Thursday, July 05, 2007

Agricultural Commodities

Mike Panzner (via the Big Picture) comments on the strength of the agricultural commodities:

Over the past nine months, the Reuters/Jeffries CRB index has essentially gone sideways, and five out of six of its sub-sectors haven't really moved one way or the other. However, one group stands out: the agriculture sector, with a 33% gain relative to the CRB index.

I noted the break out in DBA (DB agricultural commodity ETF) two weeks ago. Unfortunately, it promptly rolled out of bed and managed to hold the 50 DMA only two days ago. I will continue to monitor this ETF as I’m long term upbeat on this sector. The fantastic volatility should present some interesting trading opportunities.

Now staying with the theme and just to show you a chart that blew my mind, here’s TNH (Terra Nitrogen Co. LP). It’s in the fertilizer business that is enjoying a boom from ethanol and a general lift in the price of agricultural products. Its limited partnership structure probably also attracted yield-seeking investors. I let it go at $75 and $85 and certainly am not recommending buying now. But if you’ve had it for a while, big hat tip to you!