Agriculture Moves Last Five Months of the Year

Yesterday afternoon I mentioned three seasonal trades which typically start in August: agriculture, gas, and health care; this morning I'll focus on agriculture. According to Thackray: "agriculture has been hot the last five months of the year. This is the result of the major summer growing season in the northern hemisphere, producing cash for the growers and subsequently increasing sales for the farming suppliers."

Reasons for agriculture's hot run in recent years is the realization that the world might be running out of food; also, increasing wealth in Asian countries has resulted in an increase in meat consumption. It takes nine times the amount of grain to produce a pound of meat, than a pound of grain itself. While this sector has represented a good investment opportunity in recent years, investors should be wary of the wide performance swings such as +/- 25% in 6 years of the last 14 cycles.

To finish off this morning, Credit Suisse reports that assets in retail and institutional money market funds have been holding steady to slightly increasing the past two months. While stock market volumes don't really support the current rally, a build-up of cash reserves may provide fuel for a future rally.

GB