c13 JWBT016-Busby October 9, 2008 9:19 Printer: TBD
CHAPTER 13 Reaping Profits on the Farm
I
f I see a juicy piece of low-hanging fruit, I pluck it. When I see a mar-
ket that is ripe for profits, I move to that arena. That is exactly what
I have been doing recently with commodities. As noted previously, I
am a trader, and if money can be made buying or selling a product, I am
probably trading it. Over the years, I have traded various commodities, in-
cluding oil and energy, gold and precious metals, pork and beef. Lately,
corn has been on my radar screen. Oil prices have been sharply increasing
for many months, and that fact has resulted in a new focus on the produc-
tion of biofuels including ethanol. Corn is one of the agricultural products
needed for that technology. With demand rising, stockpiles have also been
falling. According to AP business writer Stevenson Jacobs, in April 2008,
the U.S. Department of Agriculture predicted that farmers in the United
States would plant less corn in 2008 than in the previous year—8 percent
less to be exact. Greater demand paired with less supply always translates
into price increases, and that has been the case with corn. On April 3, 2008,
corn jumped to $6 a bushel—a record high.
The United States is the largest producer of corn in the world, and our
strain on supply will have a worldwide effect. As Jacobs explains, corn
is not only a U.S. food staple, but corn and corn syrup are also used in
a wide array of products. In addition, corn is a major source of feed for
livestock. As supplies shrink, the price for a bushel of corn will just keep
going up and up, and the effects will ripple throughout the economy and
around the world. At the time of this writing, I am long corn. The mar-
ket is bullish, and I am riding the bull wagon to profits week after week.
I am using a strategy that I learned in my early days of trading. That is,