I did my DD and started positions in DBA and MOO.

"Unprecedented prosperity touted for U.S. agriculture"
http://southwestfarmpress.com/news/farm-income-0108/

Just one of many such articles on the web. Ag is one of the very few bright spots for 2008.

 

 

The charts are bullish for both MOO & DBA.  As long as the USD continues to de-value or at a minimum remains the same, commodities should go up in value.  When the dollar begins to gain some value, some commodities could become a little dicey.

uh

I've been watching DBA and like what I see. Today, it closed +0.52%, zigging up modestly when the market zagged precipitously. DBA has good liquidity compared to RJA which I've also been watching but am going to avoid for that reason.

I live in rural Illinois, the land of corn and soybeans.  Last friday,(1-11) the local ag report was commenting on the strength of corn and beans going forward.  Corn because of the ethenol projects competing with the livestock farmers for the corn.   Soybeans because so many farmers planted corn instead of beans in 2007.   They commented that if more farmers changed to corn is 08, it could really pinch inventory levels of beans.  I noticed this summer while driving around  that about 60-70 percent of the fields planted in corn.  It usually is about a 50/50 split.  By the way,  I hope you do well with DBA or are a vegetarian because with corn prices up the price of beef,pork, and chicken should be rising also.

  robert

 

Note that Martin Pring in his most recent newsletter says that commodities are in a topping phase after this multi year run up. Others have said that commodities have much further to go with a continuing bull market. Take your pick.

Note that while DBA was up 2.94% on the 17th, MOO was down 7.2%. These are both agricultural commodity plays in ETF's.

Why the difference?? Also note that DBA technically is very overbought and almost parabolic in its recent rise. Certainly overdue for a sharp pull back short term.

 Just MHO which normally doesn't count for much.

 

Jim

 

 

I noticed the same divergence between MOO and DBA.  IMO ag commodities (as in DBA) have actually been in relatively high demand globally, but more importantly, there's a big spec crowd trying to buy into what's actually a fairly small commodity futures market.  MOO, on the other hand, contains agriculturally-oriented equity securities - so its contents are subject to not only general equity market risk, but also the fact that higher commodity prices may at some point stop helping / start damaging prospects/margins for those diverse companies - some of which have ag commodities as inputs as well as outputs and some of which may(?) suffer from aspects of demand destruction from rising prices.    

how about a bit more diversification?  DJP ETN has about 30% agriculture, 33% energy, 18% industrial metals, 9% livestock, 9% precious metals. PCRDX has a higher cost at about 1.25% vs .75 for DJP but you don't have the ETN risk factor.  Anyway just a thought.

Gene

From what I could tell when I went to website, MOO is a basket of companies related to Ag. It has a correlation of about ..7 or .8 with S&P. That is not good in my mind--too highly correlated-why bother with MOO?

DBA is pure play on sugar,soy, corn, wheat. about 25% each. Much more pure ag play.

I agree (hunch) wiht post above. I think getting into DBA now or Ag now is chasing past returns. I'm leery.

I'm much more interested in MIDDLE EAST now..see other thread in another forum on middle east. Merrill analytically raves about middle east as most desireable frontier market; and Merrill is saying get out of emerging markets. Middle East-very low correlation with S&P and favorable conditions.

 

 

I remember reading somewhere that Mark Mobius of Templeton funds was talking about a possible 20% drop in emerging markets but still believes that emerging markets is a place to be.

FWIW

Roberta 

Bubble alert............... I am becoming increasingly nervous about ag.  I know all the pundits are pumping it and ag land made Forbes as an investment.

My bones tell me the bubble is rapidly expanding and it is only a matter of time before it goes poof.  You won't believe the increases in cash rent and other inputs (I'm talking 30-40%) around my area.

The cash flow on land is great now,  but but the inputs are going crazy, ehtanol does not have good long term prospects and ag is getting too hot for me. You can't even order a new John Deere tractor for this year, too much back log. 

 

I'm basically a contrarian by nature and get nervous when things get on the front page, I like it much better when nobody is watching.

Farmera,

A kindred contrarian spirit agrees.  The article in Barrons about predictions of $6 corn and $18 beans was precisely what I was waiting for.  I'm guessing ag product consumers are all hedged (long), MOO companies that have ag product inputs are hedged long, and all the specs are long their lungs as well.  Soon the last spec will grab that "last bushel that will ever exist" at the top, and we can watch these babies roll over with a vengance.  Of course, if that really is the last bushel ever, my contrarian nickers will surely be in a twist!