"US Drought Persists" How you can benefit

Following is an excerpt from a Bloomberg article published last Monday titled, "Crop Ratings Drop as Worst U.S. Drought Since 1956 Persists”: "About 26 percent of the corn was in good or excellent condition as of yesterday, down from 31 percent a week earlier, the U.S. Department of Agriculture said (Monday) in a report. An estimated 31 percent of the soybeans got the top ratings, down from 34 percent. The assessments are the worst for both crops for this time of year since a drought in 1988.” Looking back to August 1987, Soybean prices bottomed around $5/bushel and Corn fetched $1.60/bushel. Due to that drought, by June 1988 both commodities had more than doubled in price, with Soybeans peaking at $10.70/bushel and Corn at $3.64/bushel. Fast forward to now; Soybeans hit a low of $11.00 in December, and Corn brought $5.52 in June. Today they trade at $17 and $8.14 respectively, well above their recent lows but also materially beneath levels which would be equivalent to the prices observed in 1988. Assuming we can use the drought of 1988 for perspective, it is worth noting that a similar trough-to-peak rise in US grain markets would put Soybean prices at $23.54/bushel and Corn at $12.56/bushel, some 40-50% above the levels at which they trade today. How can you benefit? As an investor you may invest in agricultural commodity ETFs. These ETFs will increase in value commensurately with the price of a bushel. There is no way to know how this drought will play-out however, if it persists, expect higher prices, across the board, at the grocery store. Fortunately, the federal tax credit for ethanol, in existence for more than 30 years, expired in early January 2012, ending more than $20 billion in subsidies and easing the demand on corn. A consequence of this drought could well be an amplified debate on the scarcity of water where it is needed. There are water based ETFs as well. Give me a holler if you care to discuss any of these opportunities (205)583-3237. Securities and Investment Advisory services offered through NBC Securities, Inc., Member FINRA and SIPC. Investment products 1) are not FDIC insured, 2) not guaranteed by any bank and 3) may lose value including a possible loss of principal invested. NBC Securities does not provide legal or tax advice. Recipients should consult with their own legal or tax professional prior to making any decision with a legal or tax consequence. This is not an offer to sell or buy any securities products, nor should it be construed as investment advice or investment recommendations.