NEW YORK ( TheStreet) -- The agricultural industry started off this year on a strong note and continues to generate headlines regularly.
However, increasingly, this corner has become a choppy region of the marketplace. With the divergence in crop prices, the full-steam-ahead mentality that defined much of the opening half of the year has begun to fall by the wayside.
During the weeks and months ahead, agriculture bulls will want to maintain a conservative stance on this industry in order to avoid being taken to the slaughterhouse
Clear evidence of the shaky action taking place in the food industry can be found when looking at the family of "soft" agriculture of commodities, which includes coffee, sugar and cotton.Since the start of May, sugar prices have been on a tear, powering along a nearly uninterrupted upward path. This dramatic rally has continued into July. Month to date, the futures-tracking iPath Dow Jones UBS Sugar Subindex Total Return ETN (SGG) has ascended nearly 15% to all-time highs. As sugar prices ascend higher, cotton prices have not fared as well. This crop, whose steep rise during the closing months of 2010 and start of 2011 made it a darling amongst agriculture bulls, has seen a steep decline during the past few months. Since the start of April, the iPath Dow Jones UBS Cotton Subindex Total Return ETN (BAL) has tumbled as a result, retreating to levels last seen at the end of November 2010. The action witnessed from sugar and cotton highlights the inherently volatile nature of single-crop commodity ETNs. On a number of occasions I have warned that, while during times of strength these products can be wildly attractive, the pendulum swings dramatically in both directions. Investors caught with heavy exposure to these products when they turn south can suffer gut-wrenching losses. It is difficult to determine what is next for individual crops and oftentimes, products like SGG and BAL can find themselves jockeying between big gains and major losses on a day-to-day basis. While, with a keen eye and plenty of patience, an agile, risk tolerant trader may be able to harvesting some strength from these products, investors with a weaker stomach for risk will want to look elsewhere for agriculture exposure.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV