Blowing Off Steam

Today I hate Congress


Pennsylvania, US
June 10
Deano11 is married and has three beautiful daughters.


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AUGUST 8, 2012 2:40PM

How I'm Profiting from the Drought

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I manage my own investments in stocks and bonds, it's a hobby I took on in high school, and for the last three years I've been holding shares in a small agricultural fund based on corn, wheat and soybeans with the ticker GRU.

Between that and owning a few shares in a fertilizer company called Agrium I have made a tidy sum. I made these investments based on the advice of an old friend who majored in economics at Princeton. 

I should be glad to make some money that will one day help send my kids to college, but instead I feel really empty. Other people will suffer hardship from higher food prices, and I must acknowledge my small part in helping that reality come true. I'd feel less lousy if Congress hadn't skipped town this summer without doling out more emergency relief to ranchers.

Farmers do need higher prices if they want to stay in business. There isn't any better way to get people farming than good pay, but why should we make people suffer in the process?

 And how exactly do you follow the grain market anyway? It's not like there's an S&P 500 for corn and wheat prices.

Well, for the last few years I have Googled the words "Grain Prices" almost every day to read the news. Based on that plus a bunch of research, I was speculating the Chinese or the Indians would need to buy lots of grain in a pinch. They don't have the capacity any more to feed their own people. Grain stored in warehouses has been running lower and lower for years.

Another big country, Russia, could close its grain market any day to control Russian prices because Putin doesn't want to get overthrown by angry protestors demanding cheap bread. South America just doesn't have the infrastructure to do the kind of crop numbers they are talking about next year.

 All along, the USDA and American farmers have been playing cat and mouse with crop and yield estimates. The farmers want lower crop yields and less planted acres reported to get higher prices. Our government's position is more tricky.

The American consumer, food producers, ethanol producers, our trading relationship with China - if we charge more for grain, they might retaliate by charging higher prices for all that plastic stuff -  all these players mean the farmer is not necessarily the one whose interests are held dear by Uncle Sam. In other words, there's a lot of speculation the government has been massaging the numbers to make our food supplies look more ample than truly the case. 

Now, some people have dismissively said that crop insurance will cover farm belt losses. I don't buy that because running a tractor with skyhigh diesel (similar to gas) prices and high fertilizer prices and paying for genetically modified seed - these are hefty expenses. Pumping groundwater isn't cheap either. Our lousy infrastructure doesn't help, some farmers still don't have irrigation systems, and it's tough getting a grain barge down the Mississippi River when there's no water. 

To tell the truth, I was not expecting a huge drought in America this year anymore than anyone else, I just knew that if somebody had a bad drought, the Russians, the Chinese, the Brazilians, then we would get another food crisis. Apparantly, what made this year so bad was no rain during a warm spring, then this flash heat hit the country and stole all the moisture from the ground.

  Anyway, that friend from Princeton I was telling you about sees a silver lining. We Americans are terribly wasteful and we obviously overeat, and we often don't finish the portions on our plates when we eat out. 

Nice silver lining.

And yet, I traveled by train through the midwest for a vacation this summer, and I got to see the drought first hand. Field after field of dead corn. I wonder what those fields will look like in 20 years if it keeps getting hotter. My kids might need more than a college degree to stay alive.

Well, I think I will take a small portion of my winnings, that is if I can stop the Market from stealing it back, the way casinos whittle down card players,  and donate it to something like Greenpeace, or Rainforest Action Network.  

Meantime, if you've gotten this far I urge you to think seriously about your country's food security. Your kids' and my kids' future depends on something being done.

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My husband is an investor, as well, and one of his favorite quotes is, "Buy when there's blood in the streets." That said, you are right. It is short-term wisdom. And we should be concerned about not only our food security but our water supply as well. Speaking of which, I bet there's going to be a lot of money made by people who've been quietly cornering the market on water rights over the last couple of decades.
Most farmers follow commodity hot lines just as you do. Corn prices are high now for last year's crop. This year will be the problem for them, and it will affect all of us. Many of them will make a killing if they've held crops until this time. I'm always shocked when I hear people (as someone did the other day to me) that they are surprised that farmers are businessmen. Duh! Commodities are however exactly like the stockmarket as every farmer knows from the ebb and flow of farming.
Question seems to be: will the government hold up Price Supports? In an election year, all cards will be turned up, I am guessing here.
I' m glad that you had the counsel of your friend. I've been making a good return -- but has stalled of recent. The Euro is a concern . We really need to take the blinders off here. The energy thing is how we, as a country think -- cheaper is better. Wal Mart 's cheaper and easier. OK, we do need value, even if it's marginal. I feel that we are on the nexus of realizing new and better ways, in many sectors of the economy. Your Food story is ripe. How about Hydroponics? Will we wake up? Is there a national 'can do' attitude somewhere in the grain of our character? Let's hope so ....
Thanks for sharing.
Assholes like you, Dean, keep up the good work! Makes it easier to suggest direct solutions.