A Dollar Rebound Won't Kill the Ag Stocks

Better seeds and more fertilizer. That's it. Those are the technology weapons in the war against food shortages caused in the short term by a worldwide obsession with biofuels (we are the worst offender, of course) and in the long term by the increased affluence in China and India, which leads to more nutritious, protein-filled diets.

Both forces, when combined with worldwide droughts and failed harvests, not augmented by the U.S. -- we are late to start with our corn season -- are driving prices up to ridiculous levels. I have no doubt that if tomorrow the president of the United States said he was suspending the biofuel mandates for ethanol that we would see a collapse in food pricing. But I also have no doubt that this inept administration could never figure that out.

So, the solution comes to all of the stocks that were crushed yesterday: Monsanto (MON - commentary - Cramer's Take), Potash (POT - commentary - Cramer's Take), Mosiac (MOS - commentary - Cramer's Take) and Agrium (AGU - commentary - Cramer's Take). Without better seeds that produce higher yields, without more fertilizer that increases yields, we are going to be facing a long-term continuation of these price increases and the attendant inflation and food riots. Inflation, by the way, that has nothing to do with the Fed, unless the Fed is also a big granary hoarding wheat and corn.

The shortage didn't happen overnight. We have been over-inventoried for years in this country and around the world. We had grain storage that was so high for so many years that farmers sold land or it lay fallow. It wasn't worth it to produce.

But the increase in oil, the food-for-oil mandate of President Bush, continued even more aggressively by Obama and Clinton -- we have no idea where McCain stands, as his politics seem more of a global cooling initiative -- and the lack of inventories have produced the monstrosity that we have now.

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