A Final Look At Agriculture Stocks

By Sham Gad | December 28, 2009 AAA

This year has been a roller coaster ride for many agriculture stocks. As 2009 began, many companies benefited from the industry's tailwinds that were created by the boom in grain prices. However, prices collapsed and farmers deferred purchases, highlighting that agriculture stocks were not immune to Mr. Market's wrath. As the end of the year approached, however, a revised favorable outlook again helped companies head into December with favorable tailwinds.

IN PICTURES: Great Depression without having to make any capital structure changes. A couple of years from now, the dominance of this industry will prove very valuable. (To learn more about depression and recession, read Recession And Depression: They Aren't So Bad.)

Feeding the Masses
My favorite agriculture sector continues to be fertilizers. Fertilizers have had an excellent year, despite the precipitous decline in fertilizer prices that took hold this year. Dominant fertilizer names like Potash (NYSE:POT) and Agrium (NYSE:AGU) have valuable assets that would take years, billions of dollars and lots of environmental approval to replicate. However, both have delivered in 2009. By December, shares in Potash were up over 60%, while Agrium had increased by nearly 70%. Even the Market Vectors Agribusiness ETF (NYSE:MOO), a great collection of the major agriculture players, is up nearly 60% over the same period.

Looking Forward
The fundamentals of the agriculture industry continue to look very strong over the next several years. What started in 2009 could be the beginning of a very successful run for the quality names in this space.

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