Since touching 52-week lows of about $36 on the last day of June, the farm-sector ETF,
Market Vectors Agribusiness
, has gained 17%. (Over the same period, the S&P has risen 5%.)
for most of that rally, with
advancing 32%, 35% and 36%, respectively.
Still, the severity of the rise -- not to mention all the talk of double-dips and
-- has raised the obvious question: Is the rally finished? Is it too late to participate?
Charles Neivert, for one, believes the answer is yes. Last week, in a note to clients, he advised taking profits off the table for those investors who may have benefited from the midsummer run-up. (Monday morning, however, Neivert issued a report on CF Industries, noting that its shares are cheap relative to its peers.)
The catastrophic drought and resulting wildfires in the Russian bread basket has artificially inflated wheat prices (earlier this month they reached a two-year high in Europe) -- which, in turn, has produced an overreaction to the upside in agriculture stocks, Neivert argued. The worldwide supply of wheat is just fine, he wrote, and there won't be any shortages: "We would caution investors that wheat, unlike corn and soybeans, is a truly global crop, and global inventory remains adequate."
If you have confidence in the oracular skill of Russia's state meteorologists, then perhaps you might have even more reason to back off stocks in the ag sector. According to forecasters, the nation's drought may ease this week, with thunderstorms and heavy rain expected across the drought-stricken steppe. If the rains do come, Russia's winter wheat crop, which will go into the ground in late August and September, may turn out just fine, boosting world inventories. Indeed, wheat prices fell on the news Monday.
Back stateside, the focus remains on corn. (More than any other plant, maize is what drives the U.S. farm industry, including the relative fortunes of those companies that produce fertilizers.)
If you believe
is worth listening to on these rural matters, you might conclude that fertilizer stocks have more life left in them yet.
In a report released late last week, agricultural commodities analysts at Goldman reiterated their bullishness on corn (they're not so hot on wheat or soybeans, at least over the short term).
Their rationale is a popular one these days: corn supply will most likely be tight this year, with ethanol production generating healthy demand and yields from the upcoming corn harvest likely coming in a little below what had been expected for 2010. Also, some cattle raisers may switch from wheat feed to corn because of the spike in the price of the former.
"Accordingly," Goldman's farm watchers wrote, "we believe corn price risk is skewed to the upside going forward."
Share prices in the agriculture sector were mostly in the green Monday after having pulled back last week amid the broader market selloff. One of the few names in negative territory during Monday's regular session was Agrium, which announced a bid to
, as it looks to expand its retail business outside North America.
And so, we put it to you: Is it too late to find further returns among agriculture stocks? Or is the harvest just beginning? Take our poll below to see the consensus of
-- Written by Scott Eden in New York
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