View from the Observation Deck

1. The purpose of today's blog is to simply point out how certain events, either known or unforeseen, can impact the price performance of an investment opportunity.
2. Corn prices surged 44% from 6/15/12-7/9/12 on fears that drought conditions in the Midwest could cause a reduction in output. Some fear it could be the worst showing since 1988, when output fell 31%. (WSJ)
3. The Department of Agriculture just reported that in the span of one week the amount of U.S. corn acreage experiencing moderate to extreme drought rose from 49% to 60%.
4. In recent years, investors have been drawn to corn and other agricultural products, in our opinion, for a multitude of reasons. A weak U.S. dollar would be at the top of our list.
5. Here are some others: growing demand for food from emerging countries; increased ethanol production in the U.S.; and a hedge against the potential for higher inflation due to an easy monetary policy from the Fed.
6. Commodities offer an intriguing risk/reward dynamic. Some pundits believe that commodities will be one of the best growth areas over the next decade or two as emerging countries raise their standards of living.
7. Investors considering commodities should ask themselves the following question: Is this a market I want to trade in, or one I want to accumulate positions in over time?
8. We believe both approaches have their appeal.