Ethanol Boom
Ethanol is a biofuel substitute for gasoline. In North America, ethanol is primarily derived from grain and corn. Political reactions to high oil prices and environmental concerns have benefited ethanol stocks and related industries.
The increasing demand for crops has reduced global reserves of grain and soybeans to historically low levels. Growing North American corn production for ethanol is also boosting commodity prices. These rising prices are providing farmers with cash to buy more fertilizer to achieve higher yields and protect soil fertility. This is in turn pushing up fertilizer prices, which benefits fertilizer stocks and other related commodity investments (such as potash stocks).
However, the politically driven ethanol boom is vulnerable to decline, and this adds risk to all ethanol stocks, fertilizer stocks and related commodity investments (such as potash stocks).
AGRIUM INC. $55 (Toronto symbol AGU; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 134.0 million; Market cap; $7.4 billion; SI Rating: Average) has gained 60% in the past year, as rising crop prices, and the politically inspired ethanol boom, have pushed up fertilizer demand and prices.
Agrium has also benefited from a recent flood at a potash mine in Russia, owned …read more »
A member of my Inner Circle recently asked a question that many clients may have wondered about.
“Have you ever felt like mortgaging the house to load up on an investment? If so, what was it and when? Also, considering the current correction, are you bullish longer term on any particular sector or is it too early to project that at …read more »
