7 Billion Reasons To Play Ag Stocks

That's a lot of reasons to buy agricultural names, so here's why. According to an article on Bloomberg, the 7 billionth person will be born this year, on October 31 in India. This is from a projection from the United Nations, which cites a variety of different reasons why the world's population continues to grow. Medical advances, better vaccines, antibiotics and improvements in public-health conditions are all responsible for boosting life expectancy in emerging markets, where the majority of the world is growing. In 1800, the world's population was 1 billion. In 1925, 2 billion. From then until now, we have seen almost 5 billion added to the world's population. “In the 1960s and 1970s, people expected a population bomb,” said David Bloom, an economist at Harvard University in Cambridge in a telephone interview. “Now, we have mini-bombs going off in the most fragile parts of the world. Issues of inequality and poverty may spill over from less- developed countries, which will not be good for their neighbors or the rest of the world.” With the exploding growth of populations across the globe, this is putting a strain on assets and resources. Just last week, Potash Corp. POT reported better than expected earnings, and the company's CEO, Bill Doyle talked about the constraints being put on farmers around the world. “The continuation of strong fertilizer demand combined with the limitations of global production, especially in potash, resulted in tight fertilizer markets and rising prices for our products,” said PotashCorp President and Chief Executive Officer Bill Doyle. “With farmers committed to increasing yields and capitalizing on the unprecedented economic opportunity, we worked to keep pace with growing demand, which resulted in a record quarter for our company. We believe our ongoing investment in expanding potash operational capability is playing an integral role in the world's food story, and we demonstrated our increased ability to deliver – for our customers and our shareholders.” Credit Suisse upped the price target on Potash because of better than expected earnings, particularly the strong potash pricing. Agricultural stocks continue to be on fire as of late, as the world is trying to solve population growth and a shortage of food at the same time. It does not look like the agriculture trade is going anywhere, at least for the next few years. Sure it will have some ebbs and flows, but my conviction in the theme is extremely strong, and I believe that any correction in the space should be bought. We have not solved our food crisis and it does not look like it is going to happen anytime soon, so ag stocks should continue to benefit. 7 billion reasons. Not even Ben Bernanke can inflate that number. ACTION ITEMS:

Bullish:
Traders who believe that agriculture will continue to be constrained might want to consider the following trades:

• Go long Potash or any of its competitors in this group. That includes CF Industries CF, Mosaic MOS, Intrepid Potash IPI, Agrium AGU, and Terra Nitrogen TNH.

• Another way to play the ongoing food crisis is to play genetically modified crops and seed protection. The best way to play that is through Monsanto MON.

Bearish:
Traders who believe that population growth will slow in coming years may consider alternate positions:

• Short these names, especially the higher beta names.
  
  

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