How to Invest in Livestock

A while ago I wrote an article looking at ways to capitalise on the high food prices How to make Money from Higher Food Prices. We haven't really experienced much in the way of upside and to be honest I don't expect to see much for maybe another 6 months or so.

As I pointed out in the above article one of the drivers that I saw for investing in livestock was the rising cost of corn and feedstuffs.What is currently happening is that some farmers are selling or in some cases even slaughtering some of their herd because that cost them less than having to buy the feed to keep them alive.

While this slaughtering is going on I don't expect to see much of an increase in prices of Hogs or Cattle, after about 6 months or so of this slaughtering I think we will start to see a shortage of supply driving the market prices of livestock higher.

Until  we see a realisation that the slaughtering is starting to create a shortage I don't see there being much short term movement to the upside, if however you are looking for a good longer term play on rising food prices I would still be considering the CATL ETF for Cattle and the HOG ETF for Live Hogs. It is certainly my opinion that they are a strong buy on any further weakness.

 

Best Wishes

 

Alan

Technorati Tags: Corn,Live Cattle ETF,Live Hog ETF

How to Short Commodities using ETF

In my last post we talked about how to make money from  increased food prices and looked at the  impact these prices would have on livestock such as Live cattle and Lean Hogs. I mentioned that for the more adventurous amongst you you might also wish to look at shorting the grains as they have risen very far very quickly.Shorting Commodities has traditionally been very difficult until the recent advent of Contra ETF's.

These ETF's will move higher when the price of the commodity goes lower allowing you to benefit from declining prices by buying the ETF.One of the most forward thinking of the companies involved in these Contra ETF's is ETF Securities   http://www.etfsecurities.com/csl/short/index.asp   ETF Securities will allow you to go short a number of the major traded commodities and since you are buying and not selling they should be  tradable in most accounts.

A major shortcoming of many  brokerage accounts has been the inability to make money when markets are doing anything but going up, now with these new ETC/ETF that is no longer a problem.It also allows for some quite sophisticated trades to be placed-for example if you are bought in to the story of the last two posts of mine and you are an aggressive trader you might consider going long livestock and short grains by buying one of the livestock ETF's such as CATL (Live Cattle) and buying one of the Short ETF such as SWEA (Wheat).

 

The volatility in the stockmarket currently is very difficult to invest in and is being driven back and forward by news and by the manipulations of the big boys, the commodity markets however are more fundamentally driven by supply and demand and so are easier to predict in the medium term.

 

Best Wishes

 

 

Alan

Technorati Tags: Commodities,ETF,Short ETF,Grains,Live Cattle,Trading,ISA,IRA

How to make Money from Higher Food Prices

I am sure like me, that you have noticed the increased prices of many food stuffs when you make your trips to the local store or supermarket.Global food scarcity is even in this day and age still a major problem.Countries such as Egypt have actually widened its food rationing system for the first time in 20 years.Russia and China are putting controls in place and other countries such as Vietnam are imposing taxes on foreign sales to protect their own supplies.

The cause of all this is that our current Global food supplies cannot cope with the increasing demands of a world population which is growing by over 70 million per annum.Not only is that a huge increase but the emerging market countries with their expanding middle classes are starting to demand Westernised , meat heavy diets.We are also seeing misguided political pressure to increase the use of Biofuels-this has the effect of diverting already stretched supplies of foodstuffs such as grains to energy inefficient fuels.

This means that over the last year while the price of agricultural commodities have gone through the roof look at the price of wheat over the same period.

Last week the price of wheat rose 25% in one day as Kazakhstan (one of the largest exporters of grain) announced a plan to impose export tariffs.This caused buyers to panic sending the price soaring.So we all pile into grains then?...well not exactly I am always wary when something moves this much so quickly and I think we are experiencing a short term bubble in the price of grains.

For me a better way to take advantage of the grains boom and one which is not so obvious-and therefore less likely to be driven up by the hype is through buying meat such as Live Cattle and Hogs.Normally this would only

be possible on the CME futures but once again the advent of ETF's or in this case ETC(Exchange Traded Commodities) come to our rescue.

They can be traded in London via ETF Securities the symbols are( LSE:HOGS) and (LSE:CATL). This will give in my opinion good exposure to the grains boom-how I hear you ask, well Livestock are fed mainly on grains so if you are a livestock farmer faced with the choice of paying the increased costs of feeding your herd or selling them in the market-it seems to be a pretty easy choice.The farmers rather than feed their livestock grain will sell it into the market and obtain record prices, they will then also sell the livestock.

If you look at the prices of cattle for the last 12 months you will see that cattle has dropped in price as a result of too much stock hitting the markets

This will mean in the near term we have too much grains everyone is planting that to cash in on the high prices and not enough meat, within the next 6-12 mths people are going to start to realise that there is a shortage of meat and this will I believe cause prices to rise. Supply and demand, Supply and demand the mantra on which the commodity markets thrive.

I would be looking for opportunities to cash in on the grains and buy the meats.If you feel really aggressive then think of going short the grains and long the meats....how can I do that in a non margin account I hear you ask...........well that is for the next post. Until then good trading.

Alan

Reference List

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Bull Market in Agriculture | Teach Talk Trade Day Trading & Technical Analy..

The value of the U.S. dollar is sinking world-wide. « Bridges to Hope..

Wheat’s Major Price Reversal : Contrarian Profits

Data Feed « Trading for the Masses

Now That Warren Buffett is Crazy About the Loonie, Here are Seven Ways to P..

Tracey’s Market Update : Blog Archive : Wheat: “A rally of e..

Putting the pieces together...: Commodity/Inflation Funds: Update