Andrew Abraham

andy-0101 My name in Andrew Abraham. I have been investing in commodities and managed futures since 1994. I adhere to the philosophy of trend following. Trend following stresses a disciplined approach to commodity/ futures trading. Successful trend following and commodity futures investing requires patience, discipline and actively managing the risk. What sets me apart from other traders is that I am not only concerned about the return on investment but how much risk I will have to tolerate to achieve my goals.

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If you are interested in contacting for speaking engagements. Please email me at Andrabr9@gmail.com or call 954 903 0638.

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Futures and commodity trading involve substantial risk. The evaluations of futures and commodities may fluctuate and as a result, clients may lose more than their original investment. In no event should the content of this website be construed as an express or an implied promise, guarantee or implication by, that you will profit, or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Information provided on this website is intended solely for informative purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible, where projections of future conditions are attempted.

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Water Water Everywhere And Not A Drop To Drink

Water Water Everywhere And Not A Drop To Drink – Or Grow Crops

If you can tell me something else where the fundamentals are so attractive…I’d be happy to put my money there, but I don’t know of any other place – JIM ROGERS ON AGRICULTURE

In my last post I talked a bit about the most recent developments in the agriculture market and how I thought it could be a great place to invest in the long term.

The case is really built on some basic facts that are practically impossible to change. First, in order to grow good crops we need good soil, water and the sun. Second, we need ample supplies to meet growing demand if we want to have stable prices.

But is that what’s going on? No.

The reality is that we have some problems with land, water and perhaps the sun. In addition it comes at a time where we are seeing the world’s population growing faster than food production.

The United Nations Food and Agriculture Organization said recently “that worldwide food production will have to rise by a staggering 70% by the middle of this century to satisfy demand growth and that “almost 400 million people will face famine unless food production is dramatically and urgently increased.”

That’s a lot of people in a very compromising position yet production has only increased about ½ of 1 % over the last 20 years to aid the situation. This certainly falls short of the United Nations forecast and in order to meet that forecast, production would have to rise threefold over the current levels. That could be tough.

If that’s not enough, see the chart below where stockpiles are already at record lows for wheat, rice, and coarse grains:

Also as I pointed out in a December post, arable farm land that is properly irrigated is in short supply in the countries that need it most. China used to be one of the largest exporters of soybeans, but now, China is the largest importer of soybeans. I would guess that the culprits here are increasing demand, deteriorating arable land mass and poor water supplies. China and India are well below the world’s average for water supplies yet these are the very countries where the populations are expected to grow the fastest.

Finally, the sun is entering a period where we are likely to see cooler temperatures, more droughts, and other less-than-ideal farming conditions. We’re just entering the low part of the sun spot cycle and this will mean lower crop yields and higher crop prices.

Andrew Mickey, the Chief Investment Strategist at Q1 Publishing pointed out that “Despite all the technological advancement, farming is still a very basic process. Crops still need soil, sun, and water. And one of those important factors is where the problem lies. The lack of quality soil can be offset, to a point, with fertilizer. And there’s also the modernization of the still fertile fields of Eastern Europe and Russia, which opens up a bunch of other issues.” This is why BHP is desperately trying to buy out Potash. They recognize just how profitable a large integrated fertilizer and related feed products company will be down the road.

Mickey also stated “As for water, modern irrigation systems can transport water much farther and distribute more efficiently. Granted, water tables are falling and there are other issues, but for now, there’s enough water in most key agriculture areas.” There may be enough water for now but what about the future. It seems to me the countries with the fastest population growth are the same ones with extremely low water supplies.

In any event, he makes a great point about something most of us don’t think about. What a big role the sun plays in crop production.

“The sun will turn out to be the problem. As we’ve been covering for a long time, the sun is entering the dormant period of the sunspot cycle. This means generally cooler temperatures, more droughts, and other less-than-ideal farming conditions. We’re just entering the low part of the sun spot cycle and this will mean lower crop yields and higher crop prices. The relationship of the sun spot cycle to agriculture is not some new-fangled theory though. In his book Financial Astrology, David William’s states, “In 1875, English economist William Stanley Jevons…announced a correlation in the fluctuations in the prices of wheat, barley, oats, beans, peas, vetches, and rye with [the] sunspot cycle.”

The chart below shows the history of sunspot cycles:

As Andrew so aptly sums up, “The combination of rising demand, low stockpiles, and falling production are creating the very real risk of an imminent “Agrastrophe.”

“Add in the upside potential of commodities and you’ve got a tremendous investment opportunity. There’s one other very important factor here though. If and when agriculture commodities start to run up, people will start stockpiling food. That will only exacerbate the supply/demand imbalance.”

“That’s what happened in late 2007 with the Asian rice riots and it’s still happening all around the world. There have been a total of 70 food riots in the past three years. That’s what makes a strong bull market in agriculture commodities different than others. When it does eventually peak, the run in agriculture will be driven by fear and greed. Those are two forces which by themselves are tremendously profitable for early investors, but are downright explosive when combined. The big run in agriculture is coming. It may not be this month or next month, but everything is in place. And, quite frankly, it’s tough to imagine a scenario where you won’t regret owning agriculture stocks in the next five years.”

And finally Jim Rogers had this to say on his blog August 19th, ”The fundamentals for agriculture have gotten better. The inventories are now at the lowest they’ve been in decades, not years. Sometime in the next few years, we’re going to have very serious shortages of food everywhere in the world and prices are going to go through the roof.”

Charles Maley
Viewpointsofacommoditytrader.com

Futures trading involves risk. People can and do lose money


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