What would you say if I told you that food supplies are at their lowestlevels in 35 years, while the number of acres being planted for food grainsis at its lowest level over the same period? It sounds to us like a greatsupply/demand relationship for higher agriculture prices.

Well, interestingly enough, this scenario is currently in place. The demand for ethanol has farmers planting fewer acres for food and more acres for ethanol. The government has latched onto the ethanol theme and is using it to show that they're trying to do something to reduce our dependency onforeign oil.

The demand for basic food products is growing, as well, and driving agriculture commodities higher. The worldwide economic boom means people have more money and are demanding more protein in their diet. This means demand for meat products is also rising worldwide.

It takes grain to feed cattle, hogs and chickens and we all know those feed grains are grown by the farmers. Demand for agricultural product seems to be growing from all sides.

The increase in demand means that more acreage will have to be planted in the future and the need for machinery, seed, fertilizer and related agricultural products should increase accordingly.

The companies that supply products to this industry stand to benefit fromthis supply/demand scenario. The agriculture-related stocks continue to showimpressive strength, and stocks in the group are moving higher with someconviction.

The bullish agricultural theme is getting some legs here and thesector overlays several other strong groups in this market, such asmachinery, chemicals, biotech, food and consumer staples, which can onlyhelp.

The worldwide bull market for commodities isn't hurting the case foragriculture stocks either. This is a sector that has all the stars alignedfor a continued bull move to the upside in the coming months.

Two names in the group that stand out are


(BG) - Get Report

, which is a majormanufacturer of fertilizer in South America, and


(AG) - Get Report

, which is amanufacturer of farm machinery.

Bunge has worked its way back to the primary uptrend line over the last few months and retested support. Since then, BG has broken the downtrend channel and is challenging the highs. The stock should breakout here and reassert the primary uptrend.

Agco has been a strong stock that has moved up steadily over the past year. AG has rallied in an orderly "stair step" fashion, and the stock looks ready to break out of the recent consolidation to make new highs. These are bullish charts that suggest the bulls are firmly in control of these stocks.

At the time of publication, Scott Maragioglio was long Agco. Maragioglio had more than 15 years of technical analysis and money management experience before co-founding Epiphany Research. Epiphany Research, which has developed and utilizes proprietary tools to identify and track liquidity changes in the market indexes and sectors. He is a member of the market technicians association (MTA) as well as The American Association of Professional Technical Analysts (AAPTA) and holds a Chartered Market Technician (CMT) designation. Mr. Maragioglio has also served on the board of directors of the AAPTA.