The Rising Influence of Rising Affluence

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Dave Rosenberg on agriculture in the U.S.


If there is a secular theme that transcends the U.S. business cycle it is agriculture. Farm incomes are rising sharply and all indications point in a similar upward direction in 2011 and likely beyond. This is another way, beyond going long mining excavation equipment and industrial commodities, to play the increasing demand for food, especially proteins, alongside the ever-rising standards of living in China, India and other emerging market economies.
Here at home, it means buy what farmers need — agricultural-related capital equipment.
The latest Fed’s Beige Book provided a somewhat mixed outlook on the overall U.S. economy, but when it came to food, there was plenty of tasty treats to chew on:

December 17, 2010 – BREAKFAST WITH DAVE
“Agricultural conditions were generally favorable, with several Districts reporting yields nearing historic highs. Agricultural sales to off-shore buyers increased … The Chicago, Minneapolis, and Dallas Districts reported large to record-setting yields for certain crops. Agricultural prices continued to climb, boosting farm incomes … higher grain prices were raising feed costs for livestock producers. Nonetheless … even with higher feed costs, margins for livestock producers remain positive. Strong global demand and tight supplies pushed cotton prices to near historic highs for growers … San Francisco noted that reductions in overseas yields, combined with the lower value of the U.S. dollar, are helping boost domestic farm sales.”
If there is a secular theme that transcends the U.S. business cycle it is agriculture.


Is the ETF DBA a good way to play this sector?


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