Are Grains The Place To Invest In 2011?

by Matt Pierce

In 2008 rough rice exploded in price, nearly doubling in less than 4 months as a global panic brought it to the highest prices ever recorded on its futures contract. That same year wheat moved higher on a perceived shortage of its own, breaking all previous price records on its more than 100 year history on the Chicago Board of Trade.

Following those spikes, grains quickly declined in price through 2009. Fast forward to the summer of 2010. Russia, one of the world’s top 5 wheat exporters, experienced one of the worst droughts in recent history and even saw fires threaten crops. Wheat spiked 35% in a week – yes, in just 1 week! Then tragedy struck Australia, one of the world’s top 10 wheat producers, and floods occurred in key growing regions leading to as much as 50 percent of the crop being downgraded to feed quality – not fit for human consumption! Cotton shocked the world with a major shortage that sparked the biggest cotton rally in history – bringing futures prices far beyond any level they have ever been. All this and none of these are the REAL reason to get invested with grains.

For decades the focal point for traders in the grain markets was on the supply side. After all it is events like the ones I just mentioned that have been game-changers in grains for a long, long time. When Bush Jr. introduced corn ethanol subsidies it was the first time in a long time that a demand component became a game-changer. By the way – that was a major contributor to the biggest percentage rally in corn in more than 100 years. You see when supply is the issue traders can account for the percent drop in supply and its effect on price. However, when demand becomes the issue it lends itself to potential panic. How much demand can be a relative unknown number, especially when it doesn’t serve a country like China to show its hand while buying much needed corn for import. Demand-based panics have the potential to offer truly historic opportunities, and a rare demand based opportunity is staring the world straight in the face right now.

China, one of the largest consumers of commodities in the world, is growing at a phenomenal rate.

Here are some stats:

According to Xinhua news agency reports, the urban population of China is close to topping 700 million By 2015, China may have around 1.39 billion citizens International Energy Agency data suggests that China topped the US in energy consumption in 2009

For years population growth has been met with China’s strong internal production of grains and other key commodities. However there comes a point where the capacity for internal production may be exceeded by a strong internal demand. A good question here is how would someone know if capacity is failing to grow enough to meet population growth? For China the proof is in the overall domestic consumption of key ag commodities:

Past performance not indicative of future results. Data courtesy of USDA.

Then take a look at a snapshot of their recent imports:

Consumption is climbing. The growing middle class and urban population is adding more meat to their plates. Yet the imports have been only modestly higher in wheat. Soybean imports nearly doubled – how much more might be needed in the coming years? Arable land in China is certainly limited and the possibility of negative weather wreaking havoc with production is always around the corner. Sure, yields and modern farming techniques can potentially increase yields, but you can only fit so many plantings in limited farmlands.

India finds itself much in the same boat with escalating population growth and the potential for significant demand requirements on their farming community. Here are some stats:

Past performance is not indicative of future results.Data courtesy of USDA.

As you can see, India has experienced sudden import surges in wheat. Their crops and food production remain susceptible to weather issues, and that can spell opportunity.

Population Growth

It takes all of 10 minutes perusing the news these days to see commodity prices are inflating and that there are real concerns over rising demand. I am not telling you anything new. What I am telling you is there is growing demand that has the potential to materialize into a food crisis.

But I am not the only one that sees this opportunity. Veteran grains floor trader Matt Pierce, who CNBC goes to for grain market analysis, also sees an amazing opportunity in 2011.

“The population rise in China and India is spiraling out of control and the potential impact on corn, wheat, soybeans, cotton, rice and oats is likely to be exciting. I believe 2011 will bring about one of the most significant price moves in the history of grain futures here at the Chicago Board of Trade.”

Matt Pierce is one seriously experienced grain trader to pay attention to. A grain specialist, Matt studied farming, management, and trading sciences at the College of Agricultural Sciences at the University of Illinois. He has worked for many of the industry’s biggest grain traders and they pay for his consultation on a regular basis. Matt’s frequent appearances on CNBC and Bloomberg have made him a household name. He is near legendary status on the floor with his massive global information network that he has built up over his career. His grain service, GrainAnalyst.com is gaining traction as the place to go for real grain insight and recommendations – for hedgers and speculators alike. However, Matt wanted to give everyone, not just his subscribers, an inside track on his forecasts for this year’s grain growing season.

On February 15th Matt is releasing a very important report for grain traders. The report will provide traders, hedgers and new investors a unique insight into how to try to play this upcoming global event in the grain markets:

Which market is the most exposed to a potential shortage When he expects big price moves to occur How current events might impact plantings What the impact of the cotton price explosion may have on soybeans and other grains Why the China and India population growth may forever change the grain markets

Right now Futures Press is giving you a pre-release sale price on this report, which will sell for $99 after February 15th. If you order before the release on the 15th you will save over 50% and pay just $49! That is obviously a fantastic price tag for such in-depth analysis of what could be the next big boom. Futures Press is offering this deal so that as many people as possible get a chance to experience the talent, skill and knowledge of grain specialist Matt Pierce. As a special bonus you will also receive a follow up report that Matt will release live from the USDA Agricultural Outlook Forum in Arlington, Virginia on February 24th and 25th. This conference will mark the USDA’s first release of their forecast for planted acreage for the 2011 growing season and Matt will be presenting his findings and analysis at the conference on behalf of the CME. Report buyers will get critical news from the conference as it happens!