In the development of alternative sources of fuel, the world's supply of agricultural products (such as corn) is now split into consumption related activities and towards biofuels creation. The end result of these two opposing factors is the escalation in the price of agricultural prices. Similarly, with growing global populations and food shortages/hoarding compounding the issue, consumers will be paying more for food for the foreseeable future, which is also known as agflation. (For more, see Brazilian Ethanol Bounces Back)
Increasing prices for agricultural products do prove to be a boon for farmers, who will now earn large profits for each piece of grain and drop of milk produced. While it is unlikely for the average person to suddenly switch careers to become farmers in order to get a piece of the action, but as investors we also ride this wave by entering positions in Agricultural related companies as a picks and shovels play.
The rationale is that farmers will need the best seeds, fertilizers, animal feed and other agricultural inputs in hopes of producing the largest yields possible. Therefore, the company's that are selling to the farmers should be in for a decent payday as well.
Agricultural Stocks To Know
Archer-Daniels-Midland Company (NYSE:ADM)
|Cosan Ltd. (NYSE:CZZ)||3.44B|
|Mosaic Co. (NYSE:MOS)||30.37B|
|Potash Corp. of Saskatchewan (NYSE:POT)||42.99B|
|Bunge Limited (NYSE:BG)||8.5B|
Food prices will likely continue to rise as our population grows and biofuel development gains popularity. As a result, the companies mentioned in the table above could be a good addition to any portfolio. (For more, see 3 Companies You Can't Live Without) Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!