You Always Wanted to be a Farmer (AGRO, CRESY)

Last week we ruffled a few feathers and scared off some rabbit-chasers with our talk of a coming financial and civil breakdown. And yet, we have to admit a little sympathy with those who cast a weary eye on our forecast.

For we remember our own zeal as newbies in the brokerage business roughly a quarter century ago, when we were inundated with books and special reports and videos from wacky colleagues trying to convince us that we should –

repent

Buy gold and tuna, they said, and set up a bunker in the woods of Northern Ontario!

Embarrassed to say, we even visited the small mining town of Chapleau, a way up there in the mining belt, to scout out a suitable redoubt.

We were enthusiastic. We were a bit scared. We were gold crazy…

And we were wrong.

The expected meltdown didn’t occur, and we imagine that a great many like us went back to work chastened and perhaps wholeheartedly determined never to fall into that trap again.

But does that mean there’s nothing to worry about?

ridesalong

In our view, no.

There have been a great many documented cataclysms – both financial and civil – in the modern western historical experience. And where war is involved, we see upheavals of the greatest magnitude from every corner of the globe at every stage of history.

Perhaps we believe we’re immune to these sorts of events because we haven’t experienced one on our own soil for nearly ninety years. After all, there’s no longer any critical mass of Americans that lived through the Great Depression that can warn us of how painful it was. The memory has faded with the loss of that battle-scarred generation.

The Second World War happened a decade later, but even there, those brave fighters who went overseas don’t today control the national agenda, and even if they could – it happened there, not here. And that makes it hard to imagine that there might occur something genuinely tragic in the continental U.S. Let’s face it – we’re simply not in the habit of defending our homes against invaders like we were in the late 19th century. Why even worry about it?

But we’re nonetheless urging you to be ready for it. Because there is a growing understanding that what underpins our financial system is increasingly insecure. And once that knowledge spreads, there will be no turning back. The dam will have broken.

Get organized.

And get supplies.

pretty

We have in the past urged our readers to acquire via legal means a firearm and to learn how to use it. We continue to do so. We’ve urged you to plant a garden in your back yard or on your apartment balcony and to eat of its produce. And that, too is a wise idea. There’s a great deal more that you can produce for yourself in A VERY SMALL SPACE than you think. Try Googling ‘balcony food gardening’ for starters, and you’ll see.

Don’t diss it.

Do it.

Among your group, decide who’ll be the potato man, who the tomato, etc.

Buffett did it. Why can’t you?

 

Even better than small-plot gardening is owning a small farm of your own. That solves a great many problems that would arise should the SHTF as we suspect it eventually will (please excuse our acronymism). And we’ll have more to say about this in coming letters.

Failing that, of course, you can also invest in the farmers themselves, and there’s a great many ways to do it.

Most investors attuned to the commodity space know about the Market Vectors Agribusiness ETF (NYSE:MOO) and the PowerShares DB Agriculture Fund (NYSE:DBA), the two biggest ETFs in the field – and some of the worst performers of late, though both look equally in line for a near term pop.

Look here –

moo

You could also buy straight into a single agri-business venture like Monsanto (NYSE:MON) or John Deere (NYSE:DE), or as Warren Buffett (the very zillionaire himself!) did back in January of 2013, buy a big share of Archer Daniels Midland (NYSE:ADM), crop processor extraordinaire.

Fertilizers, too, could produce for you, but we feel the best bet is to go with the farmers themselves.

And for that you need look at two companies in particular.

The first is Cresud (Nasdaq:CRESY) and the second, Adecoagro (NYSE:AGRO), both of whom own farmland and farm operations across South America, and stand to gain substantially as the desire for both arable land and farm produce ramps up.

Look here –

cresy

Cresud’s technicals are strong, thanks to a five month pullback (in red) that brought the stock down to the long term moving average (yellow line).

It looks fairly priced between $11.00 and $11.50 (in blue) and carries a lively dividend today of 2.72%

Ahh, the sweet smell of cow pies…

Many happy returns,

Matt McAbby, Senior Analyst, Normandy Research

See what people are saying...

  1. Robert Ambrose

    I live on a small farm in Pennsylvania and have grown vegetables commercially. My investments are in silver and investment farmland. I have no stocks, and limited cash. The farmland investment has been excellent and the silver is insurance.

    I agree that folks should learn to grow their own food, both for immediate benefit and also to learn the process of farm to table, so they can understand what is happening.

    I am concerned about your recommendations concerning South American farmland. In my view the political situation there is too volatile/fickle. At least in the US we have a heritage of legal process that is lacking in South America. If not investing in farmland directly, I would look North to Canada (Sprott).

  2. Karl

    In the last depression, food became very cheap, as most people had little money to pay for it. Also, farming, or gardening as it is called when done in small plots, is hard work, takes lots of time, and requires resources. You have to have good soil suited to growing the crops you want, or buy it, or make it by adding what is missing to that mud out in the back yard. You can’t grow potatoes in clay or rocks. You need fences to keep out the wildlife. You need supports to hold the tomatoes, cucumbers, and beans. It is true, you can supplement your diet with a garden, but to feed a family will require several acres, which by the time you pay the taxes on it, you would be just as well off spending the money on food directly.
    If you are expecting rabid inflation, however, then certainly buy the farm and raise deer, but watch out for poachers. (That’s why you need that gun and a posse to guard the farm at night!)

  3. Bob Whiteaker

    I love, love, love “mad Matt’s musings”. Most financial sites bore me to sleep before I can finish them, but Matt’s comments are always entertaining and his comments and insights are more accurate than anyone else’s. I always look forward to seeing something from B & B in my inbox. And the cartoons/artwork that accompany his columns are always a breath of fresh air. Please keep up the good work.

  4. Chipster

    McAbby – Is there a quantity of cognitive dissonance here? A home or balcony garden and your own farm can help put food on the table in the type of severe social turmoil you fear, but not stock certificates and their modern electronic equivalents.

  5. Richard Jones

    If in fact you believe a financial and systemic breakdown is likely, which would focus on collapse and dissolution of the stock market, why would you recommend investments in the current financial system whose demise you are predicting – the stock market?

  6. Tim Wyllie

    backwardation

Share your thoughts...

We encourage people to join in on the discussion. Please keep in mind however, that all comments are moderated according to our comment policy, and all links are nofollow. Let's keep the conversation professional and meaningful.