Benefit From The Agriculture Boom

The prices of all kinds of meat are up. So is the price for cereals – Kellogg's and General Mills have raised their prices. Orange juice, eggs, and milk – all up significantly. You see it perhaps most prominently in higher prices for corn and wheat. Wheat recently reached an 11-year high. Corn topped a 10-year mark last year.As a result, once forlorn places such as Iowa are hot. Eager investors lurk about like bag snatchers at a railway station. They are looking to scoop up farmland. It's no wonder since running a farm is a good business again. Take a look at the chart below of average gross profit per acre (U.S.).This prosperity spills over to related industries, like a freshly poured lager that overruns the sides of a beer mug. Agricultural equipment makers are sopping up some of that prosperity, too. Farmers need tractors. They need tires for those tractors. They need irrigation equipment. Basically, anybody who sells anything to farmers is doing all right. Including the makers of fertilizers.World population growth is still putting more demands on food production. Then there is increased prosperity in China and India and other parts of the world. The result is more people with more money in their pockets. And these people want to eat more meat. That stimulates grain production even more. More grain production means more fertilizer use.Global grain stocks were already low two years ago. Remarkably, they are lower now:Forecasts call for grain inventories to reach their lowest level in modern history by the end of this crop year. Grain production should reach a new all-time high this year at 1.66 trillion tons. (Drought conditions throughout much of the U.S. don't bode well for this forecast, by the way). Yet demand is growing faster, to about 1.68 trillion tons. In three of the last four years, demand has topped production and grain stocks have fallen.Another big factor in all of this is the rush for biofuels – in particular, ethanol. Ethanol production should devour about one fifth of America's corn crop. The rush to plant corn is a great boon for fertilizer makers. Corn alone accounts for about 40% of U.S. fertilizer use. Plus, many farmers have dropped the standard corn-soybean crop rotation in favor of continuous corn planting. If you don’t believe this just look at the charts of these stocks: MON, TRA, POT, DE, MOS, CNH, AG, CF and other in the fertilizer, farm machinery and related industries for 2007. If you don’t want to buy all these to benefit from the trend in the years to come, you can check out DBA and MOO.