Editor's note: As part of our partnership with PBS's Nightly Business Report, TheStreet's Debra Borchardt joined NBR to explain how to tap into rising commodity prices by investing at the beginning of the food chain. (Watch video and read transcript)
NEW YORK (TheStreet -- Whether it's Ben Bernanke's fault or not, broad commodity prices have been on the rise over the past few months, increasing 15-20% from a low point in June.
For example, wheat prices have jumped 61% as Russians have produced 29% less wheat and the Canadians had a disappointing crop. Rice and corn prices are up 50%. Cocoa, coffee and sugar have all hit prices that many haven't seen in years.
Barclays Capital recently told clients it expects agriculture to lead the commodities markets over the next month or so as "fundamentals in grains markets look especially strong, supported by weather concerns in the U.S. over the winter wheat crop, further downgrades to 2010-11 harvest estimates, strong demand from the energy sector and expectations of rising Chinese import requirements."
These concerns are supported by the government as well. According to the latest USDA estimates, crop markets are tight. More acres and higher yields will be needed in order to balance the market this year. These crop markets could get even tighter if the weather is bad. The U.S. corn market in particular remains very tight -- the lowest level seen since 1995-1996 timeframe.But it isn't so simple to just add more acres of corn. Every time one crop is increased, another loses out, like soybeans or cotton. But those markets are tight as well. Brazil and Argentina also produce corn and soybeans, but their bad weather is putting this year's respective crops at risk. To add to the problems of limited acreage and the whims of Mother Nature, there is speculation. Investors know that Russian droughts have impacted the global wheat supply. The talk of higher prices and easy money is drawing traders to speculate in those markets -- further pushing up prices. There will be even more market interest this week as Goldman Sachs hosts an Agricultural BioTech Forum on Feb 9th. "There are three basic ways to think about food and ag commodities at the stock level and that is seed, nutrients and equipment," says Tim Holland, portfolio manager at Aston/TAMRO Diversified Equity Fund. As rising food prices fill farmers' pockets with extra cash, they inevitably buy things that would boost their productivity further, the foremost of which is soil nutrition. Here are some agriculture companies that give investors exposure to the beginning of the food chain.
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