Agriculture trades continue to ripen

This summer's record drought sent some commodity prices soaring, but a retreat in recent weeks leaves a few stocks ready for harvest.

By Stock Traders Daily Sep 27, 2012 1:56PM

Corn field copyright Bob Rashid, Brand X, CorbisBy Billy Fisher, Stock Traders Daily


The sizzling run that corn put together for much of the summer appears to be slowing. 

A stifling drought in the U.S. did push some agricultural commodity prices higher and forced corn prices to hit $8.49 a bushel last month. However, an early harvest in this country and strong exports from Brazil have since knocked about a dollar off of that corn price. The retreat now has a few trades in the agriculture looking ripe for harvest.


One exchange traded fund (ETF) for investors to consider at this point is the PowerShares DB Agriculture Fund (DBA). Even with the summer rally in corn prices, the fund is barely in positive territory for the year. DBA is up 0.4% year to date.


Not only has the recent decline in corn prices made this fund more attractive to value-oriented traders, the fund has a weighting of only 15.7% in corn. The rest of the fund is comprised of other agricultural commodities such as soybeans, cattle and cocoa. This balanced attack gives traders some risk protection in the unlikely event that corn prices continue their descent.


Market Vectors Agribusiness (MOO) is another suitable option for traders looking to enter the agriculture space while spreading out their risk. The fund holds approximately 50 names in the sector. MOO entered bullish territory last week when its 50-day moving average broke above its 200-day moving average.


Shares of Mosaic Co (MOS) pulled back to the tune of 6.2% during the last five trading sessions. The drop makes for an intriguing entry point for a stock that has otherwise been on a technically sound course. The momentum that the stock has experienced this summer propelled the 50-day moving average above the 200-day moving average last month.


The crop nutrient company is slated to announce its fiscal Q1 results on Tuesday before the market open. Analysts are predicting EPS of $1.16 versus $1.17 in the prior year quarter. A beat here should be enough for investors to recoup any lost ground. This looks like a low-risk trade ahead of earnings.


Another earnings trade in the agriculture space for traders to look at is Monsanto Company (MON). Prior to the opening bell next Wednesday, the company will check in with its Q4 results. With revenue expected to be flat and a net loss of $0.43 per share, expectations have been tepid. Monsanto has surprised to the upside in each of the last four quarters. This is another low-risk trade where the company should be able to beat Wall Street estimates once again.  




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