: You Heard It Here First As I sit here in the transit lounge for business class, I am watching CNN out of the corner of my eye, and on the air is Jonathan Stevens, a baker from a Massachusetts company called Hungry Ghost Bread. He is starting to grow his own wheat and encouraging his customers to do the same. Not a bad idea. For a 50-pound bag of organic flour, he used to pay $25, but now pays around $60. So in back of the store, the bakers are now growing their own wheat. Funny, but they may have the last laugh. Now, while farming in your backyard may not seem very practical, it’s great marketing, and also a new reality. Costco limiting the number of bags of rice — and now other things — that you can buy is clearly physical demand. I am a speculator and a Costco member, but have not been there to buy rice lately, especially 20-pound bags. ~~~~~~~~~~~~~~Special~~~~~~~~~~~~~~ A $14,300 Gain Instead of $2,200 On a single $5,000 stake, just holding Occidental Petroleum’s regular “tier one” shares — the kind you hear everyone gabbing about on the financial shows — you might have walked with just $2,200 in profits. Not so bad, but the “tier two equities” would have given back a hefty $14,300. On the same company, the same trend, and over exactly the same time period. Here’s more... ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Sure, speculation is a part of this puzzle, but to lay the blame on the farmer’s doorstep or to say it’s all speculators and hedge funds causing the run-up is a sad mistake. Real physical demand and a weak dollar are two of the biggest reasons. I don’t see demand going anywhere but higher, and this year is getting off to a bad start for agriculture in the U.S., as the weather has been awful. This year’s corn crop could be extremely disappointing. We are betting on much higher prices in soybeans and corn over in Resource Trader Alert and are using option spreads to take advantage of this. I just got back from meeting with farmers in Minnesota and learned some very interesting things and ways to invest for the next big move. You can also follow along with my latest TV appearances and my travels to Abu Dhabi and Dubai this week. I will be meeting up with “Aussie Joel” Bowman from The Rude Awakening, who now lives in Dubai, so we are sure to see many interesting things and, hopefully, learn more about some outstanding investment opportunities. I have to say it is very satisfying to have been one of the only people at last year’s Agora Financial Investment Symposium to speak on the topic of Peak Food. Some of my colleagues snickered (“There goes Kevin again”) and some audience members looked puzzled. After all, nobody in the mainstream press talked about higher food prices or the coming rally for agriculture, and now we seem to hear about them every day. Times are certainly getting tough out there. Hey, I’m just the messenger. Yours for resource profits,
Kevin Kerr Greg’s Endnote: Oil prices surging, the dollar falling, a credit crisis threatening our financial-banking system. These are all shocking developments that have occurred in just the last year and threaten to ruin our stock market. Now we’re having trouble simply coming up with enough food to feed our population. Now here’s the bad news: things are about to get worse. You can expect at least five more “super shocks” that could bring a full-on stock market apocalypse. What are they? Click here to find out… | 
